For US Democracy: There Is Only One Choice

Real Fiscal Respomsibility, Vol. II Cover
We need big, big changes in the United States. Many of them will require the Federal Government to spend unprecedented amounts, including deficit spending to enable us to solve problems that have languished, creating needs, for many, many years.

How can we get these changes legislated through a political system that has been increasingly less responsive to most people over the past four decades. There’s only one way that will work without revolution.

We need a movement for change powerful enough to replace the present establishment of House and Senate legislators and presidents wanting to preserve their way of looking at how to do things, with another group that has concluded that change is desperately needed and must be accomplished come what may, whatever the cost in long established customs and traditions in both Houses of Congress and among the vested political and communications elites in the Washington, DC/New York “village.” But not just any changes will do.

We need political changes that will bring us officeholders who will do what most of the public wants them to do and who will not enact laws that most of the people do not want. We also need legislators who will not be bought by special interests, at least for long enough that Congress has time to pass laws that will re-create a new regime that will be very difficult for these interests to corrupt.

When it comes to the 2016 presidential campaign we need to ask ourselves which of our current candidates can lead such a movement and enable its rise, and at the same time are willing to do so. I’ll assume for the sake of argument that no one would contend that anyone with appreciable support on the Republican side is likely to act in the way I’ve described, since all of them seem to believe that the people need a strong leader who will do what he/she prefers to do rather than worry about what most people want their leaders to do. And once we further ask for a candidate with appreciable support in the current campaign, we’re down to Hillary Clinton or Bernie Sanders immediately.

So, what choice should people make? I think that choice should be made based on what one thinks our nation needs in terms of policy, and which candidate is most likely to do best in fulfilling that policy agenda. So, speaking for myself, here’s what I think we need most.

— Legislation and Executive action restoring the Rule of Law to the United States. From the failures of the Dodd-Frank legislation to end the practices of too big to fail, to the unfair treatment of whistleblowers by subjecting them to the espionage act, to the failure of the justice system to prosecute, indict, and convict police who murder people on a whim, to the free passes given executives of too big to fail financial institutions since the crash of 2008, to the failure to prosecute violations of various kinds by military and prison contractors, to the wholesale imprisonment of people for minor violations of drug laws that need to be repealed in the first place, the US criminal justice system is broken. It no longer delivers even a remote approximation to equal justice under the law, and intolerable state of affairs for a free people.

— A payroll tax holiday for both employers and employees would give a couple, each earning $50,000 in wages, about $650.00 per month in increased consumption power. The holiday would last until real full employment in the private sector is reached, when the tax would be re-imposed incrementally, when and if demand-pull inflation occurs.

— A one-time grant of $1,000 per person to the States for hiring State Government employees in under-served areas of Government, many of them created by the layoffs in the aftermath of the recession of 2008, which left state and local governments with large shortfalls in tax revenue.

The funding for this would go into a special fund whose proceeds could only be used to hire such employees. In addition, if a State took a grant, it would have to agree to forego tax cuts for a 12 month period following receiving it.

— A Job Guarantee (JG) program guaranteeing a job offer at a regionally cost-adjusted living wage, averaging about $16.00 per hour across the country, with standard fringe benefits including enhanced Medicare for All benefits (see below) for those who want to work full time and haven’t found work available in the private sector. This program would NOT replace Unemployment Insurance, or other programs currently in place for easing the difficulties of the involuntarily unemployed.

— Legislation guaranteeing annual entitlement spending without regard to “trust fund” balances. We can’t look at Social Security and our other entitlements in isolation. We have to win the fight for FDR’s economic bill of rights, and for an expansion of all the entitlements in the American social safety net; now the stingiest, most inadequate safety net among modern industrial nations!

— An enhanced Medicare for All Program such as the one specified in John Conyers’s HR 676 bill, enhanced Medicare for All, a full coverage no co-pay, no deductible program.

— A program fixing U.S. Infrastructure over six years funded at $700 B per year. This is a much more expansive program than Bernie Sanders’s $1 Trillion program. However, the American Society of Civil Engineers (ASCE) currently estimates that doing this job will take $3.6 Trillion. My estimate comes from theirs plus an assumption that inflation and over-runs will require somewhat more.

— A program creating a no cost educational system from pre-school through graduate school, including a “debt jubilee” for the $1.2 Trillion outstanding student loan debt (a great drag on the US economy).

The US educational system has been falling behind compared to the rest of the world for a long-time now. In the modern world an educational system that affords the opportunity of a great education to anyone who wants one is a necessity, not a luxury, which the Government ought to be providing for everyone as a right of Americans.

— A massive program re-inventing energy foundations and protecting the climate and the environment. In his two-part series re-inventing energy foundations and protecting the climate, my colleague at the UMKC economics blog, Michael Hoexter, in a series beginning here, outlines a $4-6 Trillion a year program to accomplish this in 10-20 years.

— A Basic Income Guarantee (BIG) program, a new entitlement for all Americans. A BIG set at something like $8.00 per hour cost-adjusted across regions would be very useful for people who don’t want to work at pursuits defined as socially valuable by others, and would also be very helpful for people who cannot work at all for various reasons. It would also be a useful supplementation to Social Security retirement pensions.

Most of these agenda items are matters of economic and social justice and real fiscal responsibility, the subject of my new two-volume book series: Real Fiscal Responsibility, Vol I: the Progressive Give-up Formula; and Real Fiscal Responsibility, Vol. II: The Peterson Network, Inequality, and the Failure of Neoliberalism. So, success at passing most of these agenda items addressing very real and urgent needs of Americans, is an ability to know what real fiscal responsibility is when you’re framing fiscal policy and legislation, as well as an ability to recognize that when others frame it and advocate for it.

So, what is Real Fiscal Responsibility at the federal level?

Real fiscal sustainability is the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purposes.

Real fiscal responsibility is a pattern of fiscal policy intended to achieve net benefit relative to public purpose (such as full employment, price stability, a first class educational system, Medicare for All, and the other dimensions listed elsewhere.), while also maintaining or increasing real fiscal sustainability, viewed as the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purposes.

Since a fiat sovereign government like the US can never lose its capability to spend involuntarily, barring conquest or revolution, real fiscal sustainability/responsibility never imposes a constraint on spending arising from financial inability to spend. On the other hand, the inflationary impact of such spending can persuade a fiat sovereign to control its deficit spending.

But price stability is just one dimension of public purpose, to be traded off against other dimensions depending on circumstances. So, once again, real fiscal responsibility comes down to targeting net benefit relative to public purpose with fiscal policy, which includes “taking care of our own.”

And when it comes to “taking care of own” and real fiscal responsibility, the choice between Hillary and Bernie has to be Bernie. Here’s why.

Since Hillary Clinton has begun to compile a record on her fiscal policy positions during the 1990s she has been identified with Peter G. Peterson and his ideas about fiscal responsibility. These ideas, namely that the United States has a problem of too high and rapidly increasing public debt and must engage in deficit reduction and entitlement “reform” over the long term, are directly opposed to real fiscal responsibility, and, in fact, are the epitome of faux fiscal responsibility, leading to austerity policies and eventually to first micro-economic austerity, and later macro-economic austerity, as well as either private credit bubbles, or recessions and financial crashes.

Of course, the Bill Clinton Administrations were known famously for following deficit reduction policies, and are credited with four years of budget surpluses which the Clintons, their supporters, often the rest of the Democratic Party frequently celebrate. There is never any recognition of the explosion in private sector debt under the Clinton Administrations, and of the years in which the private sector ran aggregate deficits causing that explosion. Nor is there any mention of the 2000-2002 recession immediately following the Clinton “achievement” of its government budget surpluses.

My indictment of the practices and policies of faux fiscal responsibility are in the book series linked above. But the book series also makes it clear that the Clinton family, Peter G. Peterson, his Foundation of the same name, and the Clinton Global Initiative are closely related. Also, Bill Clinton provided a featured performance at each of 5 of the 6 Fiscal Summits, appearing more frequently than anyone else has at these annual meetings, other than the Petersons themselves. At each one, her provided a perfect testimonial to his conviction that faux fiscal responsibility is always the way of the Clintons regardless of the worldwide failures of austerity policy.

Nor was he the only Clintonite luminary to appear at these summits. In addition, many of the people who were so prominent during the two Clinton Administrations and the Obama Administrations, and who were strong advocates of faux fiscal responsibility also appeared, including: Robert Rubin, Larry Summers, Peter Orszag, Gene Sperling, Alice Rivlin, Neera Tanden, John Podesta, Jack Lew, Bill Daley, Sheila Bair, Erskine Bowles, and George Stephanopoulos.

Hillary Clinton, herself, has always spoken favorably about her husband’s achievements in the fiscal and economic policy areas and has always projected a similar faux fiscal responsibility orientation to his, and she is doing so now. In the 2016 Campaign she and her surrogates have vigorously surfaced the idea that we cannot afford the costs of Bernie’s programs, implying that he is not fiscally responsible and saying that he is not realistic and pragmatic.

So, it is pretty clear that, as President she is extremely unlikely to follow a real fiscal responsibility agenda directed at public purpose, but, instead will repeat the performance of the Obama Administration in cutting back federal deficit spending on faux fiscal responsibility grounds, and expressing joy at this insofar as federal deficits as a percent of GDP are cut. To accomplish this she will probably use the same economic advisers (Larry Summers, Gene Sperling, perhaps Paul Krugman will be new) and budget technicians (Orszag and Lew) who helped her husband and President Obama.

That is, her Administration is bound to be one that will lead to further economic stagnation and also continued growth in inequality, as well as further progression down the road toward oligarchy. All of the current economic interests of the Clintons suggest such a result, and I don’t see that it is at all likely that Hillary Clinton, as President, will extricate herself from the political, professional, financial, friendship, and familial networks she is immersed in sufficiently end the tragedy of democracy that has been going on in America for the past 40 years. That is simply never going to happen.

Clinton partisans, will probably say in reply to this argument, that the kind of agenda I am talking about is extremely unlikely to pass a Congress with the House and the Senate or both in Republican hands, so it doesn’t matter that Hillary Clinton will never try to achieve it anyway. So, what must be done is simply to accept the inevitability of her attempts to merely hold back the tide of the neoliberal march toward oligarchy, which they assume she will do, by fighting a rearguard action for democratic values, and trust to her oft-claimed technical competence to do that well, rather than gambling on Bernie Sanders as a nominee, who, even if he wins the presidency, will simply suffer constant ignominious defeat at the hands of hostile Republicans in Congress.

The answer to this, however, it is that ignores key differences between Hillary and Bernie, the kinds of campaigns they are likely to run, the dynamics of those campaigns, the likely results of a Sanders campaign versus a Hillary Clinton campaign, and the kinds of advisers and views Bernie Sanders is likely to surround himself with when he is President compared to the Clinton stable of advisers and there oft-stated views. So, what are some of those differences?

To begin with, it seems to me that a Clinton Campaign against the Republicans is likely to be a very negative campaign focusing on the all too visible negatives of the Republican candidate, whether Trump, Cruz, or Rubio, and the very well-known negatives of Hillary Clinton, herself. It will be a campaign of constant negative attacks and trench warfare with dirty tricks galore and no redeeming qualities of vision or an uplifting agenda to inspire the progressive base of the Democratic Party.

This will be especially the case if Hillary wins her contest with Bernie, by constantly attacking his progressive agenda as impractical and saying things like her recent pronouncement about single-payer’s inevitable fate in the United States. How then will she to be able to suddenly begin advocating the kinds of “impractical” programs that will get the participation and support of the base for her policy agenda?

Hillary Clinton may well win a trench warfare campaign against a Republican nominee including even Donald Trump. But it is hard to imagine that she will be able to drive enough excited Democrats, progressives, and independents to the polls to get the House back for the Democrats, or even to facilitate renewed Democratic control of the Senate. And there is no imaginable way that such a campaign will build the base up enough to create a movement behind any legislative program she has in mind.

So, with a successful Clinton campaign, the best we can hope for is political stagnation along with the economic stagnation already mentioned, with very few changes in the kind of political regime established and implemented by Barack Obama. There will still be too big to fail, and too important to prosecute. There will be the debilitating, disheartening, and discouraging emphasis on “fiscal responsibility,” meaning deficit reduction at the expense of jobs, the safety net, equality, economic growth, the environment, the climate, and every other condition that needs improvement.

There will be double standards of justice throughout the criminal justice system. There will still be the war against whistleblowers, which Hillary has already signaled by her visibly hostile attitude toward Edward Snowden and his fellow whistleblowers. There will be so-called “NAFTA on steroids” “free trade” agreements that, increasingly, give away US sovereignty to multinational corporations and their rigged trade agreement-enabled courts. And finally, there will be the constant trench warfare with the Republicans in Congress attempting to prove that she has been involved in criminal activity of little or no consequence, while they systematically ignore the criminal activity, involving blatant corruption, which they approve of, and would engage in themselves if they had the oval office.

And what can we expect, in contrast, from a Sanders campaign and a possible, even likely, victory in the primary/caucus campaigns and the general election. I think, first, we can expect a growing movement for economic and social justice, sweeping both Sanders and those who run in support of his agenda into office in a very high turnout campaign marked by vision, hope, participation and effort.

And when he wins that campaign, and gets a Congress much more committed to him and his program, than any Congress would be to Hillary, and her pragmatic Wall Street-friendly agenda, if she commits to any agenda at all, then I think we will have a far better chance of passing the kind of legislation that he and we will favor, than there would be of passing anything good for the 99% that Hillary may suggest in the event of her victory, because of the different Congress she would get from her negative campaign based primarily on fear of the Republicans.

In addition, I think we can expect continued mobilization of voters across the spectrum by Sanders in support of his campaign. He will never dismantle his winning election base, the way Obama did, and the way Hillary must also do out of fear that her winning election base may constrain her actions as President in support of Wall Street. Instead, he will use that base to pressure Congress and to build continuing support that he can use to enact the Green New Deal he seeks.

In short, Bernie’s presidency will be popularly-based, not neoliberal elite-based. Neither Bernie, nor any of his advisers are likely go to a PGPF conference to endorse and support its faux fiscal responsibility agenda. None of his advisers will bother with the “free trade” sovereignty giveaway agenda of the Peterson Institute of International Economics and their Washington Consensus. No Wall Street executives will serve in Bernie Sanders’s Administration or occupy an influential position in it.

There will be no overlapping financial and economic advisers with those who have served the Obama and Clinton Administrations, with one exception. His advisers on fiscal policy will likely come from his “dream team,” which includes: Joseph Stieglitz, Jeffrey Sachs, Robert Reich, James Galbraith, Lawrence Mishel, Nomi Prins, William K. Black, William Greider, Jane D’Arista, Tim Canova, Robert Johnson, Robert Auerbach, Dean Baker, Gerald Epstein, Robert Pollin, L. Randall Wray, and Stephanie Kelton. All are post-Keynesians, and most are what I’ve called advocates of real fiscal responsibility. Only Robert Reich was present in either the Clinton or Obama Administrations, and even then he was an opponent of neoliberalism and its influence in that Administration.

In short, the people on the Sanders “dream team” will not shrink from planning and supporting the kinds of policies needed to replace neoliberalism with a Green New Deal. They will continually shape and push for the sort of agenda I’ve offered here. And they will support the popular trends that Sanders will nurture and grow if his campaign is successful.

I cannot tell at this point whether the Sanders campaign will be successful in creating the kinds of changes I’ve written about. But I know two things. First, changes like these are needed to end the reign of neoliberalism and create democracy in the United States. Second, these changes will neither be fought for, nor achieved by a new Clinton Administration.

At most, such an Administration might accomplish a slower boiling of the frog comprised of the 99% of the United States than the Obama Administration. But, by the time a further 8 years of Clintonism is experienced, that frog will be thoroughly cooked.

I am not among those who think it would be better to have a Republican boil the frog still faster than would yet another Democrat. But I am not for boiling that frog that at all. And there is no possibility for getting the frog out of the pot if those of us who care about that do not fight to get our politics transformed and Bernie Sanders in the White House. So, for people who are not for boiling, there is no choice but to work as hard as we can both for the larger transformation, and to get Bernie elected.

Ultimately, it is the popular resistance that counts for change and not the fate of any one candidate in an election. But it is also true, that Bernie Sanders is part of the popular resistance due to his goals, the fiscal policies he favors, and his unrelenting opposition to Wall Street. He is one of our own, and he deserves our support. For US Democracy: there is only one choice!

(Cross-posted from New Economic Perspectives.)

 

8 Responses to For US Democracy: There Is Only One Choice

  1. I sympathize with much of what is written here. But until the military, 57 percent of the budget, is cut back some, this stimuli push should be limited and targeted for infrastructure and airports and the like. America is not like other industrial nations. We have the military and the other nations benefit but then spend on their people.

    My concern about Bernie’s campaign is that socialism was always defined as ownership of the means of production by the state. For Bernie to speak of his views as being socialist when it is just for social programs puts up red flags that are unnecessary. Bernie needs to think this through and educate the American people as to what the differences are between his socialism and communism. Otherwise he is blind to these issues.

    Also, negative interest rates are an issue. So there has to be some effort to boost rates and still loosen the money supply. If we go negative we have banks screaming for cashlessness. And that is a bad idea.

    Finally, there is a misuse of long treasury bonds. This misuse of the bonds as collateral in derivatives trades is giving a false demand to them that pushes rates down. Something has to be done to stop that.

    • Joe Firestone

      Bernie will try to cut the military budget since he has frequently criticized its size and our interventions. In fact, it is clear from what he has said in the past that he is the only major candidate who would do that!

  2. You make me believe that Bernie and his people can bring about a revolution. I hope you are right.

    • Joe Firestone

      Thanks. I think it will not be easy, but that we can do it, if we can create a movement large enough to change the Congress. I think Bernie Sanders knows this and will use his run to build that movement

  3. Yes, the frog kicks ass.

  4. Bernie for POTUS and Joe Firestone for Sect of Treasury! I would wager Joe F. already has a design tucked away in his files of a multi T$ HSC!

    • Joe Firestone

      Thanks, Charles, but I’ll defer to some of my more accomplished MMT colleagues including the unflappable Warren Mosler, the gifted at explanation and presentation, Stephanie Kelton, the eloquent Randy Wray, or the not quite MMTer, but absolutely dedicated to public purpose and civility, Jamie Galbraith. And since only one of them can be the Treasury Secretary, I’d pick one of the others for Fed Chair, and the rest for other key economic policy positions in a Sanders Administration. As for me I’m content to write. blog, and speak about Fiscal policy, MMT, and democracy for the duration.