Sunday, December 03, 2006

How the Democrats could go wrong

Robert Borosage:
Then the hard part begins. Democrats will face a failed
war, a slowing economy, a budget mess, unsustainable
trade deficits, declining wages and voters that are
looking for some hope.

And here is where Democrats are likely to go very wrong.
Next week, Democrats will convene a briefing on basic
issues and how they should think about them. On Tuesday,
the subject is Iraq with an array of Democratic advisors
lined up to speak. On Wednesday, the subject is the
economy and, as of this date, the experts invited
include Citibank executive and former Treasury Secretary
Bob Rubin and … no one else.

Rubin's presence is to be expected. He presided over the
Clinton economy, which, riding on the Dot-com bubble,
moved the economy to full employment, and helped lift
wages even at the bottom, while generating a budget
surplus. An attractive, self-effacing liberal, who helps
Democrats reap Wall Street money, Rubin virtually walks
on water in Democratic circles.

But if Democrats have any shot at building a governing
majority, they need to expose themselves to a range of
progressive economic views-like those advocated by the
Economic Policy Institute-that directly challenge the
tenets of Rubinomics.

In fact, Rubin's economic advice is likely to mislead
Democrats on policy and on politics. Like most bankers,
Rubin advocates balanced budgets ├╝ber alles . He'll lock
Democrats into 'pay-go' budgeting, shackling them into
showing how they will pay for any investments they want
to make. In a direct reversal of the years of Democratic
dominance, Republicans now offer tax breaks and new
entitlements without concern for deficits and Democrats
offer green eyeshade economics. One offers pleasure; the
other pain. Guess which party benefits?

Rubin is also the leading advocate of our laissez-faire
free trade system-the architect behind Clinton's support
of NAFTA, the WTO and the folly of treating China as if
it were playing by the same rules. He'll warn against
protectionism, and argue for cutting spending to help
limit the trade deficits. In office, he dismissed
concerns that our massive trade deficits were
unsustainable and were decimating American workers and
undermining their wages. Now, he's prepared to recognize
that free trade generates losers as well as winners. In
response he proposes 'wage insurance,' to provide
temporary help to displaced workers forced to take lower
wage jobs. This isn't much solace to those who are
worried about their fate in the global economy. But
that's okay, with Rubin putting balanced budgets first,
there isn't going to be any money for the program
anyway. It's a gesture, not an answer.

More importantly, Rubinomics offers no answers for the
current crisis America faces. What do we do in a global
economy that has added billions of very low-wage,
disciplined workers to the workforce supplied with
technological capacity by multinational corporations?
What do we do with unsustainable global deficits-likely
to reach nearly $1 trillion next year-that have left us
dependent on the whims of Chinese and Japanese central
bankers? (Balancing the budget isn't the answer; the
trade deficits went up under Clinton when the budget was
in surplus.) What do we do about the shredding of the
corporate social compact-family wages, secure jobs,
health care, paid vacations, pensions-which were the
basis of America's middle class? Bush's tax cuts
squandered hundreds of billions in tax breaks to the
wealthy. Democrats are wary about raising taxes. But
with the economy slowing, won't cutting spending to
balance the budget simply drag the economy down further-
and add to the growing public investment deficit in
everything from renewable energy to affordable housing
to adequate sewers? In the Dot-com boom, with a
declining military budget providing some resources for
investment, and China, India and East Europe just coming
into the global market, Rubinomics seemed to work. But
it has few answers for dealing with the fallout from
those policies and Bush's subsequent follies.

Rubinomics is also bad politics. It favors the Wall
Street wing of the party at the expense of the Main
Street voters. Democrats were propelled to victory in
this election in part because of growing public dismay
over an economy that doesn't work for them. Democrats
ran the most populist elections in memory-railing
against the drug and oil lobbies, indicting failed trade
policies that are shipping jobs abroad and undermining
wages at home. Voters-including independent voters from
the supposed 'center'-are overwhelmingly in favor of
aggressive trade policies, and are looking for help on
wages, health care, pensions and holding Wall Street
moguls and corporate CEOs accountable.

With Bush in the White House, Democrats won't be
deciding national economic policy in the next two years.
But they will be laying the groundwork for a Democratic
economic strategy. They will be offering their
indictment of Bush's course. They should be holding
hearings and developing policies to start meeting some
of the pressing demands of the voters who put them in
office. To do that, they would be well advised to reach
out to a far broader range of advisors than the leading
strategist for Citibank.

Robert L. Borosage is co-director of the Campaign For
America's Future.


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