21st Century Agenda for America

With the national conversation focused on the economy and the struggle of everyday people, NDN and the New Policy Institute offer up some of our recent work as background:

• Keeping the Focus on the Struggle of Everyday People: 2010 Edition by Simon Rosenberg, January 26, 2010, The Huffington Post – Simon offers an important, updated narrative on crafting a national agenda focused on the ongoing struggle of everyday people. This version also links to important charts and graphs on the NDN website.

• Prominent Senators Offer Proposal to Cut Payroll Tax, Create Jobs, January 26, 2010 – In column in The New York Times, Senators Schumer and Hatch promote a proposal, similar to that advanced by NDN Globalization Initiative Chair Dr. Robert Shapiro, to exempt a portion of the payroll tax on new hires in order to spur job creation.

• Crafting an American Response to the Rise of the Rest by Simon Rosenberg, January 21, 2010 – This essay written for Salon lays out three strategies for the Obama Administration to craft a comprehensive response to the new politics and global economy of the 21st century.

• The Path to More Jobs and Growth by Dr. Robert Shapiro, January 20, 2010 – Shapiro examines a Congressional Budget Office report illustrating the effectiveness of his proposed payroll tax cut for new hires. He also argues that a new strategy is needed to ensure we do not have another disappointing economic expansion.

• A Lost Decade for Everyday Americans by Jake Berliner, December 17, 2009 – This white paper advances the argument that everyday Americans have just been through a lost decade, marked by stagnating wages and declining incomes, a key factor in explaining the virulence of the Great Recession. 

We hope you find these materials helpful in your thinking on some of the most important issues of our day.

Yesterday, Massachusetts voters, Democratic by a 3 to 1 margin, elected Republican Scott Brown to fill the seat formerly occuped by Democratic lion, Ted Kennedy.  It is truly a shot from the Bay State heard round the world.  However, it need not spell disaster for the Obama Administration providing the Administration interprets it correctly.  Here are six lessons from the vote that the Administration absolutely needs to internalize.

It was not about Martha Coakley.  Contrary to some spin that is emerging Martha Coakley was a strong candidate and the real deal for Massachusetts Democrats.  Her mother was one of twelve in a working class Irish family.  One of five, herself, she worked her way up to Attorney General and handily beat Rep. Michael Capuano in a hotly election that hyperpolitical Massachusetts pols had been anticipating for years.  She was coasting to a landslide right up to the Senate Vote on healthcare.

It was and is about the Healthcare bill.  Brown managed to make the race a referendum on the health care bill and Democratic governance and Coakely gave the impression she would go along with the leadership. The American people--as this vote should make clear--don't like the health care bill.  They don't like the process and they don't like its content.   Had Democrats crafted a bill able to get at least a few Republican votes, one that cured the obvious problems of portability and exclusion of pre-existing conditions, had no individual mandate and did not tax health care while claiming to lower its cost, neither Coakley nor the President would have seen their poll numbers collapse. 

It was about the voters.  Scott Brown won not because of anything elected officials--or Fox Commentators did or said but because of how voters feel.   The voters, genuinely angry, are the obstacle to health care and the Administration's course, not the machinations of any politicians, other intermediaries or people in the media.  It is the people who are unhappy about this health care bill and what it signifies.  Democrats need to face this fundamental truth.

It was about Democratics and Independents, not Republicans.  In a state with 3 to 1 Democratic registration, Scott's win, moreover, had nothing to do with Republicans who were practically bystanders.  The revolt was by Democrats and, to a degree, Independents in this bluest of blue states.  Democratic voters did publicly what Democratic legislators have only been willing to do privately, voice their disatisfaction with a bill they don't like.   The problem for the Administration and Congress is not with Republicans, but with their own voters.

If you go partisan, you better get it right.  The partisan strategy has a fatal flaw--you are on the hook for every letter and word of a law and can't blame it on compromise with the other party.  If the Democrats had managed to get at least one Republican vote, voters might not have blamed them exclusively for provisions of the bill they don't like.  Instead, acting alone, they have come up with two bills that fail to satisfy.  The partisan strategy exposes a party that employs it to total responsibility for what they produce. 

Finally, it's about the economy.  As Simon argues below, the single greatest problem facing America today has to do with jobs and wages and people want their leaders to solve it.  To justify so much effort on health care as opposed to the economy in a time of double digit unemployment, the Administration has tried to argue that high health care costs are hurting the economy and hurting family budgets.  In fact, health care costs have little to do with the cyclical state of the economy that (as one learns in Economics 101) determines employment and economic well being.  The public quite simply isn't buying.  The second argument that health care costs eat into budgets is true.  However, few Americans believe either the House or Senate bill will address this.  Further, Americans want to choose their level of health care, more, less or none (unless it is free)--the reason they oppose elements of this plan like the health care tax and individual mandate.  Most Americans view the health care debate as a distraction from what they want right now: jobs and a return to prosperity.

Will the Democrats absorb these lessons?  That is the crucial question.  The time to change course is now, not in November.  The Democrats should pass a stripped down health care bill as quickly as possible, if they can, that does what the people want--provides portability and ends exlusions, shorn of complex and controversial provisions that people don't like.  The Administration should then focus on that elements of the economy people want fixed--more jobs with rising wages  The latter isn't easy.  But it is critical.  On the two legislative items next on the agenda, financial reform and energy, Democrats ned to reach across the aisle to find Republican votes. 

True, Republicans will probably resist these changes so as to keep the anti-Democrat momentum alive.  That only proves how important changing course now really is.  The alternative, staying the course that led to last night's election shock will only lead to more elections like that in Massachusetts this fall.

The perennial question of whether America is in decline is back.  It’s the subject of new books and the cover story of the Atlantic Monthly, where James Fallows does his usual credible job with it.   For declinists, the forces animating the current sense of national malaise about the future are everywhere, from the chronic disrepair of our infrastructure and the sad state of public education, to soaring public debt and the quagmires of our foreign wars.  On top of these dismal matters, there’s growing inequality and social polarization, and the failures of most important institutions, from the press and leading universities to, of course, Congress and Wall Street.  Fallows paints a dreary picture.  But he’s also impressed, and properly so, with American society’s flexibility and openness to new people -- from obscure origins here and immigrants from everywhere else – with new ideas, new technologies, new ways of conducting business, and new ways of living what almost everyone else in the world would call the good life.  He figures that these qualities are enough to meet any difficulty -- but for a political system that seems unable to address any serious challenge. 

Fallows is right about almost all of this, as far he goes.  Unfortunately, that’s not nearly far enough.  The analysis, along with most of what’s said in Washington these days, misses how much the context of America’s problems has gone global over the last generation.  It’s most obvious in the economic sphere, where the financial meltdown, problems creating jobs, even our soaring public debt are all intertwined with globalization.  The housing bubble, for example, drew on global dynamics driving up all asset prices.  That’s why housing bubbles appeared not just here, but around the world –and one is just getting started now in China, with housing prices in Shanghai and Beijing jumping 50 percent in the last year.  And it was global institutions drawing on global savings that drove the explosion of the financial instruments and their derivatives around this bubble.

The problem with jobs is also one that Washington policymakers can’t understand, much less solve, until they begin to view it in its true, global context.   A generation of sweeping economic reforms across most of Asia, Eastern Europe and much of Latin America, along with huge transfers of new technologies and entire business organizations from the West to everywhere else, produced tens of thousands of new businesses around the world.  For at least a decade, they’ve been competing with our own companies and workers, either directly or indirectly in their own home markets.  When competition becomes turbo-charged like this, everybody has to figure out how to cut costs – and in countries where most workers earn decent livings, like America, those cuts start with jobs and wages.  So, the answers to our jobs problem will have to be a lot more complicated than a new tax break for small businesses or ecologically-fashionable sectors.  

Everywhere we look, the problems and the opportunities that America faces involve our relationships with the rest of the world.  We will never manage a transition to a low-carbon economy with simply own ingenuity and grit – and why should we, when by definition, the climate problem and its solutions are entirely global.  Similarly, the notion that the President, Congress and the Pentagon, among themselves, can work out the “solution” to Afghanistan – as the last administration recklessly imagined it could with Iraq – is one that would be taken seriously only on Fox news.  And if, as most of us suspect, great social and economic opportunities lie in the wired world of broadband and wideband, 3G and 4G, their true potential can only be tapped and managed on a global basis.  

So, the challenges we face are not about the prospect of America’s decline at all.  They’re about the rise of the rest of the world and our capacity to understand and operate in a genuine global context. 

In his weekly address, President Obama discusses the struggle that everyday people have been and are currently going through, and how health insurance reform is a key piece of a new foundation. He specifically focuses on reforms that will take effect in the first year after reform passes. Take a look:

In December, NDN made the decision that the most appropriate term to describe the last decade was as a lost decade for everyday Americans. I blogged on this topic on December 3 and published a white paper on December 17 entitled, A Lost Decade for Everyday Americans.

Since that time, the lost decade narrative has been discussed in a variety of other sources. On Saturday, Neil Irwin in the Washington Post covered the lack of job growth over the last decade:

It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism -- there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable.

There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well.

Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 -- and the number is sure to have declined further during a difficult 2009. The Aughts were the first decade of falling median incomes since figures were first compiled in the 1960s.

Paul Krugman called the decade a “Big Zero,” and yesterday, the New York Times editorialized on the need for the next decade to avoid looking like Japan’s Lost Decade and worried that not enough is being done to avert such a scenario. 

Thankfully, 2009 ended better than it began. Economists talk about green shoots of recovery taking hold. Consumer confidence has improved. Equity markets have soared. But for all the progress, the American economy remains extremely vulnerable.

To understand those economic risks, it is worth considering Japan’s experience in the 1990s. A bursting housing bubble there sparked a banking crisis that was followed by a decade of economic stagnation.

The Japanese government lacked the resolve to do what was necessary. It failed to fix its banks and stopped its early fiscal stimulus before recovery had taken hold, leaving the economy all too vulnerable to outside shocks, including the Asian currency crisis and the dot-com collapse in 2001. Japan’s annual growth rate — which had averaged 4 percent since 1973 — slowed to less than 1 percent, on average, from 1992 to 2003.

While obvious, it bears repeating that American economic policy must, first, account for fact that the last decade was already lost for everyday Americans, and, second, do everything to avoid another one. The economic, social, and political consequences of back-to-back lost decades would be catastrophic, and such a scenario is a legitimate possibility. 

Note:  Ordinarily, I write about clean technology matters, but the Senate health care vote today is so important to the country's future that I want to weigh in on the issue.  In my view, certain provisions of the bill raise grave issues. There is still time, however, by fixing key provisions, to make a better bill and prevent political disaster.  In casting their votes today, members of the Senate should make it clear that they reserve the right to modify this version of the bill in the final House and Senate package.

This morning, Christmas Eve, at 7AM, the Senate is expected to vote on party lines to pass a Health Care bill. All Democrats and two independents will vote for.  All Republicans will vote against.  The bill will pass but not in the way that anyone likes to see important legislation advance.

It is no secret that opponents of the bill have been virtually on the point of taking up arms. Supporters from Democratic leaders to Paul Krugman in the New York Times have generally argued that the bill has issues but contains more good than bad.  It caps a period that has been among the worst for any political party in recent history, sending President Obama's approval ratings plummeting from overwhelming positive to below 50%, the generic Democratic Republican matchup from about +10 to -9 and Congressional approval ratings lower.  Harry Reid is now trailing in polls in his home state.  In short, the bill has already exacted a high price from Democrats but is likely to exact an even greater price this fall. 

Here is how to improve the bill and stave off a political and policy disaster.

First, the bill has some features that enjoy broad support, notably a Patient's Bill of Rights that prevents exclusion for pre-existing medical conditions.  This is good policy and good politics.  This alone would have been a major accomplishment and political winner for the Obama Administration.  Unfortunately, this positive element has been lost in discussion of other elements of the bill. Two provisions, both of which punish key progressive constituencies, stand out as so deeply flawed they should be deal killers.  If the majority party is to recover from this chapter in political history, it must remove these provisions from the final House Senate version of the bill.

First, both the House and Senate bills force all Americans to purchase insurance from a private company or face the legal consequences.  President Obama campaigned against this idea, the so called individual mandate, which owes its existence in both the House and Senate bills to the relentless pressure of insurance company lobbyists.  The impact of this provision will fall most heavily on the young, poor and minority who have the least money to purchase health insurance and the least organizational skills to comply with a federal mandate.  Bruce Western at Harvard University who studies criminal justice has shown that the huge expansion of prison population in recent years has occurred among minorities locked up for the most part for administrative crimes like missing court dates not traditional common law offenses.  Once in the system, they no longer have a shot at upward mobility and often see their lives spiral downwards.  The health mandate will create a new category of offense that will disproportionately impact the young and poor.  More fundamentally, however, forcing American citizens to write a check every month to the Aetna corporation for the privelege of turning 18 runs deeply counter to the American tradition of freedom.   The provision which has so deeply troubled liberals like Howard Dean must be dropped from the final bill.

Second, the bill imposes a tax on good quality health care plans.  This is baffling politically as it targets union workers, a mainstay of the Democratic party--as well as anyone who has what the bill is supposed to provide.  The union struggle for quality health care has been at the center of the fight for social equality for more than a Century.  Taxing union benefits is deeply punitive to the labor cause as it will not only take money away from members but have the secondary effect of making it harder to organize.  Anyone with quality healthcare will instantly see a decline in their welfare from the bill.  More fundamentally, however, normally, one levies excise taxes on undesirable things, for example, cigarettes and alcohol.  Indeed, taxes on "bads" impacting health such as tanning salons which subject people to UV rays make sense in a healthcare package.  Taxing quality health care plans, in contrast, as the Senate has done in a bill designed to provide just that is not only counter-intuitive but imposed in place of a general tax or one on the wealthy, deeply regressive.  This provision, not present in the House bill, must be dropped in any final bill.

One can debate the political wisdom of pushing ahead with a bill that the American public so disklikes.  However, that debate is over.  The task now is to change the bill so that there is less to dislike, allowing the parts that do work to stand on their own and make the bill better as a result. 

In short, it is late in the game but not too late to fix these two flawed provisions. Failure to do so will have steep policy and political consequences.  Fixing them is not only good policy but good politics. 

NDN President Simon Rosenberg just sent out this note alerting people to the release of a new paper from NDN:

In recent weeks, policymakers in Washington have begun to take a new look at the American economy and the increasing struggle of everyday people in this new era of globalization. 

To help inform this conversation, NDN will be releasing a series of targeted "white papers" over the next few months designed to highlight particularly significant aspects of this important debate.  

We proudly release the first in this series, A Lost Decade for Everyday Americans.  This new paper, written by Jake Berliner, Deputy Policy Director of NDN’s Globalization Initiative, makes the point that over the last ten years the typical American family has seen their incomes decline; and, that for many, economic hardship had come long before the recent recession began. 

Read the paper here on the NDN website.

Best regards,
Simon Rosenberg
President, NDN

From the introduction:

To ensure the success of the economic strategy the government adopts next year, it is imperative that the plan accounts for and explains the underlying economic weakness that affected everyday Americans in the years prior to the Great Recession. As this paper illustrates, this past decade in America has been a lost decade for ordinary Americans.

Marked by stagnating wages, declining median household income, rising living costs, abnormally slow job creation, and then capped by the destruction of many trillions of dollars in personal wealth held in housing and stocks, the decade has left most everyday Americans worse off than they were ten years ago. Too little of our national dialogue has focused on the intense struggle of everyday people prior to the Recession, yet understanding that struggle is critical to formulating an adequate response to this great economic challenge.

Read on.

Friday’s unemployment report of fewer jobs lost than expected surely beats the alternative, but that does not mean that the employment situation will improve significantly anytime soon. What it hopefully means is that things won’t get dramatically worse, although that certainly can’t be ruled out.

Calculated Risk, perhaps the most prolific chart maker and data analyst of all economics blogs, presents an analysis on the potential speed of the employment recovery. These estimates are based on Okun’s Law (an established relationship between GDP growth and job creation):

In the 2010 budget, OMB projects real GDP growth of 3.5 percent from the fourth quarter of this year to next, meaning that, if Okun’s law were still operable, we’d be somewhere in the mid to high 9 percent unemployment range at the end of next year. (The Federal Reserve sees similar numbers.)

Having said that, many leading economists, including NDN’s Rob Shapiro and the Director of the National Economic Council Larry Summers, have argued that Okun’s law has broken down, making the relationship between GDP growth and employment weaker, which means these projections may be - sadly - optimistic. 

UPDATE: For more on NDN's Lost Decade narrative, read the new NDN White Paper entitled, "A Lost Decade for Everyday Americans."

With the White House Forum on Jobs and Economic Growth getting underway, now is a good time to note that the problem isn’t just jobs. As we’ve long argued and the Wall Street Journal pointed out recently, the last decade has been a lost one for everyday Americans. First, we generally note that, even as GDP and productivity surged, household income didn’t keep up. In fact, the average household income took more than a $2000 loss during the Bush presidency. 

A second point, illustrated by the Wall Street Journal, is that private sector employment has basically not grown in a decade.

It is difficult to understand how bad this recession has been without fully understanding the pre-recession weakness of the American consumer caused by dropping incomes and higher costs. NDN’s Dr. Rob Shapiro – who is at the White House Forum right now – has agued that structural dynamics in the American economy have broken down its job creation and wage growth capability. For NDN’s latest thinking on these important issues, please consult:

I enjoyed this latter section of the President's speech last night. It is perhaps the clearest holistic indication to date of his view of America's role in the world:

As President, I refuse to set goals that go beyond our responsibility, our means, or our interests.  And I must weigh all of the challenges that our nation faces.  I don't have the luxury of committing to just one.  Indeed, I'm mindful of the words of President Eisenhower, who -- in discussing our national security -- said, "Each proposal must be weighed in the light of a broader consideration:  the need to maintain balance in and among national programs."

Over the past several years, we have lost that balance.  We've failed to appreciate the connection between our national security and our economy.  In the wake of an economic crisis, too many of our neighbors and friends are out of work and struggle to pay the bills.  Too many Americans are worried about the future facing our children.  Meanwhile, competition within the global economy has grown more fierce.  So we can't simply afford to ignore the price of these wars.
...

But as we end the war in Iraq and transition to Afghan responsibility, we must rebuild our strength here at home.  Our prosperity provides a foundation for our power.  It pays for our military.  It underwrites our diplomacy.  It taps the potential of our people, and allows investment in new industry.  And it will allow us to compete in this century as successfully as we did in the last.  That's why our troop commitment in Afghanistan cannot be open-ended -- because the nation that I'm most interested in building is our own.

Now, let me be clear:  None of this will be easy.  The struggle against violent extremism will not be finished quickly, and it extends well beyond Afghanistan and Pakistan.  It will be an enduring test of our free society, and our leadership in the world.  And unlike the great power conflicts and clear lines of division that defined the 20th century, our effort will involve disorderly regions, failed states, diffuse enemies.

So as a result, America will have to show our strength in the way that we end wars and prevent conflict -- not just how we wage wars.  We'll have to be nimble and precise in our use of military power.  Where al Qaeda and its allies attempt to establish a foothold -- whether in Somalia or Yemen or elsewhere -- they must be confronted by growing pressure and strong partnerships.

And we can't count on military might alone.  We have to invest in our homeland security, because we can't capture or kill every violent extremist abroad.  We have to improve and better coordinate our intelligence, so that we stay one step ahead of shadowy networks. 

We will have to take away the tools of mass destruction.  And that's why I've made it a central pillar of my foreign policy to secure loose nuclear materials from terrorists, to stop the spread of nuclear weapons, and to pursue the goal of a world without them -- because every nation must understand that true security will never come from an endless race for ever more destructive weapons; true security will come for those who reject them. 

We'll have to use diplomacy, because no one nation can meet the challenges of an interconnected world acting alone.  I've spent this year renewing our alliances and forging new partnerships.  And we have forged a new beginning between America and the Muslim world -- one that recognizes our mutual interest in breaking a cycle of conflict, and that promises a future in which those who kill innocents are isolated by those who stand up for peace and prosperity and human dignity. 

And finally, we must draw on the strength of our values -- for the challenges that we face may have changed, but the things that we believe in must not.  That's why we must promote our values by living them at home -- which is why I have prohibited torture and will close the prison at Guantanamo Bay.  And we must make it clear to every man, woman and child around the world who lives under the dark cloud of tyranny that America will speak out on behalf of their human rights, and tend to the light of freedom and justice and opportunity and respect for the dignity of all peoples.  That is who we are.  That is the source, the moral source, of America’s authority.

Since the days of Franklin Roosevelt, and the service and sacrifice of our grandparents and great-grandparents, our country has borne a special burden in global affairs.  We have spilled American blood in many countries on multiple continents.  We have spent our revenue to help others rebuild from rubble and develop their own economies.  We have joined with others to develop an architecture of institutions -- from the United Nations to NATO to the World Bank -- that provide for the common security and prosperity of human beings.

We have not always been thanked for these efforts, and we have at times made mistakes.  But more than any other nation, the United States of America has underwritten global security for over six decades -- a time that, for all its problems, has seen walls come down, and markets open, and billions lifted from poverty, unparalleled scientific progress and advancing frontiers of human liberty. 

For unlike the great powers of old, we have not sought world domination.  Our union was founded in resistance to oppression. We do not seek to occupy other nations.  We will not claim another nation’s resources or target other peoples because their faith or ethnicity is different from ours.  What we have fought for -- what we continue to fight for -- is a better future for our children and grandchildren.  And we believe that their lives will be better if other peoples’ children and grandchildren can live in freedom and access opportunity.  (Applause.)   

As a country, we're not as young -- and perhaps not as innocent -- as we were when Roosevelt was President.  Yet we are still heirs to a noble struggle for freedom.  And now we must summon all of our might and moral suasion to meet the challenges of a new age. 

In the end, our security and leadership does not come solely from the strength of our arms.  It derives from our people -- from the workers and businesses who will rebuild our economy; from the entrepreneurs and researchers who will pioneer new industries; from the teachers that will educate our children, and the service of those who work in our communities at home; from the diplomats and Peace Corps volunteers who spread hope abroad; and from the men and women in uniform who are part of an unbroken line of sacrifice that has made government of the people, by the people, and for the people a reality on this Earth.