by Bill Clinton
THIS IS A BORZOI BOOK
PUBLISHED BY ALFRED A. KNOPF
Copyright © 2011 by William Jefferson Clinton
All rights reserved. Published in the United States by
Alfred A. Knopf, a division of Random House, Inc., New York,
and in Canada by Random House of Canada Limited, Toronto.
www.aaknopf.com
Knopf, Borzoi Books, and the colophon are registered
trademarks of Random House, Inc.
Due to limitations of space, permissions to reprint previously
published material can be found following the acknowledgments.
Library of Contress Control Number: 2011940942
eISBN: 978-0-307-95976-8
Jacket photograph by Andrew Hetherington, 2011/Redux
Jacket design by Carol Devine Carson
v3.1
To the millions of good people who are looking for the
chance to be part of America’s recovery, and their own.
CONTENTS
Cover
Title Page
Copyright
Dedication
Introduction
PART I / Where We Are
1. Our Thirty-Year Antigovernment Obsession
2. The 2010 Election and Its Place in the History of Antigovernment Politics
3. Why We Need Government
4. So What About the Debt?
5. How Are We Doing Compared with Our Own Past and with Today’s Competition?
PART II / What We Can Do
6. How Do We Get Back in the Future Business?
Epilogue: Time to Choose
Acknowledgments
Other Books by This Author
Charts
INTRODUCTION
I WROTE THIS BOOK BECAUSE I love my country and I’m concerned about our future. As I often said when I first ran for president in 1992, America at its core is an idea—the idea that no matter who you are or where you’re from, if you work hard and play by the rules, you’ll have the freedom and opportunity to pursue your own dreams and leave your kids a country where they can chase theirs.
That belief has a tenuous hold on the more than fifteen million people who are unemployed or who are working part-time when they need full-time jobs to support themselves and their families. And it must seem downright unreal to the growing number of men and women who’ve been out of work for more than six months and can’t even get interviews for job openings, as if they’re somehow to blame for becoming casualties of the worst recession since the Depression.
Work is about more than making a living, as vital as that is. It’s fundamental to human dignity, to our sense of self-worth as useful, independent, free people. I earned my first money mowing lawns when I was twelve. At thirteen, I worked in a small grocery store and set up a used-comic-book stand on the side. By the time I finished college, I’d made a little money doing seven other things. By the end of law school, seven more. Over the last four decades, nine more, not counting my foundation and other philanthropic work. Most of my early jobs didn’t last long. I didn’t like them all. But I learned something in every job—about the work, dealing with people, and giving employers and customers their money’s worth.
I came of age believing that no matter what happened, I would always be able to support myself. It became a crucial part of my identity and drove me to spend a good portion of my adult life trying to give other people the chance to do the same thing. It’s heartbreaking to see so many people trapped in a web of enforced idleness, deep debt, and gnawing self-doubt. We have to change that. And we can.
In these few pages, I’ll try to explain what has happened to our country over the last thirty years, why our political system hasn’t done a better job of meeting our challenges, and why government still matters and what it should do. I’ll do my best to clarify what our choices are to revive the economy and deal with our long-term debt, and I’ll argue that the looming debt is a big problem that can’t be solved unless the economy starts growing again. And I don’t mean the kind of jobless, statistical growth of the first decade of the twenty-first century, with stagnant wages, rising poverty, crippling household debt, and 90 percent of the income growth going to the top 10 percent. I want American Dream growth—lots of new businesses, well-paying jobs, and American leadership in new industries, like clean energy and biotechnology.
Unless we restore robust economic growth, we’ll be stuck in this economy for years, and nothing we do will solve the longer-term debt problem, regardless of how we try to do it.
In short, we’ve got to get America back in the future business.
PART I
Where We Are
CHAPTER 1
Our Thirty-Year
Antigovernment Obsession
I DECIDED TO WRITE THIS BOOK after the 2010 midterm election not because my party took a beating, but because of what the election was about. The bad economy, the high cost of keeping the recession from falling into full-scale depression, the fact that the recovery had not yet begun to improve many lives—all these ensured that anger and anxiety would be at high tide on Election Day, and that’s always bad news for the party in power.
What troubled me is that with so many people hurting and so many challenges to be faced, the election season offered few opportunities for a real discussion of what went wrong, what the president and Congress had actually done or failed to do in the previous two years, what the two parties proposed to do in 2011 and 2012, and what the likely consequences would be in the short and long runs. Nor was there much of substance said on the larger issues on which these questions would have an impact: How do we propose to restore and maintain the American Dream at home? How do we ensure America’s economic, political, and security leadership in the more competitive, complex, fragmented, and fast-changing world of the twenty-first century?
Instead, the election seemed to occur in a parallel universe of inflated rhetoric and ferocious but often inaccurate attacks that shed more heat than light. The Republicans seemed to be saying that the financial crash and the recession that followed, as well as the failure of the United States to fully recover from it less than eighteen months after the economy bottomed out, were caused by too much government taxing, spending, and regulating, and that all would be well once we cut the cancer of government out of our lives and pocketbooks. They portrayed Democratic congressional incumbents and the president as big-government liberals who had brought America to the edge of destruction and, if given two more years, would push us over into the abyss.
The attack proved to be very effective in the election, but I thought it was all wrong. First, the meltdown happened because banks were overleveraged, with too many risky investments, especially in subprime mortgages and the securities and derivatives that were spun out of them, and too little cash to cover the risks. For example, Bear Stearns was leveraged at thirty-five to one when it failed; traditionally, commercial bank lending is leveraged at ten or twelve to one, investment banking a bit more. In other words, there was not enough government oversight or restraint on excessive leverage.
Second, the meltdown did not become a full-scale depression because the government acted to save the financial system from collapse. The Federal Reserve made massive investments of about $1.2 trillion to stop the financial collapse, including buying securities and guaranteeing loans. The often-derided Troubled Asset Relief Program (TARP) was originally authorized to spend up to $700 billion and spent a bit over $400 billion. Most of the TARP money has been paid back, with only $104 billion still outstanding. In a July 8, 2011, Washington Post article, Allan Sloan and Doris Burke estimated that the final cost of the TARP program would be just $19 billion and cited an analysis in Fortune magazine concluding that the Federal Rese
rve’s income on its investments would produce a net profit for the taxpayers on the bailout of between $40 billion and $100 billion.
Third, according to most economic studies, the stimulus, along with the rescue and restructuring of the auto industry, succeeded in keeping unemployment 1.5 to 2 percent lower than it would have been without it. Of course, the stimulus didn’t restore the economy to normal levels. It wasn’t designed to. You can’t fill a several-trillion-dollar hole in the economy with $800 billion. The stimulus was designed to put a floor under the collapse and begin the recovery. More than a third of the money funded a cut of about $800 per family in withholding taxes for 95 percent of American families, whose incomes had increased modestly or not at all in the nearly eight years before the crash. Many people needed the money for necessities. About 30 percent of the money was sent to state and local governments to prevent larger layoffs of teachers, health workers, police officers, and other state and local employees. That part of the stimulus must have worked: After the funding ceased, state and local government payrolls declined by more than half a million people.
Only a third of the stimulus money went into direct jobs projects, mostly roads, bridges, and other infrastructure construction; and into incentives, loans, and grants to increase the manufacturing of new clean-energy products and more energy-efficient technologies. For example, between January 2009, when President Obama was inaugurated, and Election Day 2010, the United States had gained thirty new battery plants, built or under construction, increasing America’s share of the world market for the batteries that power hybrid and all-electric vehicles from 2 percent to 20 percent in less than two years. We’ll have the capacity to fill 40 percent of the market by 2014, if the incentives are maintained.
In other words, the crash occurred because there was too little government oversight of and virtually no restraint on risky loans without sufficient capital to back them up; the recession was prevented from becoming a depression because of a government infusion of cash to shore up the banking system; and the downturn hurt fewer people because of the stimulus, which supplemented wages with a tax cut, saved public jobs, and created jobs through infrastructure projects and incentives to create private-sector jobs, especially in manufacturing.
The success of the Republicans’ antigovernment attack was doubly surprising to me, because of their own record over the previous eight years. They cut taxes and increased spending at roughly twice the rate it had increased during my eight years in office, creating few new jobs but ending four years of balanced budgets and surpluses and doubling the national debt even before the financial meltdown. And, of course, they also regularly voted to raise the debt limit so they could continue to borrow and spend, a practice I had worked hard to end.
When the Democrats regained a majority in Congress in 2007, they inherited an already severe mortgage crisis and very weak job growth. By the time President Obama was inaugurated, we had been in a recession for more than a year, and the financial crash in September 2008 had turned it into the worst downturn since the Depression, sending both the annual deficit and the total national debt even higher. Something had to be done to stop the decline. Immediately, the antigovernment movement reversed course. After eight years in which the Republicans had increased spending at a rapid rate, they opposed spending by the new president and Congress to put a floor under the recession, and they began blaming the Democrats for the explosion of debt caused by their own policies and the crash.
ONE OF THE MOST INTERESTING THINGS to me is how easy it was to persuade so many Americans, even those who rely on government programs, to join in the government-bashing. One congressman was captured on camera looking dumbfounded at a town hall meeting on health-care reform when an angry constituent shouted that he didn’t want the government “messing with my Medicare”! In Arkansas, which has a large agricultural economy, farmers who had always lobbied hard for agricultural supports voted against the first Arkansan ever to chair the Senate Agriculture Committee, Senator Blanche Lincoln, because she was for “too much government.” As far as I could tell, her main contributions to “big government” were sponsoring a big increase in nutrition aid for poor children, which also helped farmers; passing an amendment to the financial reform bill that requires the derivatives sold by traders on Wall Street to be as transparent and financially sound as the agricultural derivatives farmers buy to hedge against losses from yields or prices that are too low; and saving more than a thousand factory jobs by insisting that the federal government enforce the rules against unfair trade practices. And she voted for the health-care bill, which postelection analysis showed cost Democrats in Republican-leaning areas about 6 percent of the vote. I think it was the right vote, especially for a state like Arkansas, with lots of uninsured small businesses and working families who will now be able to afford health insurance. But on Election Day, it looked like too much government.
Now, in 2011, Republicans and Democrats in Congress and in the White House are locked in a pitched battle over how and how much to cut our annual deficit at a time when our economic recovery remains shaky. Republicans say they will tolerate no new taxes, even on upper-income individuals who reaped almost all the income gains of the last decade (90 percent to the top 10 percent; more than 60 percent to the top 1 percent and more than 20 percent to people with incomes over $9 million), with multiple tax cuts, to boot. They opposed the stimulus in part because the tax cuts only went to the bottom 95 percent. For months, they threatened to refuse to raise the debt limit, which allows the government to borrow money to pay bills it has already incurred, a move that would further harm the recovery. If we ever refused to honor our obligations, the government’s credit rating would be downgraded. Americans would pay higher interest rates across the board, on credit card purchases and on small-business, home mortgage, car, and college loans. The government’s annual interest payments on our national debt would also rise, further increasing the deficit.
For reasons that are unclear, the president and the Democratic Congress did not raise the debt ceiling after the election, in November or December 2010, when they still had a majority. Given that fact, as well as the president’s duty to go the extra mile to avoid a default, the last-minute agreement in early August 2011 between the House Speaker, both Senate leaders, and the White House to raise the debt limit in return for $2.5 trillion in budget cuts over a decade and no new revenues could have been a lot worse. It requires $1 trillion in spending cuts over the next decade, followed by an agreement early in 2012 to cut $1.5 trillion more, after Congress gets recommendations from a twelve-member committee of its members, made up of six senators and six representatives, equally divided by party. Democrats won the concession that Medicare, Medicaid, Social Security, and a planned increase in Pell Grants1 would be exempt from the first round of cuts, a mixed blessing. And in the first year, 2012, only $21 billion of the $1 trillion will be cut, a concession to the weakness of the economy.
The whole debt ceiling/deficit reduction debate process was an extreme example of why Mark Twain said the only two things people should never watch being made are sausage and laws. To the outside world, the United States looked weak and confused, completely in the grip of the antigovernment zealots in the House Republican caucus, with Democrats unable to use their Senate majority to pass a bigger, more balanced plan of cuts and taxes, because they hadn’t raised the debt ceiling when they had the chance and the antigovernment ideologues were willing to default on our debt to get their way. Representative Michele Bachmann, a Tea Party favorite, even endorsed a default, describing it as a needed dose of “tough love.”
SHORTLY AFTER THE AGREEMENT WAS ANNOUNCED, one rating agency, Standard & Poor’s (S&P), downgraded America’s long-term credit rating anyway. The decision was criticized in many quarters because no one doubted the ability of the United States to pay its debts. The nation has total assets valued at just under $60 trillion. Progressive commentators blasted the decision as hypocritical, because S&P, along with
other rating agencies, consistently gave high ratings to the subprime mortgage securities that were far riskier than U.S. Treasury bonds. Some wondered whether S&P’s double standard was rooted in the fact that the rating agencies are financed by payments from the securities industry. Others said that S&P erred in concluding that the debt deal was too small to “stabilize the government’s medium-term debt dynamics” because the agency overstated the size of the debt by $2 trillion.
S&P stated clearly that what really upset it was the politics of Washington, the slow recovery from the recession, and the fact that over the next few years debt in several wealthy countries is projected to go down as a percentage of GDP but the U.S. debt probably will not do so, mostly because the United States, alone among wealthy nations, has had no effective restraint on health-care costs. Above all, S&P thinks America’s politics have become dysfunctional. Their assessment sounds like Mark Twain’s comparison of lawmaking to sausage-making—on steroids, and without the humor.
I HAVE STARTED AND STOPPED this project several times over the last few months because politics is no longer the center of my working life and I don’t want just to add another stone to the Democratic side of the partisan scale.
I decided to go forward because I think it’s important that all Americans have a clear understanding of the basic economic facts and of the ideas driving the policy proposals under discussion. For example, even though I strongly favor a multiyear plan to bring our budget back into balance, if we cut spending or raise taxes a lot when the economy is still weak, it will slow down economic recovery. Unlike the situation in 1993, when my deficit reduction plan sparked a substantial drop in interest rates and a big increase in private investment, interest rates today are already near zero. So in the short run, a big cut in spending could even increase the annual deficit, because tax revenues might decrease even more than government spending is cut. The problem today is weak demand for new goods, services, and labor, reinforced by the huge drag of the unresolved home mortgage crisis.