by Bill Clinton
But we can’t get the right answers if we begin with the wrong question. How can we weaken our government, reduce its revenues, and restrict its reach so we can throw off its chains? That’s the wrong question. We’ve been asking it too long.
Here are the right questions: How can we move back to a full-employment economy with good jobs and rising middle-class incomes? How can we restore American leadership for peace and prosperity and leave our children and grandchildren a brighter future? What do Americans need government to do to achieve these goals? How are we doing now, compared with our own history and expectations? How are we doing compared with the competition from other nations? As you’ll see, there remains a lot of space for a real, productive debate, areas in which both Democrats and Republicans could contribute to bipartisan solutions that actually get our country back in the future business.
In a positive political environment, liberals and conservatives could learn from each other and advance the public interest. Liberals want to use the government to solve problems and are usually eager to experiment, believing, like Robert Browning’s Andrea del Sarto, that “a man’s reach should exceed his grasp.” True conservatives are more cautious, reminding us that if something sounds too good to be true, it probably is. Liberals believe that government can solve social problems, or at least mitigate them. Conservatives believe culture, including a strong work ethic and stable families, matters more. Progressives believe they can advance liberal goals in a way that reinforces positive cultural norms and avoids “too good to be true” options. Libertarians caution against the potential of even well-conceived government initiatives to restrict individual liberty. In the end, we need to take into account all of these perspectives to reboot and rebalance our economy. Today, our process is too tilted in favor of powerful private interests over the public interest, in favor of short-term financial gains over long-term employment and income growth, in favor of consumption over investment, in favor of pushing more of our national income up to the top 1 percent over increasing the incomes of the middle class and giving poor people a chance to work their way into it.
The only people who have taken themselves out of this needed debate are the antigovernment ideologues. They already have the answers, and the fact that the evidence doesn’t support them is irrelevant. The inevitable consequence of their policies is to push the pedal to the metal of the most destructive trends of the last thirty years, to increase inequality and instability, and to forfeit the future.
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1 In the 2005 Energy Policy Act, Congress agreed in effect to insure the nuclear industry against losses in building new power plants, since no private insurance company will issue policies to do so.
2 The student loan reform law will actually cost $60 billion less over ten years than the current system. The bill allocated $40 billion to increasing Pell Grants and other student aid, with the remaining $20 billion applied against the debt. So repeal actually increases the debt!
3 The cuts apparently had no adverse impact on Medicare Advantage. In 2011, a record number of private companies applied to the Department of Health and Human Services to provide the program’s services to seniors.
4 Margot Roosevelt, “Critics’ Review Unexpectedly Supports Scientific Consensus on Global Warming,” Los Angeles Times, April 4, 2011.
5 Bill Clinton, My Life (New York: Knopf, 2004), p. 537.
6 I was one of two governors representing the states in working with the Reagan White House on welfare reform in 1987–88 and with the Bush White House on developing national education goals in 1990. Both efforts were serious, cooperative attempts to solve problems in a way that involved Congress and the states, without regard to party.
7 In the eight years of my administration, health costs increased at about the same rate as overall inflation, and we had an increase in the percentage of Americans with health insurance for the first time in twelve years.
8 The experience of other countries proves the point. Banks in the United Kingdom, Ireland, and Iceland got in trouble without any subprime mortgage securities because they took on too much debt without adequate cash reserves. By contrast, Canada has a unified banking system that stayed strong because banks limited their risks in both commercial and investment operations.
9 See http://www.gpo.gov/fdsys/pkg/GPO-CDOC-107sdoc18/pdf/GPO-CDOC-107sdoc18-1-12-4.pdf.
CHAPTER 3
Why We Need Government
WHAT DO WE NEED A NATIONAL government for in the twenty-first century? According to the antigovernment activists, not much beyond national security and trade deals. Most everything else is seen as interfering with free markets and imposing unnecessary taxes. For the first time since 1995, they seem determined to radically reduce the size of the federal government as much as they can until the voters stop them. After the new antigovernment majority in the House of Representatives began airing their budget-cutting proposals in 2011, Representative Ron Paul was asked if he favored selling off the Grand Canyon. After some hesitation, he said no, then said, “Is that a trick question?” To his credit, he didn’t say yes, but he was suspicious. After all, it’s a national park, the park rangers are government employees, all paid for by our tax dollars. There must be something wrong with it.
I think the role of government is to give people the tools and create the conditions to make the most of our lives. Government should empower us to do things we need or want to do that we can only do together by pooling our resources and spending them in large enough amounts to achieve the desired objectives.
Here’s a list of what that covers today:
1. National security, including the military, intelligence agencies, diplomatic efforts and development assistance, homeland defense, federal law enforcement, border control, natural-disaster response, and the area most recently added to the list by the Pentagon and the CIA, combating climate change.
2. Assistance to those otherwise unable to fully support themselves and to provide a decent retirement for seniors, including Medicaid, Medicare, and Social Security, aid for the disabled, food stamps, unemployment benefits, nutrition aid for newborns and mothers, and public housing.
3. Equal access to opportunity, including federal aid to education for low-income and disabled students, the HOPE Scholarship tax credits for college tuition costs, the student-loan program, Pell Grants, work-study payments, and job-training assistance.
4. Economic development, including trade agreements; financing for businesses to enter new markets; incentives to create new businesses and jobs in advanced manufacturing, clean energy, energy efficiency, and other high-growth areas; investments in basic research and development and incentives for private research and development to be done in the United States; an adequate minimum wage and support for work and child-rearing, including the Family and Medical Leave law and the child tax credit; Small Business Administration–guaranteed, microcredit, and community development loans to promising businesses that would otherwise be shut out of credit markets; financing and other support to help companies sell products made in America in other countries; and incentives to invest in areas of high unemployment and low incomes.
5. Oversight of financial markets and institutions to ensure transparency and honest dealing, competition, and consumer choice and to limit leverage to avoid future collapses and bailouts.
6. Protection and advancement of public interests the market can’t fix, including clean air, clean water, safe food, safe transportation, safe workplaces, civil rights, access to affordable health care, and preservation of natural resources for the common good, including national parks, national monuments, and national forests.
7. Providing investments, through tax or fee revenue, for projects we all need when the costs are too great or the cost recovery period too long for the private sector to finance, including highways, airports, rails, accelerated broadband connections, a national electric grid, and critical research and development in areas from space to advanced mater
ials to nanotechnology and biotechnology to clean energy.
8. A revenue collection system, to collect taxes and issue credits and deductions deemed by Congress to be in the national interest, including tax deductions for home-mortgage payments, charitable giving, health-care payments, children, and many business expenses and deductions.
Now, this is a very long list, though I’ve left many federal activities and programs off for the sake of brevity. But the big ones are there. You may think we should stop doing some of these things. Even if you don’t, there are opportunities to save money. In 2010, Congress updated the Government Performance and Results Act of 1993, requiring the Government Accountability Office (GAO) to identify government programs that have duplicative activities and other areas for cost savings or revenue increases without raising tax rates. In March 2011, the GAO issued its report, detailing areas where several programs are doing the same things, other areas of potential savings, and opportunities to increase revenue through better government enforcement and elimination of duplicative tax credits.
Partial implementation of just two of these recommendations—collecting just one-fourth of the taxes that are owed but unpaid every year, $345 billion, and putting one-third of the approximately $170 billion in no-bid contracts the government approves every year up for competitive bids—could reduce the annual deficit by more than $100 billion a year, or more than $1 trillion over a decade. Over the last fifteen years, switching from no-bid to competitive bid contracts has saved the taxpayers a lot of money, lowering their costs, on average, 25 to 30 percent. Both these changes are harder to make than they sound, but these recommendations and others in the GAO report, even if only partially implemented, could reduce the debt and actually improve performance.
We’re also ripe for a review of the clarity, efficiency, and costs of federal regulation, building on the groundbreaking work Al Gore did with the Reinventing Government initiative or what Erskine Bowles did at the Small Business Administration, where he reduced loan applications from one-inch thick to one page front and back and cut the waiting time for approval from ten to three weeks. President Obama has ordered an ongoing review of regulations and has received the first set of proposed changes, which are designed to save $10 billion and to be especially helpful to small businesses. Congress, with a large bipartisan majority, has already voted to reduce the most onerous small-business reporting requirements in the health-care law.
This is all work that would save taxpayers time and money. A good conservative (or a good progressive!) could have a field day just working through the GAO report and acting on its findings.1
BUT IF YOU THINK THAT TO balance the budget, we should eliminate virtually all government departments, including the Department of Education, the Environmental Protection Agency, the Labor Department and the Occupational Safety and Health Administration, the Securities and Exchange Commission, the Commerce Department, the Energy Department, the National Institutes of Health, the National Science Foundation, the Agriculture Department, the Interior Department, and the national parks—if you’re against them all, you can be a leader in the antigovernment movement’s next struggle! It won’t, however, make you a leader in bringing down the debt that twenty years of combining tax cuts with more spending ran up. Because that’s not where the money is.
And it’s not in foreign aid either. For decades, every time the American people have been asked how to balance the budget, the first thing they say is “Cut foreign aid.” When asked how much of the budget we should spend on foreign aid, people normally say about 10 percent. When asked how much we do spend, they say between 15 and 25 percent. The difference is a lot of money. The problem is that for decades our spending on foreign assistance has been around 1 percent of the budget. That’s where it still is, even with substantial development spending in Afghanistan and Iraq. Almost all other wealthy countries spend a higher percentage of their budget on foreign assistance than we do. In many countries, especially in Africa, China is spending more than we are in absolute terms, building highways, rail systems, and other infrastructure projects in the hope of gaining access to Africa’s metals, minerals, and other materials to fund its growth.
When he was in office, the former secretary of defense Bob Gates, a Republican, repeatedly said that an adequate foreign assistance budget for the State Department is essential to our national security, and he urged Congress not to cut foreign aid. Some of Secretary of State Clinton’s most important work to build a world with more partners and fewer adversaries has involved the wise investment of relatively modest amounts of your tax money to educate and empower women and girls, fund small loans for poor people to start businesses, help developing countries secure needed energy at lower costs, and reduce the enormous toll of death and injury that results from cooking with charcoal by distributing 100 million clean cookstoves.
So what’s a well-intentioned conservative to do? Actually, he or she could do a lot, hopefully with bipartisan support, if willing to take on lobbyists for private contractors—alas, also bipartisan—dedicated to protecting the way foreign aid is spent. Too much of the money appropriated for foreign assistance, sometimes more than 50 percent, never reaches the nations or the people it’s designed to help, largely because it is channeled through U.S. contractors who take a lot of it off the top for overhead and administrative costs both in the United States and in the affected country. If we gave a higher percentage of the money to local governments with proven records of honesty, transparency, and ability, or to locally operating nongovernmental organizations with low overhead costs and proven capacity to do the job, we could educate more kids, save more lives, raise more farmers’ incomes, bring clean water, decent housing, and electricity to more people, and make more friends.
In one African country where my foundation works, a U.S. contractor said it would take six months and cost $3 million to complete a project required before U.S. aid could be released to buy lifesaving drugs. Six months was too long and $3 million too much for the relatively simple project. Our people did it in six weeks for $80,000. Changing this system is a task ready-made for bipartisan reform.
But that’s still not where the money is. Medicare, Medicaid, Social Security, the defense budget, and interest on the debt claim eighty-five cents of every federal tax dollar. The entire rest of the budget, called discretionary nondefense spending, claims only 15 percent. Included in that 15 percent are our investments in the future—in education, infrastructure, clean energy, research. Our quality-of-life budget is also there—in a clean environment, safe food, air traffic control, a safe workplace, and much more.
If you’re an antigovernment activist who wants to do away with all this stuff, you might use the deficit as an excuse to eliminate as much of the 15 percent as you can, but you won’t get rid of the deficit; you’ll probably force increases in state taxes to pick up some of the activities; and you’ll reduce the productivity of our workforce, our rate of economic growth, and our quality of life.
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1 You can find more about the specific examples of deficit reduction possibilities I mention in this chapter and many others besides in the GAO report at http://www.gao.gov/ereport/gao-11-318sp.
CHAPTER 4
So What About the Debt?
EVEN THOUGH OUR IMMEDIATE PRIORITY SHOULD be putting people back to work and restoring healthy economic growth, the rapid increase of our national debt over the next ten to twenty years, if not addressed, will cause us big problems. When I took office in 1993, after the debt had quadrupled since 1981, it was 49 percent of GDP.1 By 2001, after four years of declining deficits followed by four budget surpluses,2 total debt had dropped to 33 percent of GDP and was projected to be eliminated completely by 2013, assuming both the tax structure and PAYGO spending restraints were maintained.
From 2001 to September 2008, tax cuts, spending increases, and weak job growth (fewer taxpayers, more benefits users) doubled the debt again. Then the recession hit, and the tax relief an
d increased spending passed to put a floor under it, plus lower tax receipts and more people eligible for food stamps, medical benefits, and unemployment, added another $3 trillion to the debt. Now it’s up to 69 percent of our GDP and rising.
Of course, when normal economic growth returns and employers start hiring again, the costs associated with surviving the recession will go down and tax revenues will increase. Nevertheless, according to the Congressional Budget Office, with the retirement of the baby boomers, the oldest of whom turn sixty-five this year, and inflation in health-care costs back with a vengeance, the debt is projected to grow to 100 percent of GDP by 2021 and almost 200 percent by 2035.
We can’t let this happen. If it does, interest rates will explode, our GDP will be reduced, and our children’s future will be compromised. There are only three things we can do to turn the debt problem around before it becomes a crisis: restrain spending below current projections, raise taxes, and grow the economy faster. We have to do all three. This chapter is about the first two.
As the bipartisan National Commission on Fiscal Responsibility and Reform, usually referred to as the Simpson-Bowles Commission, has recognized, we shouldn’t take a big bite out of the annual deficit and the total debt until the economy starts to grow again, but as reasonable growth returns, we do need to implement a serious long-term plan to reduce the debt. What should be in it?