Tuesday night’s surprise result in Michigan showed that Americans are fed up with the status quo. While Hillary Clinton is offering little more than business as usual, voters in the state’s Democratic primary ultimately backed Bernie Sanders’ calls for much-needed public investments, lower health care costs and worker empowerment. Indeed, Tuesday night’s results, coupled with Sanders’ strong showing in other contests, reflect a simple reality: Americans want more than a continuation of the same game that Bill Clinton played 25 years ago, and that Obama has continued in his presidency.
The reality is that the United States faces three wrenching economic problems. The first is slow growth. This is no great mystery; the public sector has stopped investing even in the most basic infrastructure, like repairing roads, bridges, dams and waterways. It has not taken the lead in vitally needed low-carbon energy. The near-term infrastructure deficit is on the order of $3.6 trillion, according to the most recent estimates. With no clear investment signals from the public sector, private money sits on the sidelines. Net saving and investment rates have plummeted, and so, too, has long-term growth.
The second is crippling health care costs. The United States spends around 18% of national income on health care, while our competitors in Europe and Asia spend 10% to 12%. The Institute of Medicine studied the problem carefully. The problem is inflated health care costs, huge administrative overheads and waste. Even the White House has noted that as a nation, we could save perhaps 5% of GDP in lower costs, around $900 billion per year, though it produced no realistic plan to achieve the savings.
The third is stagnant wages. This results from a 30-year assault on union power, international investment agreements that empower internationally mobile capital while hurting immobile labor, and technologies that substitute advanced technologies for traditional forms of work. The shocking fact is not the stagnation of wages; the shocking fact is that the government has stood by and done nothing about it for decades.
Hillary Clinton’s answer to all this is the status quo, echoing the approach of both President Clinton and President Barack Obama: Talk about public investment, health costs and wage justice, but in fact do too little about them, instead keeping the alliance with Wall Street, accepting a strong limit on public-sector programs and promising to keep taxes low. Hillary Clinton has waffled on fracking, the now-defunct Keystone pipeline, and international investment agreements that undermine worker and environmental rights.
Remember that it was Bill Clinton who brought Wall Street into the Democratic fold, but at the cost of financial deregulation, privatization of prisons and other public services, a quarter century of financial bubbles, low taxes on the rich, falling public investments, and the off-shoring of jobs. In 1996, Clinton famously declared that “the era of big government is over,” and he meant it.
Obama, alas, has continued in the same vein. The size of total federal spending on nonsecurity discretionary programs — including infrastructure, training, housing, education, water, climate change, small business and scientific research — is on a decline-path to very low levels of GDP not seen in half a century. This is the Democrats’ Faustian bargain since 1992: Align with Wall Street, take their campaign dollars, win the White House, and then do little more than resist even more swinging cuts proposed by the Republicans.
Sanders proposes a different path, one that is resonating with voters. Maybe that is why New York Times pundits like Paul Krugman are up in arms, even accusing Sanders or his supporters of letting “idealism veer into destructive self-indulgence.” How dare Bernie give us hope? How dare he suggest real changes? How dare he threaten the status quo?
How dare he indeed. But the fact is that he is winning a new generation of voters, ones that doesn’t want to continue the pattern of rising inequality, stagnant wages and slow economic growth.
What does this mean in practice?
The first solution is a massive increase in public investment. While Obama pushed a two-year stimulus that was mostly tax cuts and transfer payments, Sanders is pushing a decadelong stimulus that is filled with long-term public investments, the kind needed to restore economic growth. The difference, of course, is that Sanders is not declaring the end of big government; he is in fact campaigning to restore a high rate of public investments in the spirit of Franklin Roosevelt (public works), Dwight Eisenhower (the highway system), and John Kennedy (the moonshot and more).
The second solution is real health cost reform by doing what all other high-income countries do: put health care into the public sector where it belongs. American health care is a system of local monopolies that pocket sky-high profits at the expense of the taxpayers’ and workers’ incomes and health. Both Clinton and Sanders bemoan high health care costs, but only Sanders’ plan for a single-payer system would actually do something about it. The attack on the plan — that it would raise taxes — is fatuous. The saving in private health care costs would swamp the increase in public outlays; that’s the whole point.
Sanders’ third solution is worker empowerment through actions on several fronts: company governance, union rights, increased budget outlays for working families, and international agreements that don’t give away the store to footloose capital. Again, the pundits say it can’t be done. They don’t recognize that successful countries like Germany and Denmark have done these very things for years, resulting in high wages, low unemployment and much lower income inequality than in the United States.
Mainstream Democratic Party economists have attacked Sanders’ plans in blogs, op-eds and letters. It’s not surprising. Look at who is making the attacks: the architects of the Democratic Party’s embrace of the status quo. The attacks on Sanders’ health plans have frequently come from defenders of private health insurance. The attacks on his public investment plans come from those who defend Hillary Clinton’s embrace of the low-tax, small-government philosophy embraced by Bill Clinton a quarter-century ago.
The mainstream Democrats backing Clinton have promoted a theory they call “secular stagnation.” It’s a fancy term to say: Don’t hope for a better future. Sanders is right to reject that philosophy and to attack the stagnation of Democratic Party mainstream economic policy. As Michigan demonstrated, that’s where the younger generation — and the young at heart — want to go.
