How Democrats Go Wrong

Robert L. Borosage

December 01, 2006

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

When the next Speaker of the House, Democrat Nancy Pelosi, takes office, it will mark a new day for Congress. Pelosi will drive new rules through the House to help curb the corruptions of the DeLay Congress. She has Democrats prepared to pass her “100-hour program,” anchored in bread and butter, common-sense issues—raise the minimum wage, halve interest rates on student loans, negotiate lower drug prices, revoke subsides to big oil and invest in renewable energy. A broad range of progressive groups will mobilize across the country to ensure this agenda passes to the Senate with clear public support. This will mark a sea change from the corrupt, corporate lobby-driven agenda of the DeLay congress.

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 briefings 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 über 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 the North American Free Trade Agreement, the World Trade Organization 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.