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Bill Clinton as Deficit Hawk and supporter of Peterson Foundation 2011 Fiscal Summit

June 1st, 2011 by selise


1. The following is a transcript of Bill Clinton’s May 25th appearance at the Peterson Foundation 2011 Fiscal Summit. All errors are mine.

2. I should make it clear from the start that I think what Clinton had to say was mostly dangerous bat-shit-crazy nonsense. The reason I bothered to transcribe and post this is that I don’t think Clinton should get away with such nonsense and I hope this will be a resource for anyone willing to take on the task of shredding, or at least mocking, the worst of it.

3. update 6/2/11: woo hoo! bill mitchell shreds!!! please see: When a former US president makes things up. thanks bill!

— selise

Pete Peterson: There are so many reasons I’m thrilled to have President Bill Clinton with us today. I don’t think anyone is more qualified than he to discuss the urgency of our fiscal challenges, what to do about them, and how they relate to the future of America’s prosperity and our global stature.

When he took office in 1993, President Clinton knew that America’s economic future could be determined in large part by our ability to get our fiscal house in order. At the time the country was emerging from an economic recession and had gone through a long period of budget deficits. Does that sound familiar to anyone? He led a bipartisan effort that bridged varying ideologies and put in place tough spending restraints, spending caps, pay-go rules and tax increases and the like, which led to a period of major growth in the economy and even budget surpluses. I am very interested to hear how he might apply his political and leadership magic to today’s polarized and paralyzed environment.

Let me also say that if I were to name the President who’s post-presidency I most admire, I could not imagine one that equal or certainly surpasses President Clinton’s. The Clinton Foundation has brought together organizations and contributors across sectors and the globe to develop a stunning $63 billion to address urgent needs, including HIV/Aids, climate change and economic development. Having been privileged to attend the last two Clinton Foundation annual meetings, I can attest that President Clinton’s knowledge of and passion for his wide range of philanthropic areas needs to be seen to be believed.

It’s enough to encourage me to reconsider the amendment that restricts the presidency to two terms. Although if Bill Clinton were restricted to the presidency, I feel we would lose some of his philanthropic talents. Who better next month the Clinton Global Initiative will launch a CGI America, which will focus on strengthening the  American economy, creating jobs and promoting investment. I’m looking forward to being there and getting a preview today of his thoughts on economic growth and fiscal sustainability. Mr. President, my friend, the warmest of welcomes.

And who better to interview you than Gwen Iffel? As the host and managing editor of Washington Week, Gwen, is one of the most respected voices in American journalism. She’s also a senior correspondent for the PBS News Hour and has moderated two of the most recent Vice Presidential debates. Gwen is the best-selling author of “The Breakthrough: Politics and Race in the Age of Obama.” She has been honored numerous times for her outstanding work, which includes interviewing a variety of national leaders. Gwen, we are delighted to have you here.

I now introduce the President and Gwen Iffel.

Gwen Iffel: The President just said to me, who better to interview him than someone who stalked him for eight years. Actually, what he said was gave him hell for eight years, but I decided to make it nicer.

I am thrilled to be here today to talk about an important topic. And in the interest and spirit of the conversation that the Peterson Foundation has had so far, I want to start by talking to you in a bipartisan manner. Tim Pawlenty, who just announced he’s running for President, said last week he feels that Americans are not looking this in the eye. That they need to slash budgets without regard to sacred cows. Is that even possible?

Bill Clinton: Yeah, I think it is, but I think that it needs to make sense.

Let’s not forget the terrible double-bind America is in right now. It’s that in classic economic terms, this is the worst time to cut deficits. That’s the relentless stream of columns Paul Krugman writes in the New York Times every day. He’s right about that. There’s a chance that if there is zero demand for private capital — it’s not quite that low, but interest rates are virtually zero and there’s so little activity in the private sector — if you cut public investment at the same time that actually you’ll lose more revenues in declining economic activity and declining tax revenues than you get from the spending cuts.

It’s going to be very interesting to see what happens in the United Kingdom on that, because the early results are not particularly encouraging. The theory of the Cameron budget is the same theory and the whole theory that the European Central Bank seems to be driving is that even though interest rates are functionally zero so the benefit you normally get from reducing the debt is to ease interest rates and you get a big increase in investment, they think there’s some sort of confidence premium in doing it right now when things are fairly flat.

I thought the genius of the Bowles-Simpson report was that they recommended big structural long-term changes and ask we not start until next year when the recovery was clearly, plainly under way. The work that Pete Peterson and Michael and the whole group in the Peterson Foundation have done is based on dealing with this over the long run.

So my view is if you deal with over the long run and tell the American people the truth, I think that we can work through this.

Now, I know some people will say that the election in New York yesterday for Congress proves that that’s not true, but I just completely disagree with that. I mean, the Republicans ran to the left of the Democrats on Medicare in the last election. They excoriated us for all these savings that are now embedded in Congressman Ryan’s budget. They claim we cut Medicare, when what the Democrats essentially did was to cut the reimbursement rate for Medicare Advantage and put the money into lengthening the life of the Medicare trust fund and closing the doughnut hole in the drug program. Which, according to Kathleen Sebelius, is saving money because we’re also requiring a discount of drugs bought in volume, which we should do, I think.

Gwen Iffel: Do you think the race in New York was a referendum on this issue, or was it about something else? It’s sometimes easy to over-interpret.

Bill Clinton: No, no. It was about Medicare.

The only point I’m trying to make is it was an inevitable consequence of the fact that the Republican rans to the left of the Democrats. They attacked the Democrats for cutting Medicare. It was not a true charge. And the Democrats, for reasons I  will never understand, decided to keep what they had actually done a secret so the attack would certainly work. Go figure.

So it happened, but all I’m saying is you shouldn’t draw the conclusion that the New York race means that nobody can do anything to slow the rate of Medicare costs. I just don’t agree with that. I think that you should draw the conclusion that the people made a judgment that the proposal in the Republican budget is not the right one. I agree with that, but I’m afraid that the Democrats will draw the conclusion that because Congressman Ryan’s proposal, I think, is not the best one that we shouldn’t do anything. I completely disagree with that. There are lots of things to do to bring down Medicare costs.

When I was President, we passed a Medicare reform bill, bipartisan, and it saved 50% more than it was estimated to save in the first two years. So much so that the Congress went back and actually increased some of the reimbursement rates and still over a ten-year period — keep in mind, this is more than a decade ago — it saved 23% more than Congressional budget office said it would, more than $700 billion over a decade. So you can do this.

Gwen Iffel: How different are things now than more than a decade ago when you faced $300 billion in deficits when you came in office and when you left there were surplus as far as the eye can see?

Bill Clinton: Well, the deficit problem is worse because — let’s go back to the beginning. This started — this whole thing — we had never run permanent structural deficits of any size before 1981 when the American people bought the argument in the ‘80 election that the government was a source of all evil and there was no such thing as add a good tax or no such thing as a bad tax cut.

That was the beginning of America’s involvement with structural deficits. The debt of the country was quadrupled between 1981 and 1993. Then we had four surplus budgets paid about $600 billion down on the debt. My last was obviously was mostly President Bush’s first year. We were in a recession. He proposed tax cuts but continued to propose them, so we doubled the debt again in the next eight years. Then we had the financial meltdown, which devastated the revenue stream of the government.

So this is a more severe problem. And it’s more severe because I was in — I became President at the tail end of a traditional business cycle recession. When we had clearly high real interest rates because of the debt.

This recession was caused by a financial meltdown, and the recovery has been slow even with zero interest rates. It’s more like what Japan went through after their collapse. These financial real estate collapses normally take longer to get out of than traditional business cycle recessions. So, it’s tougher now.

Gwen Iffel: Democrats can oversell the idea that in the years when you were President everything was rosy and now that the Republicans have been in charge for eight years and the Democrats are just taking it over, they should  be able to fix it, just give it back to the Democrats. They’re overselling that?

Bill Clinton: Well, I think that they’re fundamentally right that the approach they took was better, but the Americans — if you look at the last 30 years, we only get hired when things are messed up. And so people want to feel fixed. In 1994 we lost the Congress because people didn’t feel fixed yet and because we were vulnerable to claims that we were proto-socialist. All that stuff they said this time.

Then in 2010 people didn’t feel fixed yet. But, in fact, a lot of good things were going on underneath the surface, including a return of America to real prominence in manufacturing and the race for clean energy technology. I hope those two things will not be reversed in whatever bipartisan resolution is worked out.

I still believe that essentially the same dynamics will take hold and that we’ll have a bipartisan resolution both because of the work that Vice President Biden and the gang of six, now five is doing, and because they all want to get re-elected. People will want to see some progress on this.

Gwen Iffel: The debt ceiling, you talk about what the American people think. There’s a new poll out today in the Washington Post that the Pew Research Center did with them that shows more people are concerned about the potential of raising the debt ceiling, than of government default. The argument that this administration has been making which is there will be disaster if the debt ceiling is not raised, it’s going to send the wrong message to the world. It’s not taking hold with the American people. Why is that?

Bill Clinton: Because they’ve never lived through it. Nobody knows what will happen. I don’t think — in a lot of these areas, I think polling can be useful, but you can’t be paralyzed by it because in the end people hire the President and the Congress to win for them. To win for America.

And a lot of the most important things I did as President were unpopular. 80% of the people were against the Mexican bailout, 74% were against the help I gave Russia to bring the troops home, majorities were against what we did in Bosnia and Kosovo when we did it, lots of other things. Helping Brazil. The things we did in America on the economy were not wildly popular. We lost the Congress over them. But I think in — you have to make these decisions based on where you think the end will bring you out. Of course, if the end doesn’t bring you out all right for a decade, then you’re toast.

When we have elections every two years, it’s impossible to guarantee positive results from all these structural changes within that amount of time, and I think that’s what happened in ‘94, it’s what happened in 2010.

Gwen Iffel: But isn’t leadership about bringing people along, even for the tough decisions or especially the tough ones?

Bill Clinton: Absolutely. I think what you have to do there is — as far as I know, there’s been no national Presidential address yet, for example, on the consequences of America defaulting on its debt.

Gwen Iffel: Should there be?

Bill Clinton: Yes, but not yet. I’m still not sure it’s going to happen. Whatever the polls say, if we defaulted on the debt once for a few days, it might not be calamatous. If people thought we were literally not going to pay our bills anymore and then they would stop buying our debt.

One of the really troubling things to me about the decision to maintain all these big tax cuts and not address some of the other structural problems with the debt is that we borrow increasing amounts of it from countries that enjoy big trade surpluses with us.

As a result of that, what we should have been doing in the last decade, which is going to a future that was less totally dependent on finance, housing and consumer spending and had more manufacturing and green technology, that required us both to have more trade agreements and to more vigorously enforce the ones we’ve got.

And since the people who were loaning us money were the same people that had big trade surpluses with us, our trade enforcement dropped 80% in the last decade. 80%! And for good reasons — nobody slugs their banker. I mean, you’re not going to get up tomorrow morning and have an extra cup of coffee and go down and just knock the living daylights out of your personal banker. Could you get a loan the next day?

So this is going to take some time to work out. The main point I want to make that you started with is I don’t think that the Democrats or the Republicans should conclude from the New York race that no changes can be made in Medicare, that no changes can be made in Social Security, that no changes can be made in the tax system, that no changes can be made that will deal with this long-term debt problem. Because we can’t allow ourselves to be so paralyzed by the present and by people’s preference for present certainty and present benefits that we stop creating the future. America’s always been about the future, and if we stop being a future country, we’re going to be in real trouble.

Gwen Iffel: So we have this immediate logjam, whether it’s the gang of five or whether it’s the meetings that are happening that Vice President Biden is trying to negotiate, the basic disagreement seems to be about whether there will be revenue increases, whether you call them fees, whether you call them taxes. You’re in the room and you want to bust through to some sort of agreement. How do you do that?

Bill Clinton: I think you have to, first of all, say that our revenues when I was President were very low as a percentage of our GDP, but that’s because our growth rate was so high. And there is a revenue premium to high growth rates, but high growth rates are not achieved by low taxes alone at the expense of fiscal responsibility. That’s the real lesson of my eight years that is applicable to this eight years. Arithmetic still matters. That’s one of my greatest one-liners and people said “What great new idea did you bring to Washington when you became President?” And I always said arithmetic. The idea the lower tax rates are the better everything will be has been debunked now for 30 years both in positive terms when I was President and in negative terms by quadrupling the debt once and doubling it again. So how many times to we have to see this movie before we know how it ends?

On the other hand, could you have taxes that are too high or too stupid? Absolutely. So what I think we have to do is to say that would it be good if the federal revenues were somewhere between 20% and 22% and no more at robust growth rates and maybe someday they’d be lower again like they were when I was President?

Yeah. They probably can’t get as low as they were when I was President until after the baby boomers have died out. Some of this is demographic. Keep in mind the grandchildren of the baby boomers are more numerous than their parents. We will have demographic relief from Social Security after about 18 years and from Medicare for about 20, and that will be a good thing. I think you just have to make the point.

I also think that we may have some room for tax reform here. One of the really impressive accomplishments, I think, of the Bowles-Simpson Commission was pointing out just how many money there is out there in so-called tax expenditures. I would favor returning individual rates to where they were when I was President. Maybe even across the board, but certainly for the upper income people.

Then I think you ought to do something with the tax expenditures. On corporate taxes I have a little different take. I raised corporate tax rates, and I thought it was important because the percentage of the federal pie covered by corporate taxation went way down in the 12 years before I was President. But it is very important to be internationally competitive, so our rates are fairly high compared to all of our competitors, but our loopholes are also fairly high. So if you got rid of a lot of the tax expenditures on the corporate side, you can actually lower rates and still raise the same amount or more money and that would make us, I think, look more competitive and be more competitive. But then everybody would have to pay something. You wouldn’t have some corporations paying 35% and others paying 10%.

Gwen Iffel: You talked about arithmetic and I talked earlier about sacred cows. One of the pieces of arithmetic that the Peterson Foundation and these six groups have put on the table is reducing or eliminating the home mortgage interest deduction, a sacred cow if ever there was one. Is that a reasonable arithmetic target?

Bill Clinton: Well, I certainly think it can be reduced. There’s no question that at a million dollars it contributes to inflation, and there’s no question since it only goes to one home and so many people with a heck of a lot of money have more than one home, that the absence of it is not a deterrent of getting the house. So I  think that that’s something that should be reduced. We need to — here’s what I think about how far down you should go. You need to look very carefully at these income levels and see how much inequality has increased. We need to try to structure a tax system that doesn’t aggravate it.

One of the reasons that America is not more productive and the growth rate is not higher is that from World War II to roughly 1980, the bottom 90% of Americans had 65% of the income. The top 10% had 35% and the top 1% had 9%. It was enough inequality to reward people for working hard, having good ideas, starting new businesses, putting people to work and not so much inequality that it constricted the capacity to build a great middle class and a growing economy. In the last 30 years those numbers have changed. The 90%’s 65% has dropped to 52%. The 10%’s 35% gone to 48%. The 1%’s 9% has gone to 21%.

So that’s too much inequality. It is not sustainable. It’s the kind of thing you get if you have all your economic growth in finance, consumer spending and housing, which is what happened before the meltdown. Not enough attention has been given to what happened to America’s economy before the financial meltdown in the last decade. We only had 2.5 million new jobs, and some of it was 9/11 and its aftermath, but most of it was we didn’t have a source new jobs for this decade that would support a broadly diversified economy. So that’s what I think about that.

I think, you know, people like me should pay higher taxes. I think that we should be careful on home mortgage deductions repealed and everything else, not to do anything that would aggravate inequality at the middle class and lower levels. We’ve got — the only time in the last 30 years when the bottom 20%’s income increased in percentage terms as much as the top 20% was in the second four years I served, because we had so many jobs that it tightened the labor market because health care costs increased only as much as inflation for the first time and because we had a lot of supports for working families and for single mothers in the work force.

In spite of that, all that, we didn’t do anything to stop the increasing inequality benefitting the top 1%. So, I just ask you all to think about that. I think that in the back of our minds we should realize that as we come out of this and create more jobs, we ought to create more consumers, and that requires that the income distribution support a middle class income and allow poor people to work their way into it.

Gwen Iffel: Mr. President, we solicited questions from the public to direct to you and had a facebook audience vote on which one to ask. The winner was a fellow named Ken Fletcher of Albany, Oregon. His question is, “Why is there some much focus on reducing entitlement programs as opposed to the military or other forms of spending?”

Bill Clinton: For the same reason Willie Sutton robbed banks. That’s where the money is. But I think you do have a point. Let’s talk about it.

Non-defense discretionary spending is only about 13% of the budget. That’s — there is — there are savings to be had there. The GAO just did a big study which I’m sure a lot of you have seen, which determines, for example, all the different programs. I think there are like 19 adult literacy programs. That’s a small example. But there’s a few billion dollars there. It’s not a significant amount as against the size of this deficit, but it is a significant amount in terms of reinvestment in our future. I personally — if it were me, I personally would favor looking at that study, implementing all the things as we did under Al Gore’s reinventing government plan which saved $136 billion over a ten-year period. I’d like to see that money reinvested in non-defense discretionary spending that’s future oriented and green technologies and bringing back manufacturing and biotechnology in a re-authorization and expansion of the new market initiatives which rewards investments in relatively poor areas in America. That’s what I think should be done there. There is money there, but it’s not dramatic.

Then on defense, I agree with you, sir, but defense is 4% of our gross domestic product. Medical spending is 17.2%, And almost half of that is government insurance of some kind or another. So there’s just a lot more money in health care.

Also on Social Security it was meant to be self-sustaining, and with the retirement of the baby boomers it won’t be anymore. But I think there are progressive and fair and decent ways to reform Social Security, and I think Medicare and Medicaid cannot produce savings in good conscience unless they’re part of a comprehensive plan to bring down the rate of inflation in medical costs.

You can’t have medical costs go up at three times the rate of inflation every year. You can’t justify America spending 17.2%, Canada being the next highest rich country at 10.5%, Germany and France always rank first and second for overall outcomes at 10%, and America ranking somewhere in the high 20s to 30 in the overall effectiveness of our health system.

Everybody just assumes we can’t do anything about this, but if you break down where we’re out of whack with the rest of the world, you see that the biggest category is the rooted in paying for a procedure instead of for health care. And having no comparative studies of costs and outcomes.

Pennsylvania, I think, is still the only state in the country that requires all the hospitals to file what are charged for various procedures and attempts to determine the comparative results. What they find every year is there’s literally no connection between what’s charged and what results we’re getting. So that’s the biggest.

The second biggest, by far, are the administrative costs and profit margins related to the way we finance health care.

That’s one of the things that’s also a source of problems between the Republicans and Democrats because the Republicans want to put more people in the insurance system and claim individual consumers will have bargaining power. It’s not true. In 2009 in the depth of the recession and before the passage of the health care bill, so it was not available to blame, the insurance companies raised rates in 2010 and this year claiming, “I’m sorry, we don’t have cost raises, but we have to have these huge reserves when all this terrible Obamacare comes in.” In 2009 they didn’t have it to blame. Their profits went up 26%, 5.5 Million people lost their insurance, 3 million went on Medicaid and ballooned the deficits of the federal and state governments. So we have to look at that.

You simply can’t have an unregulated defacto monopoly. In most states one or two companies have 80% of the market, and you can’t have 30% administrative costs in our system, which is what it is if you count the insurance companies, the hospitals, the other providers, the employers and the individually insured, all their paperwork cost, nobody else is over 19%. That’s $215 billion a year, the trillion dollar difference. We can’t have that.

Now, there are other things. We have too many readmissions and medical errors. If we had uniform sterilization procedures we’d save a fortune and save a lot of lives. The VA hospital, alas a government entity, the VA hospital network is the first in the country apparently to uniformly apply these procedures to try to reduce infections, readmissions and costs associated with it. That’s a problem.

American people are about 15% of the problem. Our lifestyle choices, particularly related to obesity and exploding diabetes, are a result of about $150 billion of this.

And then we — according to McKenzie’s study — we pay about $66 billion more for medicine than we would if we lived in any other country, including the pharmaceutical producers in other countries.

Gwen Iffel: Yet, Mr. President, even supporters of the new health care law, which, as you know, the American public is still greviously split over, even they say it may not have done enough to address all of the things you’re talking about to bring health care costs down.

Bill Clinton: I agree with that. Gwen, my position — you know, when I was out there making appearances in the last campaign, I said, look, this law is not perfect, but this is a huge, complex issue. What we should do is continue to improve it, not repeal it. The argument for repeal I can give you in a second. I know this is a complicated issue, and we haven’t talked about malpractice reform or the end-of-life care which is a big part of this or other things. The real reason there was a big push to repeal instead of to reform is one little line in that health care law that says if you’re insured in the big plan, 85% of the premium has to go to health care and not profits or promotion. If you’re in a small plan, 80%.

Oh, my goodness, the insurance companies acted like it was the end of the world. In Minnesota more and more plan are pay for health care not pay for procedure, they’re already at 91% statewide, and if you take Bluecross Blueshield of North Carolina, for example, is already at 87%. It’s not an unreasonable requirement, and I believe it’s going to hold. These things will really bring down health care costs compared to our competitors over the next decade, but we’ve got to do much more of them.

Basically there ought to be a national system like Pennsylvania’s that has real reports on a regular basis about costs and results. It will create — that really will give consumers power. That will give insurers who want to bring down costs power. It will have a huge impact if we do it.

Gwen Iffel: Can I get back to the defense spending question just for a moment? Because you said that it is not the problem, that health care spending is the bigger problem.

Bill Clinton: I think there are savings there. I’m sorry. We have to include defense. Let’s look at where we are. This gentleman’s question, why is there so much focus? Most people in Congress believe that we need a strong defense, and we do. Increasingly or national security is affected by climate change, resource depletion, the so-called soft power conflicts of religious and other political conflicts. So national security is going to have a broader meaning here. Protecting the borders and all that.

I think that some of these weapon systems have to be eliminated. Now that Congress eliminated — unbelievably we had the joint strike fighter which I spent a lot of your money trying to develop and which I believe in. Why should every service have their own fighter plane? It was a good idea. When they saved money on that, then they turned around and said an engine might fall off. Let’s give another company a contract to produce another engine. It was not a good thing. They got rid of it finally. The Marine Corps also asked to eliminate a fighting vehicle that is being produced. It’s a $5 billion article. Congress refused to do that.

We have 11 carrier battle groups. The Chinese navy has been dramatically modernizing. They have these great diesel-powered submarines that go deep, fast and quiet but they have only one air craft carrier battle group. Do we need 11?

Now, keep in mind every time you do that, somebody in America loses a job, but in the end if the money is properly reinvested, you get more jobs. That’s what happened when we had the base closing in my first term. We just used those resources to build a different kind of economy.

I think there’s no question that defense will have to be a bigger part of this than it’s been so far.

Gwen Iffel: You touched on an important point, there are economic tradeoffs at a time when the economy is still struggling to rebound. You didn’t have to deal with the struggling economy as you attempted to do these big things. How does this administration deal with the economic tradeoff? For instance, if you decide to increase corporate taxes, there’s a strong argument to be made that you’re also slowing down the economy by doing that. If you lose a job when you cancel a weapons program. If you cancel homeowner’s aid assistance, no matter how you determine what the actual affect is, the message you sending is you’re taking jobs away, taking support away at a time when we’re not back on our feet yet.

Bill Clinton: I’ve already said what I would do is to combine — first, I think the timing is important. I think most of this stuff should bite next year, not this year.

Gwen Iffel: Because?

Bill Clinton: Because the economy is too weak.

Gwen Iffel: Not because of the election?

Bill Clinton: No. The heck with the election. No. The election is next year. Some of this stuff will start before the election. No. It should be driven by economics. Secondly, I think it there should be a real effort this year to take the GAO study and other things that we know to cut as much peripheral spending in the nondefense discretionary budget as we can and reinvest it in things that will create jobs, mostly manufacturing and green technology and incentives to invest in other areas.

Thirdly I said — I don’t mean to say this again. I think our corporate tax rates can be lowered in a way that will be an incentive to invest in America and will raise as much or more money if we won’t lower the rates before we get as much or more money out of tax expenditure eliminations. It’s not just individuals that get expenditures, corporations do too. So, this corporate rate looks high, but the bizarre thing is some people pay it because all their operations are in America and they don’t have the access to deductions and others pay next to nothing. So, I think we can bring the rate down, but we have to bring the tax expenditures down.

Then I think on the individual side, again, relating to creating jobs, we may want to move away altogether from a system that taxes labor at middle and lower levels and income and tax things more. You could get rid of the payroll tax altogether, which is a big deterrent to creating jobs, if you imposed a progressive VAT tax or if you had a tax on pollution, so-called externalities, and then create just as much money and invest more of it.

My problem is with the current dilemma we’re in now, is we need to get rid of this debt but do it in a way that brings back investment. What happened when I passed the deficit reduction, we got a big drop in interest rates, a big spike in the bond prices, a big increase in private investment. 92% of our jobs were private sector jobs.

Right now we don’t have a strategy to get there or an easy path, even though the banks have over $2 trillion in cash and only $160 billion according to the last thing I saw in bad mortgages.

So whatever we do, whatever complex of things we do should be designed to trigger more bank lending and more investment from corporate surpluses in the United States so that we’ll get enough economic activity that will really boost revenues if you make these other changes. 

Gwen Iffel: Is Paul Ryan’s approach dead on arrival? Is it the wrong argument to be having?

Bill Clinton: Well, I think he’s wrong to say no matter what happens and no matter what the circumstances are, we won’t touch taxes. I’ve already said I wouldn’t be against lowering the corporate rate as long as you didn’t lose the money, but making sure everybody paid something. But Ryan’s position is whatever tax rates exist now are perfect as compared with anybody paying $1 more. The only way to make the tax system more perfect is to have it produce less revenue. And I think that’s wrong. But I don’t think the Democrats can say the same thing about Medicare or Social Security or anything else.

The other thing is I just think his Medicare proposal is on the merits wrong. That is, there is no reason to believe that if you cut a check to all the people on Medicare all of a sudden they’ll have market power and drive down Medicare costs and they’ll be better off. What in all probability will happen, particularly if they dismantle some of these other cost controls, is that medical costs will continue to go up and older people will use less, get sicker and die quicker or they will be poorer because they’ll have to spend so much of their money on health care. In other words, the problem is rising medical costs.

Medicare is a part of a whole health care system that has a toxic rate of inflation and a spending base today that’s not sustainable. It’s also one of the major reasons people don’t get pay raises. Employers, they try to provide health care to their people. Fine. In a down economy it takes whatever increased revenues they allocate to labor just to pay for the health care premiums and they’ve got nothing left to give pay raises.

So, I applaud Congressman Ryan for making the suggestion, but I think on the merits it doesn’t work. And that’s really what… I hope that’s the lesson we draw from the New York election. Not that we can’t talk about Medicare and we have to tippy-toe around because we have got to have a system that brings health costs in line with our competitors, and we do have to have, to go back to your popular opinion question, we gotta have a much deeper commitment we’ve had to making sure Americans understand the American health care system as compared with others. Americans are so historically averse to caring about or absorbing what our competitors are doing in some areas. We’ve got to know what our competitors are doing in every area and it has to matter to us.

Gwen Iffel: You said a moment ago, and I know you didn’t mean it quite this flippantly, to heck with the election next year. But we’re in Washington and you follow politics. Is there any stomach for actually grappling with these issues with an election year looming, not only for the President, obviously, but also for a Congress?

Bill Clinton: If they could reach a bipartisan agreement?

Gwen Iffel: Big if.

Bill Clinton: Even if people disagree with the particulars, you got a mini-example of that at the end of the year when the President and Congress made an agreement on the tax thing. I didn’t agree with all of it, but I thought he should take it because it was the best deal he could get and I thought the Republicans should take it because from their point of view it was the best deal they could get. The American people supported it overwhelmingly even though there were things almost every American didn’t like about it.

There is a real hunger for us to do things. So, I think a lot of these polls will shift if they reach an agreement. And I wouldn’t put it past the President and the Congress to be able to reach an agreement next year because it’s an election year. And because the Republicans now have the majority in Congress, and they want to hold it.

Gwen Iffel: How do you know there’s a hunger to do something big? I mean, you talk to people all the time. You travel the country and world. Where do you get that from?

Bill Clinton: I’m not sure there’s a hunger to do something big. I said there’s a hunger to make an agreement. But I think that we haven’t done enough, any of us, to educate the American people. That’s why I like what — that’s what we’re doing today. The main benefit of all this is to register in people’s psyche that this is a huge problem.

We’ll never, you know — because none of us have a vote in Congress. I think Mr. Ryan is coming up later, but otherwise unless you’re in Congress you don’t have a vote. Unless you work in the Whitehouse or Treasury department, you might not have an impact. But I think — I think that the American people want us to work together to meet the big problems of the country.

If — the only problem we have now is that we’re not a young country anymore. We’re actually the oldest democracy in history now. And every society that achieves enormous success at some time reaches a point where they have to reform or suffer the consequences of decline because the institutions no longer serve the purpose for which they were established as much as they preserve the positions of the leaders and the constituents of the institutions.

People get more interested in holding onto the present than creating the future. There’s some of that in America now, and we have to create an appetite for the future again by showing people both the negative consequences of not doing it and also the positive consequences of doing it.

The purpose of this is showing a negative consequence and not dealing with the debt, we also need a prettier picture about the positive consequences of creating the future, which requires us to deal with the debt.

Gwen Iffel: My next question is about where you see the political consensus, but I want to put it in the words of Jim Dickey, who is one of our members of the public who wrote in from Bouder, Colorado. He asks, “What is the likelihood that incumbents of the House and Senate will vote for any kind of debt compromise or budget bill versus holding their party’s line in order to get re-elected?”

Bill Clinton: I think the likelihood is greater that the Democrats will do it and that the Republicans in moderate districts will do it. If there is any changes in revenues which can be tagged as revenue increases then in those districts where the Tea Party can control the primary, or if you’ve got a situation like that situation which cost Senator Bennett his job in Utah because he dared to have a conversation with Ron Wyden about health care reform, in other words, a caucus situation, it’s a problem.

So I think it’s different from district to district, different from state to state. But there may be enough votes for a bipartisan consensus. I think it’s going to be ironically easier to get the Democrats to vote for a bipartisan consensus than Republicans if they come from districts where the anti-tax theology school can declare them heretics and banish them to electoral hell.

Gwen Iffel: So you think Democrats are at a better position? Why would you think that? I can’t imagine. You think the Democrats are in a better position to agree to consensus than the Republicans are?

Bill Clinton: Because we proved that we will do things that are controversial, and a lot of us gave — the only thing that I think is working on the Democrats now in terms of taking on controversial decisions is how many of them got beat in the last election for doing the right thing on health care and the stimulus. But that’s partly our fault because we, like I said, didn’t have a national campaign. For the first time since 1998 we ran it without a national message at a time we needed it more than anytime since 1994. And because we didn’t have it, we got the same results we got in 1994.

I still think Democrats will vote for a combination of spending cuts and revenue increases either from eliminating tax expenditures or changing rate structures. They’re just more willing to do it. And I think the Democrats would vote for changes in Medicare, but they want to believe they would actually work to stabilize health care costs and not just make the elderly poorer and more at risk.

Gwen Iffel: What should the national message be? Should it be this or something else larger, bigger, smaller?

Bill Clinton: No. First of all, I think dealing with the debt is a precondition of creating the future. In an interdependent world where the people that are buying your debt are the same people that are selling you products with undervalued currencies, you can’t be in a position where you can’t enforce your trade laws.

I supported 300 trade agreements, the World Trade Organization and putting China in it, but we enforce our trade agreements. The World Trade Organization, contrary to a lot of people’s assumption, does not require unilateral disarmament by America. It presumes mutually beneficial trade relations, and you have to negotiate those and fight them through and work through the details and assess things like the relative currency values if you want to have a balanced economy with a manufacturing sector and not be totally dependent on finance and consumer spending and housing.

So my view is that we should say that’s a parts of it, but it’s not the only part of it. As I said, we’ll be able to sell this debt reduction thing a lot better and bringing the deficit back toward balance if we also have a positive picture of the America we’re trying to create, the kinds of jobs we’re trying to create, the opportunities we’re trying to create.

We have a lot of other issues here. You know, college graduates are having trouble finding jobs now. We dropped from first to 12th in the world for the first time in World War II in the percentage of young adults with four-year college degrees in this decade. We’re still first in the percentage of young people going to college, but we dropped to 12th in degrees.

We got a lot of things that we can do that ordinary people will understand more than the details of CBO scoring or the seven things you have to do if you want to get health care costs under control.

And so I think that the political strategy here should not be to run away from this but to marry this to a positive program to put America back to work and a picture of what it will look like if we go through the changes.

If the public won’t buy it, then we’re stuck with where we are. We shouldn’t give up the chance before we give up the ghost. They don’t have a fair chance to evaluate a real balanced plan to create a different future yet.

Gwen Iffel: Since you left office people are so much more scattered, not only what issues are number one but also, you know, we’re at war in more places, we’re intervening in places where it’s not exactly war and it’s not… The headlines that are on people’s cell phones that drive today day are not just about this issue, no matter how compelling it may be, it seems it makes it more difficult to come up with a consistent cohesive message for Democrats or Republicans in an election year like this?

Bill Clinton: I agree with that to a point. That is there are more sources of information, and there are more things being done that are hard to put into a clear pattern. It’s what happens if you live in an interdependent world with instantaneous transmission of information where borders look more like nets than walls. When you get right down to it, that’s at the heart of this little stat we’ve seen unfolding in America about what should be the final steps between the Israelis and the Palestinians. I mean, they’re sort of a microcosm of the larger global interdependence that you can actually see there. I agree with all that.

But that — the fundamental problem that I think we have in America that I — let me just contrast America with Brazil, just for a minute. A guy named Bill Bishop who happened to be a liberal Democrat wrote a book two years ago called “The Big S.O.R.T.” He’s from Austin Texas. S.O.R.T. He started off with the story of the one Republican family that lived in his very Democratic voting precinct in Austin Texas where John Kerry beat President Bush three to one.

And this guy loved his Republican neighbor and their kids played together and they talked and they disagreed and they learned together. But everybody else was mean to him, so he moved to another neighborhood in Austin where President Bush beat John Kerry four to one.  And the argument that Bishop makes in the book is that both neighborhoods were worse off. He said Americans aren’t as racist or as homophobic or as sexist or as homophobic as we used to be. We don’t have much religious prejudice anymore. We just don’t want to be around anybody that disagrees with us.

I think you could — you’re all laughing because you know there’s something to it, right? He actually described a development and how a developer made a fortune in the inland empire outside of L.A. or near there by doing a profile and finding out the people who were upper income people he wanted in his development were almost evenly divided between Republicans and Democrats. So he devised one side of — it was a one street long development.

One side for the Republicans and another side for the Democrats. I couldn’t make this up. The Republican developments had sidewalks and basketball courts in the back. The Democratic developments had rooms for yoga mats and other things. I swear to God. He sold all the houses in a nanosecond.

By contrast, I was in Brazil, in Manaus, on the edge of the rain forest the other day for a sustainability conference, and they got serious problems in Brazil. 95% of the electricity is from renewable sources. They want it to be more even as they grow. So they want to build three hydroplants. The problem is that the dams have to be on rivers that flow fast, and all the ones that are left are in the rain forest. So, they’ve got competing sustainability arguments. Serious problem.

But what was the difference? Here I was at this conference in this nice little conference center. You had every oil company, every utility company, the head of the Green party, the head of the people representing the Indigenous tribes, one of which will be totally destroyed if one of these big dams is built, all these people whose interests are affected and they’re actually sitting down having an honest, civil conversation in a two-day seminar where they all listen to each other and try to work through this.

I don’t want to be Pollyanna here, but this is a hell of a deal. Until this last year when Brazil had slippage they reduced, under Lula, rain forest annual destruction by 75%. Little known fact. They got all the loggers out but they’re still pushing the cattle farmers and soybean people in.

Gwen Iffel: Did you sit there fantasizing about having that kind of conversation here?

Bill Clinton: Well, I think we should. We should try. Maybe we’ll have to go through another election, but in the end, we have to listen to people who disagree with us. It cannot be possible that either the Democrats or Republicans are always wrong. It cannot be possible that 100% of us are proceeding in bad faith.

I basically think that the country’s been badly hurt in the last 30 years by the adoption of two ideas. One predominantly in business and one in government.

The business idea was that corporations are not really creatures of the state. They’re independent entities just like citizens. They ought to be able to do whatever they want in elections and their only responsibility is to their shareholders. Since people hold shares for 15 seconds now before they sell them, what it means is corporations have become uprooted. My generation was taught, those who went to business school and studied economics, corporations were creatures of the society and had responsibilities to all their stakeholders. Yes, their shareholders but their employees and their customers of the communities of which they’re a part. We have to go back toward that.

The primary government idea that we had was the one that triumphed in the 1980 election, the government will screw up a two-car parade. The secular saints of America, the founding fathers, they were all perfect. Just about everything that’s happened in the last 80 years is horrible. Government always screws up. There’s no such thing of as a bad tax cut or bad regulation or a bad this or a bad that as opposed to government.

It hasn’t worked. Look at the job numbers. Look at the deficit numbers. Look at the growth numbers. Look at the productivity numbers. Look at the numbers. So, we have to — if we can break out of theology and get back to evidence and experience and aspirations of ordinary people, I think we can have bipartisan cooperation. And I think the Democrats are going to have to be willing to give up maybe some short-term political gains by whipping up fears on some of these things if it’s a reasonable Social Security proposal, a reasonable Medicare proposal. We’ve got to deal with these things. You cannot have health care devour the economy.

Gwen Iffel: I have one more question for you, but before that, I wouldn’t be a reporter if I didn’t follow-up on an illusion you made to the Israeli-Palestinian peace process. Did all of this sound terribly familiar to you, this debate in the last 4 or 5 days, about these 1967 borders, and do you feel like it’s moved anywhere?

Bill Clinton: Yeah, I think for one thing to some extent it’s a tempest to the tea pot. First, I think what the President said was maybe too much shorthand and raised a lot of questions, but also it got — remember what Prime Minister Netanyahu said yesterday? Amidst all the things that are in the headlines, he also said if he made a peace agreement with the Palestinians, he was well aware he would have to give up so much of the West Bank that not all the settlements would be included and he would have to close some.

Gwen Iffel: He never said that loudly.

Bill Clinton: No. That has been totally overlooked, and he deserves credit for saying that, especially when you look at how hard it was on Sharon to get out of Gaza, which nearly everyone wanted to do, except the settlers that were living there.

So when Mr. Netanyahu was Prime Minister before and I was President, when all of the people I worked for eight years saying that the ‘67 borders were a reference point was nothing more than saying that’s what we looked at the map on. When Prime Minister Barack said that he was prepared to give up 94 to 96% of the West Bank with land swaps in return with certain strict requirements on the Palestinians, including waiving the right of return, it’s 94% to 96% of what? In other words, the ‘67 borders were the reference point. I think that’s what the President meant. But I also believe that before they get back to the table, Israel is entitled to know in the end there will be recognition of the state of Israel.

My recollection is that President Abbas has already said publicly at some point in the Bush years that a) he would accept the deal that Arafat didn’t, that I offered. And b) that he would give up the universal right of return. They gave that up when they signed the agreement on the White House lawn in 1993 whether they acknowledge it or not. The Israelis always said there’s some families that have been in northeastern, northwestern Israel forever who are their descendants now in these Lebonese camps, we’ll let some of those back in, but if there’s going to be a peace deal there’s got to be a Jewish state and Palestinian state heavy majority. Everybody knows that. I even offered as a part of this deal when I was working to raise $10 billion which was real money back then, to resettle the Palestinians out of the refugee camps either in new state of Palestine or in the U.S., Canada or wherever the heck else they wanted to go that people would take them.

So I think that — I don’t think we should get too carried away here. If you look at the map, any operating map that any of these negotiators have used, it’s clear what the boundaries were before and after ‘67. And it’s also clear that because the peace was not made in 2000 or in the intervening years that the land differences will be great now. Like when I was President you could get 97% of the Israeli settlers in the West Bank on 3% of the land. Now you have to take 6% of the land just to get 80% of the settlers. So that is a very — I don’t want to minimize the difficulty, but I wouldn’t just — don’t let this thing get off the tracks here because of the what the President said and Prime Minister Netanyahu said have been juxtaposed. You can overstate the divide here. As long as they’re both willing to keep talking about this, I think they should.

There’s just two other things that I think were not mentioned by either that I think it’s a mistake to forget. One of Israel’s legitimate complaints with Arafat was always they could never be sure they had a partner for peace. Although in ‘98 when we had lots of things going, with the only year in the history of Israel that no one was killed by a terrorist attack because of the security cooperation. The second argument was, even if we make this peace, our neighbors will never accept this. There’s no question that the King Abdullah and Saudi Arabi’s peace initiative includes all the Arab countries, but Syria, and other Muslim countries around the world promising political economic security normalization. If I were Prime Minister, I know he feels this way, I’d want to get it at the same time. But if he got a simultaneous peace signing with all these countries that normalize relations, that would be worth something. Neither side — neither the President nor the Prime Minister, I don’t think, talked about that. But those two things should not be ignored given the recent developments in Arab world.

Gwen Iffel: Mr. President, George Mitchell stepped down, so there’s an opening for an envoy, if you’re interested.

Bill Clinton: I have great confidence in the Secretary of State. They don’t need me.

Gwen Iffel: I want to end with this final — I’ll let you get away with that. I’m going to end with this final question back on our main topic. You said in an interview in Atlantic that you were talking about climate change but you said we are in a race against time and circumstance. Is this true as well about debt and spending, and do you think that the current President appreciates that?

Bill Clinton: Yes and yes. Look, this is really a lot like climate change. You know if you don’t change these trends something really bad is going to happen. You just don’t know when. Or precisely what form it’s going to take. But so yes, I think we’re in a race against time.

Secondly, this debt problem is already constraining our options as a country. It constrains our ability to develop a more diversified economic strategy by undermining our ability to get investment capital as opposed to consumption capital and by undermining our ability to enforce our trade laws, which discourages us from doing new trade agreements. I think it’s terrible we haven’t already done this Colombian trade agreement and the one with Panama I guess has been approved, and if they made some improvements in the one with Korea. Korea is one of the fastest growing economies in the world. It’s terrible.

We’re paying a price for this now, but when we get to the point where — and then interest rates will start to rise again with more balanced global growth. No matter what Mr. Bernanke does. I think the criticisms of him, by the way, are wrong. I don’t think he should have started raising interest rates and the value of the dollar yet. I think it would only have slowed down our recovery. But no matter what he does, when the economy comes back, interest rates are going up. The percentage of the budget as now constituted devoted to interest payments on the debt will go up. That means you won’t be getting anything for spending relatively less on Medicare or defense of non-defense discretionary budget. All you’ll get is sending more money out the door. So that’s another argument we ought to make to the American people. We’re fixing to have changes in all these other spending programs to pay our interest rates to other people if we don’t deal with this.

And yes, I believe the President will do things which will be politically risky arguably to him and I think if he wasn’t prepared to do it, he wouldn’t have asked Vice President Biden to chair this budget group. I think that you just don’t do that. You can’t do that. You look like, if you get outted for being unserious in a context like that, a President can pay a terrible price. So yes, I think he will do that, the right thing there.

    21 Responses to “Bill Clinton as Deficit Hawk and supporter of Peterson Foundation 2011 Fiscal Summit”

  1. 1 Tom Hickey said:

    How much as Pete contributed to the Clinton Library?

    replyReply to this comment
  2. 2 selise-reader said:

    Selise, is this worth reading? I have read through about the first quarter of it and stopped because Clinton stays too vague or says things that are not true (and is never going to be challenged by Iffel). And is it possible for you to summarize what he says, or do you think that each answer makes some point(s) that make it impossible to summarize? I really don’t think that it is worth the time to read if his answers don’t get more specific and he doesn’t get challenged (I don’t expect either).

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  3. 3 selise-reader said:

    For example,

    And a lot of the most important things I did as President were unpopular. 80% of the people were against the Mexican bailout, 74% were against the help I gave Russia to bring the troops home, majorities were against what we did in Bosnia and Kosovo when we did it, lots of other things. Helping Brazil. The things we did in America on the economy were not wildly popular. We lost the Congress over them.

    Clinton could have said, “The Mexican bailout was a bailout of Citicorp. In retrospect, that was a HUGE mistake. We should have nationalized that bank and shut it down. The other bankers would have taken a lesson from this that they weren’t too big to fail. I screwed up then because my theory of economics was wrong–ridiculously wrong as it turns out.” He doesn’t. Instead, he keeps it vague, strokes his own ego, and doesn’t get challenged by Iffel. Likewise, he says “things we did in America on the economy were not wildly popular,” but he doesn’t say “NAFTA was unpopular, and was a huge mistake that cost millions of people their jobs and has concentrated the wealth of the country into fewer and fewer hands. My economic theories have been a disaster.”

    Is it worth reading through the rest of his answers? I’m guessing that he’s learned little from any other mistakes he made (millions of dollars from speeches will do that to a person).

    replyReply to this comment
  4. 4 selise said:

    “is this worth reading?”

    @selise-reader: so sorry, i should have made some comment at the top and saved you the time and frustration.

    i posted this only in the hopes that some one would shred it. imo clinton gets too much of a pass from progressives and dems when he says something as bat-shit-crazy as the above. i mean, how was talking back stage to paul ryan a scandal but what clinton said on stage was not?

    p.s. added note #2 at the top.

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  5. 5 selise said:

    @Tom Hickey: LOL! i don’t know, but that’s a hell of a good question.

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  6. 6 selise-reader said:

    i posted this only in the hopes that some one would shred it.

    Yeah, that would be a substantial task. Every few sentences, I was thinking, “what? is this going to get corrected later?” It reminds me of a “documentary” that came out a few years ago (I’ve forgotten the name of it–it was before the 2008 election, so maybe in 2006 or 2007) that was attempting to present the case that Soc. Sec. was broke, or some such nonsense, and Dean Baker took on the task of providing a nearly minute-by-minute rebuttal (“shredding”).

    Speaking of Baker, I was so glad to see him provide a rebuttal to J. Bernstein the other day:

    Right to Rent Trumps Moral Hazard

    What I don’t understand is why Baker needed to post this, when David Dayen should have included it in his discussion of Bernstein and Krugman. Baker has written about the right-to-rent proposal dozens of times in many forums going back to at least the middle of 2008, and it has even been in the (FDL) news since then as a proposal presented in Congress. Why has it not sunk it to the minds of the Dayens of the world?

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  7. 7 selise said:

    @selise-reader: just my impression, but it seems bernstein is getting the kind of pass given to krugman (and even delong!)… iow, the “he’s one of us” tribalism that trumps policy. hope i’m wrong about that.

    p.s. thanks for the baker link. just went and gave him a “rec” as well as a read.

    re “substantial task.” amen. transcribing this wasn’t nearly so bad as having to listen time and again. i don’t have it in me right now to attempt even a partial shredding.

    …. as a gift to myself, i think i will next transcribe an excellent galbraith talk.:)

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  8. [...] the full transcript of the Clinton appearance at the latest Peter G. Peterson Fiscal Summit. The Transcript contains some extraordinary revisions of history which I presume were not set straight by the PGP [...]

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  9. 9 selise said:

    billy blog: When a former US president makes things up

    bill mitchell shreds!!! and even better yet, because it’s bill mitchell, he doesn’t just shred: he teaches!

    thanks bill!

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  10. 10 selise-reader said:

    I’m confused. In Clinton’s remarks above, he says:

    I think it’s terrible we haven’t already done this Colombian trade agreement and the one with Panama I guess has been approved, and if they made some improvements in the one with Korea.

    But today I read: link

    Against this background, Secretary of State Clinton announced this past week that she is certain that the Colombia FTA will be introduced by the Obama Administration in the very near future. Bill Clinton’s own confession before the Senate last year that such free “trade policies have failed everywhere they have been tried,” should ring in Secretary Clinton’s ears and in the ears of President Obama.

    Is it just me, or are those two statements opposed to each other?

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  11. 11 selise said:


    i think bill clinton, in his remarks at the peterson summit above, was attempting to blame the fed govt. “debt” on the failure of our trade policies.

    it’s total bs that the fed govt. “debt” is the cause of the failure of our trade policies, but i suppose that makes his story “only” a lie, and not necessarily contradictory.

    my two cents.

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  12. 12 selise-reader said:

    Somewhat off-topic: Here is Randal Wray on The Real News, interviewed for about thirty minutes on May 29, discussing the ongoing economic crisis: Crisis is Not Behind Us

    Among other things, he discusses the idea of the Job Guarantee, which Bill Mitchell and he proposed many years ago (although, as they have pointed out, it originated back during the New Deal). In addition to pointing out the errors in the economic analysis of those who are using government deficits to attack social programs, it would be good if more people were to present this positive step that needs to be taken. I would have liked it if during the interview, Wray had pointed out that it has been reported that it costs the U.S. government approximately $1 million for each soldier each year that they are in Afghanistan, and contrasted that with the cost of employing people in the U.S. under the Job Guarantee.

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  13. 13 aligatorhardt said:

    I agree with Clinton on almost every issue. I think most of the complainers missed the part about using the economic arithmetic to see what works. Rhetoric is not analysis.
    The Ryan plan will not work because it is not based on reality, it is based on wishful thinking. Reaganomics has proven to be a complete failure.

    replyReply to this comment
  14. 14 selise said:


    i don’t have to support ryan (i most certainly do NOT), to think rubinomics is also a complete failure.

    worse yet, obama is following in the rubinomics tradition and that leaves us without a workable alternative to ryan.

    replyReply to this comment
  15. 15 selise said:


    it would be good if more people were to present this positive step that needs to be taken

    good point.

    I would have liked it if during the interview, Wray had pointed out that it has been reported that it costs the U.S. government approximately $1 million for each soldier each year that they are in Afghanistan, and contrasted that with the cost of employing people in the U.S. under the Job Guarantee.

    but the macro cost is not dollars (which the fed govt can choose to create with a few keystrokes), the cost is in real resources like lives, research, mfg, raw materials, etc.

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  16. 16 selise-reader said:

    but the macro cost is not dollars (which the fed govt can choose to create with a few keystrokes), the cost is in real resources like lives, research, mfg, raw materials, etc.

    What answer would you have wanted Wray to give when Paul Jay (the interviewer) asked him how much it would cost to have a Job Guarantee? And what would you want Wray to say (or give as testimony before, say, a House committee) when asked to contrast the cost of employing an adult using the JG versus the cost of a soldier in Afghanistan?

    replyReply to this comment
  17. 17 selise-reader said:

    worse yet, obama is following in the rubinomics tradition and that leaves us without a workable alternative to ryan.

    Is Clintonomics distinct from Rubinomics? My guess is that it is not.

    Has anyone been calling Obama’s economic policy “Geithnernomics” or “Summernomics”?

    Obama deserves the primary responsibility for the current economic policy, and Clinton deserves the primary responsibility for the economic policy from Jan. 1993 to Jan. 2000.

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  18. 18 selise-reader said:

    I agree with Clinton on almost every issue.

    For what it’s worth, this (kind of) comment is too vague to respond to. The writer would need to provide specific quotes to say which issues he agrees with and which she disagrees with. Also, the writer does not say whether he read Mitchell’s (economics) argument so we don’t know whether she agrees with that or not.

    replyReply to this comment
  19. 19 selise-reader said:

    billy blog: When a former US president makes things up

    Here, in brief, is what I understand is Mitchell’s argument:

    1) Clinton says that there were no structural deficits before 1980.

    2) Therefore, all deficits before 1980 were cyclical (i.e., caused by the economy under-performing to its capacity)

    3) According to government statistics (OMB, CBO), the government ran deficits 85% of the time between 1930 and 1980. If these were all cyclical, according to point 2, then the economy has been under-performing 85% of the time during that period.

    4) But this period was one of significant growth in the U.S. economy, that is, the economy was not under-performing during most of this period. (In fact, it was the greatest period of growth in the history of the U.S. economy, and made possible the creation of the large middle class.) Therefore, not all of these deficits were cyclical.

    5) Therefore, Clinton’s claim 1 is (blatantly) false.

    Is this summary accurate and complete, or have I left out something significant?

    replyReply to this comment
  20. 20 selise said:

    2) Therefore, all deficits before 1980 were cyclical (i.e., caused by the economy under-performing to its capacity)

    @selise-reader: i don’t think so… here are some bits why:

    Now, let’s start with the most recent CBO data which begins in 1960. Accepting their estimates of the decomposition between structural and cyclical components at face value I produced the following graph. I gave the value 1 in each period for a structural deficit (blue column), a budget balance (red column) and a structural surplus (green column). The graph shows overwhelmingly (in a very explicit way) how many “structural deficits” there were between 1960 and 2011. The US federal government ran structural deficits 88 per cent of the time.

    Quite apart from the actual data relating to budget deficit outcomes, how might we otherwise know that the former president’s summation that the US had never run any structural deficits before 1980 had to be a lie? Answer: Because the US economy grew before that date.

    In terms of the CBO’s methodology – which is biased towards finding larger than otherwise structural deficits – the budget balance would be structurally in deficit if the actual budget balance was in deficit and the economy was operating at the CBO measure of potential real GDP. That is, what they consider to be full capacity.

    At that point there would be no cyclical component by definition. You have to think for a moment but imagine the former US president was correct – that there were no structural deficits before 1980s.

    Then all the deficits before 1980 would have been cyclical and given that since 1930 the US Office of Management shows that actual budget deficits occurred 85 per cent of the time (that is, were the norm), then the US economy would have to have been always operating below potential. So why would potential GDP grow over this long period if the economy was always failing to hit capacity? Why was unemployment low for much of this time with strong real GDP growth driving strong employment growth if the automatic stabilisers were always suggesting the opposite?

    The fact is that the US government has consistently run structural deficits and that policy stance has helped to “fund” employment and income growth and has contributed to the relative prosperity that Americans until recently had enjoyed.

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  21. 21 selise-reader said:

    > > 2) Therefore, all deficits before 1980 were cyclical (i.e., caused by the economy under-performing to its capacity)

    > @selise-reader: i don’t think so… here are some bits why:

    Just to be clear, I am not arguing that all deficits before 1980 were cyclical. I am saying that Clinton is implying that by saying that there were no structural deficits before 1980. And this is what Mitchell is arguing with: Mitchell is arguing that there were structural deficits before 1980, contrary to Clinton’s claim.

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