Those of us who want to reverse America's most troubling trends--widening inequality, increasing poverty, global warming, and a world grown increasingly unfriendly, to name a few--cannot simply rely on election victories. A Democrat moving into the White House in January of 2008, coupled with a Democratic majority in Congress (let's even fantasize 60 votes in the Senate) is a necessary precondition. But electoral triumphs will not be sufficient. Recall that we had both at the start of 1993, yet too little was accomplished to reverse these trends. All are worse now than they were then.
CLEANING UP THE BUSH MESS
A new Democratic president will face many of the same challenges Bill Clinton faced at the start of his administration--but all made worse by George W. Bush. Clinton, recall, inherited a fiscal straightjacket. At the start of 1993, the federal budget deficit was running $300 billion a year as far as the eye could see. Prior Republican administrations had sought to "starve the beast," going deep into the red by spending heavily on defense while at the same time cutting taxes.
A new Democratic president coming into office in 2009 will face a national debt much larger than it was in 1993. Despite the $5 trillion 10-year budget surplus that ended the Clinton years, the federal debt at the end of the Bush years will be almost $4 trillion larger than it was then. It will have grown about 70 percent during Bush's reign. If you assume 5 percent interest, the Bush debt burden will require the government to pay its creditors--prominent among them, the Japanese and Chinese--$200 billion a year, forever. That will use up a lot of tax revenue even before any of the nation's problems are addressed. In this way, George W. and company have done Reagan one better. They've not only starved the beast through tax cuts for the rich and increased defense spending; they've just about dismembered it. Even worse, and for reasons having more to do with sociology than economics, financial markets tend to be more suspicious of Democratic presidents than Republican ones. That means they'll insist a new Democrat embrace fiscal austerity more zealously than his or her Republican predecessor, as the price for lower interest rates--as did bond traders and Alan Greenspan when Bill Clinton came to power.
By the start of 1993, Republicans had so demonized Democrats as "tax and spend" liberals that the public was conditioned to reject tax increases. Reagan had reduced marginal tax rates on the rich on the specious supply-side grounds that the benefits would "trickle down" to the rest of the population. They did not, of course, but by the time Bill Clinton became president the public had been reflexively conditioned to object to any tax increases on anyone. Clinton slipped through a modest tax increase nonetheless, just on the wealthiest 2 percent; it passed by a one-vote margin. Nowadays, the drumbeat against tax increases is louder still. George W. Bush succeeded at reducing marginal taxes on the rich much further than Reagan, with the same supply-side argument, supported even by Alan Greenspan (although he claims he did so unwittingly). When the Democrats weren't looking, Republicans also convinced voters that the estate tax, barely affecting the richest 2 percent of Americans, was a "death tax" that would hurt the middle class.
Meanwhile, the fiscal demands facing a new Democratic president in 2009 are far greater than when Bill Clinton took office in 1993. Clinton's investment agenda in schools, job-training, health care, and infrastructure was badly needed then. Today, it's urgent. Inequality of income and wealth is wider and upward mobility has slowed. Our schools are worse than they were when Clinton became president, classrooms more overcrowded, and school buildings, falling apart. Job-training is almost nonexistent. At least 10 million more Americans lack health insurance than they did in 1993. Among the 13 wealthiest nations, America now ranks last or nearly last in infant mortality, low birth weight, and life expectancy. …