Responding to criticism that President-elect Barack Obama’s cabinet is composed largely of recycled Bill Clinton appointees, Obama’s close advisor David Axelrod told the New York Times, “He’s not looking for people to give him a vision. He’s going to put together an administration of people who can effectuate his vision.” A few days later, after introducing his foreign policy team, Obama himself declared, “I will be responsible for the vision that this team carries out, and I expect them to implement that vision once decisions are made.”
Which leads to the inevitable question: What is Obama’s overarching vision? What is the philosophical framework that will animate his administration and guide his cabinet officers to adopt policies different from those they embraced in the past?
At the moment, rather than articulating a vision, Obama seems content to embrace the sentiment Michael Dukakis expressed when he accepted the Democratic nomination in 1988: “This election isn’t about ideology; it’s about competence.”
In his post-election “60 Minutes” interview, Obama told Steve Kroft, “… I don’t want to … get bottled up in a lot of ideology and is this conservative or liberal. My interest is finding something that works. And whether it’s coming from FDR or it’s coming from Ronald Reagan, if the idea is right for the times, then we’re going to apply it.”
Of course one should take a good ides from anyone, but what if we substituted the word “vision” for “ideas”? Would Obama say that whether the vision is coming from FDR or from Ronald Reagan if it’s right for the times, he’s going to apply it?
During the campaign, Obama expressed admiration for Reagan because, “Ronald Reagan changed the trajectory of America in a way that Richard Nixon did not and in a way that Bill Clinton did not.” The implication is that Obama wants to change the trajectory of America, too. He needs to be as clear as Reagan and Franklin D. Roosevelt about the new trajectory on which he would set the nation.
Reagan announced his vision of a new direction for America in his first inaugural address. Interestingly, the speech was delivered as the United States was sliding into the worst economic recession since the 1930s. Reagan described the context for his address with words Obama might use on Jan. 20, 2009: “These United States are confronted with an economic affliction of great proportions. … Idle industries have cast workers into unemployment, human misery and personal indignity.”
Then Reagan began to teach Americans a new narrative about their country and themselves. He started with a diagnosis of the principal cause of the nation’s economic problems: “It is no coincidence that our present troubles parallel and are proportionate to the intervention and intrusion in our lives that result from unnecessary and excessive growth of government.” And then moved on to his core message: “In this present crisis, government is not the solution to our problem; government is the problem … It is time to … get government back within its means, and to lighten our punitive tax burden. And these will be our first priorities, and on these principles there will be no compromise.”
Government is not the solution; government is the problem. That would be the defining philosophy of Reagan’s America.
Ronald Reagan’s defining application of his philosophy of governance occurred seven months after taking office. On Aug. 3, 1981, the nation’s air-traffic controllers struck to gain higher wages and fewer hours for an increasingly stressful job. Two days later, President Reagan fired them all. And to make abundantly clear to America the radically new trajectory he expected America to follow under his administration, he not only fired them, he banned all 11,000 from ever returning to their jobs. As one former air-traffic controller, who was still trying to get his job back 23 years later told USA Today, “Reagan banned us for life. Even murderers are eligible for parole.”
Reagan sent a message. In the new America, government was bad and its powers and responsibilities must be curbed, but corporations were good and their power should be unrestrained. Corporations got the message. As Georgetown University historian Joseph McCartin has observed, prior to the firings it was considered unacceptable by both government and the general public for employers to replace workers on strike, even though the law gave employers the right to do so. Reagan’s response to the strike eased those inhibitions. Major strikes plummeted from an average of 300 each year in the decades before 1980 to fewer than 30 in 2004.
The loss of the strike as a weapon crippled America’s workers. Unions, the organizations that gave us the weekend, the 40-hour workweek and corporate pensions, were decimated.
After 1980, we adopted another of the key principles of Reagan’s philosophy: personal responsibility should substitute for collective responsibility. Jacob Hacker describes the ensuing years as “the great risk shift.” We shifted risk from the society to the individual. Reagan taught Americans that those of us who suffered economic hardship did so because of some personal failing and were not to be bailed out by society. Indeed, Reagan convinced us that by becoming more individually insecure, we would become more entrepreneurial and productive, and therefore, collectively richer.
Corporations adopted the new philosophy at an alarming rate.
In 1980, about 24 million Americans lacked health insurance. By 2007, this had risen to more than 46 million. Almost the entire decline is due to a drop in the scope and generosity of employer-provided health coverage. In 1980, according to William Galston, the majority of employers at medium-to-large companies paid 100 percent of the premium for family health coverage. Today, less than a quarter do
In 1980, more than 80 percent of large and medium-sized corporations offered traditional “defined-benefit” pensions that provide a predetermined monthly benefit for the remainder of a worker’s life. Today, less than a third do. Instead, companies that provide plans now offer “defined-contribution” plans where the risk is transferred from the company to the worker.
We became a more fearful nation even in good times. In 1982, amid a severe recession that pushed the unemployment rate up to nearly 10 percent, a poll by a private business research firm found that 12 percent of workers were “frequently concerned about being laid off.” In 2005, with the unemployment rate down to 5 percent, the number of Americans worried that they would lose their jobs was 35 percent.
Under Reaganism, curbing individual wealth at any level undermined the motivation of the wealthy to produce and therefore reduced national wealth. From 1935 through the late 1970s, the nation’s wealth had become more equalized. After 1980, it became more unequal. From World War II to 1980, wages rose almost in lockstep with increases in productivity. Since 1980, according to economists Frank Levy and Peter Remin, productivity has increased by more than 70 percent while median compensation has risen by only 19 percent, and 82 percent of all personal income gains went to the top 1 percent of the population.
The economy continued to expand, not because of increases in collective wages but because of increases in public and private debt. Debt increasingly became the defining feature of the American economy. Before 1980, corporate borrowing financed investment spending; after 1980, a significant portion of corporate borrowing was for the purpose of buying back stock.
Recall that Obama admired Reagan because Reagan changed the trajectory of America “in a way that Richard Nixon did not and in a way that Bill Clinton did not.” That is an important and wise observation.
Nixon continued the trajectory of America began by FDR. Indeed, it was Nixon who in 1971 declared, “We are all Keynesians now.”
Bill Clinton continued the trajectory of America begun by Ronald Reagan. In 1996, Clinton signed into law the instructively titled Personal Responsibility and Work Opportunities Act, ending the 60-year-old commitment by the federal government to support those in greatest need. The impact on the poor of that federal withdrawal of ultimate responsibility was delayed because of the economic boom of the last half of the 1990s. But it was an artificial buoyancy created by a speculative bubble that burst the year after Clinton left office, which led to federal actions that led to the second speculative bubble that ended five months ago. In 2002, Stephanie Pomboy at MacroMavens presciently dubbed this “The Great Bubble Transfer.” The speculative burst in the home mortage market compensated for the bursting of the dot-com-driven stock market.
Some would argue that in his early years, Clinton did try to change the Reagan trajectory. He raised the income tax on the wealthy. He tried to institute a national health plan. But that latter resulted in the loss of the House of Representatives to the Republicans, and from 1994 onwards he did little to take on Reaganism directly.
In the early 1980s, Reagan negotiated a free trade agreement that changed the 150-year-old definition of free trade. For the first time, free trade focused on “nontariff trade barriers,” which meant virtually any government policies that favored its citizens. Reagan negotiated the U.S.-Canadian Free Trade Agreement. Six years later, Clinton pushed through an expansion of that agreement, the North American Free Trade Agreement. Later, he signed on to a new global free trade agreement establishing the World Trade Organization. In doing so, he codified Reagan’s philosophy that government power was to be curbed, while corporate power was to be unrestrained.
In the early 1980s, Reagan pushed through a law that untethered the nation’s savings and loans from their communities and their original mission of encouraging savings and home ownership. Six years later, thousands of S&Ls closed their doors as the nation experienced its first post-1933 financial meltdown. Ten years later, Clinton pushed through a law that overturned a key part of the New Deal, the Glass-Steagall Act, which kept banking and speculation separate. The current financial meltdown has already surpassed that of 1988.
Under Reagan, to use a term coined by Gerald Epstein, the financialization of economies began. Looking back from 1994, economist Paul Sweezy noted, “In the old days, finance was treated as a modest helper of production. … By the end of the decade (1980s), the old structure of the economy, consisting of a production system serving a modest financial adjunct, had given way to a new structure in which a greatly expanded financial sector had achieved a high degree of independence and sat on top of the underlying production system.”
As Robert Weissman succinctly observes, “As Big Finance mutated and escaped from the modest public controls to which it had been subjected, it demanded that the economy serve the financial sector.”
Clinton aided and abetted this process. Indeed, as Bob Woodward reports in his book on the Clinton years, The Agenda, at one point Robert Rubin explained to Clinton who the real boss of the economy was: bond traders.
“Look, they’re running the economy, and they make the decisions about the economy. And so if you attack them, you wind up hurting the economy and wind up hurting the president.”
By 1997, James Carville was uttering his famous quote about being reincarnated as the bond market, because then “you can intimidate everyone.”
So here we are. As Obama himself has conceded, Democrats — including many of his new cabinet officers — did not stop the new trajectory of America launched under Reagan. As William Greider rightly points out, ” For the last generation, Democrats have colluded with conservatives in the destruction of New Deal law and principle.”
If Obama wants to set America on a new path, he needs to make clear what that path is. He needs to offer a new and compelling narrative that helps Americans understand what went wrong over the last generation and what we need to do to make it right.
This won’t be easy. More than a third of his audience has never known anything other than Reaganism. But then, when Reagan delivered his inaugural address, more than two-thirds of his audience had never known any other philosophy than that spawned by the New Deal, and yet he still changed the trajectory of America.
If Obama wants to do the same, there’s no better place to deliver that message than in his inaugural address.