Yes, you are correct. We should even go a few steps further. Zoellick was a major player in the W administration that followed Clinton. It was during the W time that spending got out of control, that the real estate scams promoted by the
likes of Hank Paulson while at Goldman Sachs came crashing down with the emergency of the 2007-08 financial crash and Great Recession. What was Zoellick doing or saying then? Nothing that I am aware of.
From: Salon <salon-bounces@listserve.com> On Behalf Of
Janet Breslin-Smith via Salon
Sent: Thursday, August 17, 2023 11:59 AM
To: Chas Freeman <cwfresidence@gmail.com>
Cc: salon@listserve.com
Subject: Re: [Salon] Team Biden wants a revolution
There is much to think about in this piece. I need to read it a number of times. But my memory of the period of the late 80’s and 90’s captures Zoellick’s points in a different way. I was legislative director for Senator Leahy during
the first part of this era, and we formed a bi partisan group to support the budget discipline of Gramm Rudman Hollings. I was deputy staff director of the Senate Agriculture Committee also during that time, and there is no doubt that it was hard to cut farm
support/subsidy programs. Very hard. But the structure of Gramm Rudman, and the bi partisan support for that legislative process produced almost a decade of budget discipline, so rare in a representative body. And the result was the ‘gift” of a budget surplus
for the incoming President Bush. I believe the Congressional role needs to be acknowledged.
I might also add that Clinton’s policy, while effective, as Zoellick notes, might be said to have laid the tinder for the fire in the country now. The Democratic Party embraced big business, wall street and free trade, along with our Republican
colleagues. President Trump tapped the resentment against the resulting impact of that trinity—the wealth of elites, inside deals, and loss of manufacturing jobs. His populism, and economic nationalism, should be more of a concern for Zoellick, as it continues
on today.
janet
Team Biden wants a revolution
The economic thinkers who generate the intellectual energy for the Biden administration are on a mission: to slay their elders, figuratively speaking, from the Clinton and Obama eras. The revolutionaries do not just want to devise new policies;
they are demanding an ideological transformation to rewire the political mind of the Democratic Party.
Some elders try to compromise with the upstarts, yielding some principles and hoping the radicals will moderate with time. Others appear to have given up on ideas, and coldly calculate how the new plans might buy votes. They should be forewarned:
Republican leaders waffled in a similar way and lost their contest for ideas.
Advocates of a new Democratic economics rally around a four-part manifesto: ignoring fiscal discipline; dismissing the importance of prices and costs; celebrating state direction; and slighting international economic leadership.
First, they want to replace budget restraint with huge spending financed through a wizardry known as modern monetary theory. In doing so, they are tearing down the legacy of former treasury secretary Robert Rubin, who convinced President
Bill Clinton in the 1990s that balanced budgets would reassure bond markets and investors, leading to lower interest rates and sustained growth. The Republican Congress of 1995 joined in and together they produced something unimaginable today: budget surpluses.
President Barack Obama, confronting a costly Great Recession, also accommodated constraints on spending.
Biden's advisers spurn budgetary rigor. Disdaining Obama's sluggish recovery, they instead prescribed a stimulus of about 10 percent of gross domestic product, the first of a series of enormous spending bills and debt forgiveness. The new
theorists imagine that perpetually low interest rates and relaxed monetary policy can consign fiscal discipline to the past.
Second, the Clinton-Obama generations paid close attention to price signals, even when they were exasperated by the vagaries of markets. In contrast, Biden's team pursues trade and antitrust policies while questioning the importance of
prices, costs and efficiencies. Increased prices for consumers matter little to the administration compared with such goals as challenging big companies, blocking foreign competition, helping unions, doing away with fossil fuels and experimenting with new
regulations.
Third, earlier Democratic economic architects understood that the private sector powers the economy. Those administrations also wanted to redistribute the gains in the economy — but they did not fall into the trap of thinking that government
creates the gains. Clinton's welfare reform encouraged people to rejoin the workforce, and his policies combined taxes on higher income with credits for the poor. Though Obama was more skeptical of the private sector, he designed his signature initiative —
Obamacare — to work with private companies and enhance markets. The new progressives wish that he had nationalized health care.
National security adviser Jake Sullivan has argued that reliance on private businesses and markets has resulted in major economic and social failures. The Biden administration instead relies on state direction in areas of the economy far
beyond infrastructure, R&D and education. Washington now chooses the vital sectors of the future economy, offering subsidies in exchange for favored policies — including preferred technologies, limitations on imports and exports, unionization and child care.
Pipelines are out. Solar and wind energy are in, but not with foreign components. Education cannot rely on private firms. Companies must report on the carbon usage of their suppliers as well as their own — and trial lawyers are empowered
to police the paperwork.
Finally, the Clinton and Obama administrations embraced America's global economic leadership. Biden's planners do not. Clinton bucked protectionists to pass NAFTA and completed the global trade negotiations that contributed to a decade
of global growth. Obama, though initially skeptical, eventually recognized the strategic and economic importance of trans-Pacific trade.
In contrast, Biden's trade representative, Katherine Tai, embraces Trumpian isolationism. She denies the power of deals to open markets to develop international standards for the digital economy and other cutting-edge sectors; to add resilience
to nations and supply chains; and to encourage developing countries to improve environmental and labor standards.
The Biden theorists imagine a national economy that Washington designs without foreign involvement. Their industrial policy uses tariffs, rules of origin and "Buy American" requirements to block foreign competition. They send a destructive
message to our partners: Join the race to subsidize. If you are a poorer developing country, too bad.
Inflation and higher interest rates have hampered the new ideologues, but they have plunged ahead. Only trouble awaits them. Their massive spending bills will soon be tainted by tales of waste and corrupt crony capitalism. Their international
policies are adrift. Narrow economic nationalism might be the one thing that Donald Trump and Biden agree on.
The danger is that the new ideology — with its subsidies and protection — does not have to work well to win adherents in the short term. Democrats who have decried Republicans' suspension of traditional beliefs should reflect on the comparison:
They, too, could lose out to the faction with dangerous ideas.
Robert B. Zoellick served in four Republican administrations at the White House, State and Treasury departments, and as the U.S. trade representative.
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