Yes, the country is in a foul mood, with 15 million unemployed. The
Democrats may get clobbered in 2010. And even if we survive, how do we
hang on for the long term? If our great founder, FDR, could come back to
us, he might remind us of the three simple rules that once, long ago,
Democrats used to follow:
1. Do something for your base.
2. Do something for your base.
3. Do something for your base.
Seriously: why can't we do something for our base? It's been almost a half-century since we Democrats did something for our base, when Lyndon Johnson pushed through Medicare, i.e., "socialized medicine" for seniors. And while some may compare the new Patient Protection and Affordable Care Act of 2010 to Medicare, there's a big difference. To the public, the new law seems to benefit only the uninsured: the young or the marginal, few of whom will even vote in 2010 (maybe just a third of the electorate will). So while the new law is a big help to them, it does nothing for the rest of our base, especially our smaller core base that will vote in the midterms. Indeed, it seems to penalize our base, or at least raise their taxes, at a time when they have lost a big chunk of their 401(k) pensions, or their jobs, or even their homes—and if they're lucky and still have a job, they may be working just three instead of five days a week. These are the very people who voted us in. "Yes, we can!" And they watched, dumbfounded, as Congress virtually forgot their plight in our struggle to raise their taxes to give benefits to a lot of red-state uninsured who may never say thank you, and whose twenty or so red states are now trying to overturn the law.
Of course I'm in favor, wildly in favor, of this civilized and humane step toward healthcare for all. But after forty-five years of doing nothing for the people who register as Democrats, we might have kicked off 2010 by doing something for our base.
Yes, of course a fraction of our base, the uninsured, will benefit. But we could have started by doing something really big to reward or empower everyone in our base. Indeed, it's a puzzle that someone with Obama's acumen would not have done more to keep intact all these old-time Democrats and others who lifted him up to the White House in the last weeks of the election after Wall Street collapsed.
By the way, FDR would be the first to tell us it's not enough to do something for our base. Here are three other little rules we should follow when we do something for our base:
1. Keep it simple. The healthcare bill not only did nothing for our base; it was hard to understand. Every initiative should be capable of being put down in a single sentence or two. "Financial reform" is fine, but the Dodd-Frank Act is too hard to sum up coherently to our base on even an index card, much less a bumper sticker.
2. Make it universal. People on the left have all sorts of ideas for programs that turn out to be available only to a select few. By contrast take FDR's big ideas, like Social Security. Not everyone is on it, but sooner or later we all are headed there. If we're not there, our parents are. Likewise, Medicare: we'll all get there. The public option, which was left out of the healthcare law, was a nice idea and all, but in the end it would have been available only for a few.
Finally, the last and most important rule:
3. Make it add up to a plan. I mean, let's go beyond "the vision thing" and let people know we have a plan. Obama will not bring back the American economy of golden memory. The deficit will be horrendous. We may have to get used to unemployment of 7 percent, a 7 percent that covers up a bigger percent of people working just three instead of five days a week. FDR did not end the Depression, either. But people were patient because they knew he had a plan. He was rebuilding the economy from the bottom up, and it paid off, not in the 1930s but in the unionized, high-benefits postwar decades after he died.
People will be patient with us and keep us in power if they think we have a plan.
In this spirit here are ten things the Democrats could push this fall that not only do something for our base but (1) are simple, (2) appeal to at least half or more of the country and (3) add up to a plan.
1. Raise Social Security to 50 percent of working income.
Let's stop saying we will "save" Social Security. Don't save it. Raise it. Let's push Social Security up to 50 percent of people's income. It's down at about 39 percent now. Of course we can't do this overnight, but we can set it as a serious goal. Here at last we would be doing something for our base. I mean, who are we for, right? Yet even on "our" side, the cognoscenti want to cut it. Even Barack Obama spoke in his 2009 State of the Union address about "strengthening" Social Security—by which he meant cutting or at least capping it. Fine, we're running a deficit. Go ahead, listen to "respectable" voices, all the Congressional Budget Office types. But we're the Democrats. Who are we for? Private pensions have disappeared. People's homes have lost value or are in foreclosure. Don't tell me how Social Security is more generous than ever. With the collapse of the private pension system and the popping of bubbles, we need to expand the public pension system as never before.
"Wait. It will be tough enough to make the current system solvent. Where's the money to come from?" Let's put aside the fact that Social Security is solvent—or at least sure to be solvent until 2040, which satisfies me but not kids in their 20s. Fine, let's fix it for the long term as well. But as long as we're going to take the heat to make the current system "solvent" even for people under 40, i.e., to "save" Social Security even for them, we might as well raise it, too. After all, our real base voters are more likely to get off their couches and vote for us if we burn into their brains that their worst worries about retirement are over. There are three sources of a fiscal fix, not just to save but to raise it. The Democrats should propose all three:
First, restore the estate tax that existed in the 1950s and '60s and dedicate the proceeds to the Social Security trust—as Robert Ball, former Social Security commissioner, once proposed. (One might think of it as a backdoor form of means testing. At least we should get back the Social Security we paid the deceased.)
I know, "A majority of Americans oppose the estate tax." Let's find out if they do if it means they don't have to worry about dying broke.
Second, lift the cap on the Social Security tax (it's at $90,000 now) so it applies to all incomes. After all, Social Security is for everyone. If people above $90,000 are in it, then they should be in it all the way.
Third, cancel the huge tax deduction on the most wasteful sorts of corporate debt, especially the kind used for speculation and leveraged buyouts. Dedicate that new revenue to raising Social Security. It's a deduction we should get rid of anyway, for good and independent reasons. It's that deduction that has encouraged the leveraged buyouts and looting of corporations by private equity funds and all the other speculation that caused Wall Street to crack up.
"But in the long run, don't we have to raise people's taxes, especially to get above 50 percent?" Yes, I admit, we do have to raise the tax. Right now, I would not propose to go immediately to 50 percent. But there's nothing wrong with this increase if people grasp that they are spending it on themselves—that was the flaw in the Obama healthcare plan, where the higher taxes went solely to "other people."
"But there's a generational equity problem. We're asking the young to subsidize the old." So David Brooks complains. That's his kick against the welfare state. Why is that a problem? Since the time of Adam and Eve, that's why people have had children—to support them in old age. Besides, would you as a young person rather pay for Mom and Dad out of your own wallet? Raising Social Security does plenty for the young—and they are freaked out about their retirement too.
Then it might be easier to cut healthcare costs.
Why is it that in European social democracies people spend far less on healthcare but are healthier at every income level? Thanks to better pensions, they have healthier lives.
In short, if we wanted to cut healthcare from 17 percent of GDP and wean our base away from endless visits to doctors, we might try giving them bigger pensions on which to live. They might accept caps on Medicare if it meant we could give out bigger pensions for healthier lives.
Democrats! The next time we promise a cutback in Medicare, let's promise that the savings will go to raising Social Security in return.
2. Let's extend Medicare to people 55 to 65.
Remember FDR's first rule. Keep it simple. I can't think of anything simpler and easier for people to grasp than for the Democrats to propose extending Medicare to age 55.
And start now.
For a moment, during the healthcare debate, this idea caught on in the Senate. We should try again. Why? For the purpose of the midterm elections, it should be obvious. People age 55 to 65 are the people who vote.
Remember Bush's drug program, as expensive as it was? At least it made sure that in 2004 he won the state of Florida. The second time, Florida was not even close.
But there are more principled reasons, too. First, we have to make the country more competitive. That means we have to take over the healthcare costs employers pay. Before we get to single payer, let's start with the most medically expensive employees, those age 55 to 65. How do we pitch it?
First, "be competitive." If the government takes over these costs from employers, we lower labor costs. Didn't getting out of retiree healthcare costs (people often 55 to 65) help revive GM and Chrysler? Extend Medicare, and it's like a GM-Chrysler bailout across the board. If we're going to compete with European social democracies like Germany, which are now booming thanks to exports, maybe we need to resort to a bit more "socialist" healthcare to lower our labor costs and let us outsell them.
Let's put America first, right?
Second, as we lift the Social Security retirement age from 65 to 67, we should put those in the 55 to 65 category on an even playing field in terms of labor costs. Indeed, if we expect people to last longer in the workforce, we should do more to sustain them, like Elijah, for the journey.
Third, people age 55 to 65 right now have to cross a kind of no man's land. That's the worker category most vulnerable to getting sick and the one employers have the strongest incentive to cut. This demographic alone could re-elect the Democrats in 2010: think how many are being pushed out for "early retirement." The promise of Medicare picking up their healthcare costs might cause many a boss to hold off the ax.
How to pay? Most of the cost could come from an automatic surcharge—remember, these people aren't paying premiums.
Some may say, "That's a fine idea, but it's too late—the whole healthcare thing is over." But this one, conceptually, is easy. It's certainly a majority vote in the Senate: if anything is budget reconciliation, it's a one-page change in the eligibility rules. Instead of 2,000 pages to say what we're changing, all we need is one. All we need is fifty Democratic votes.
It does something for our base, especially the base likely to vote in the midterms.
It meets all three of FDR's little rules:
It is simple.
It is universal, like Medicare itself.
And it adds up to a plan to bring back the economy and lift the middle class.
If pulling this group off the insurance rolls doesn't bring insurance rates down, then there's every reason to liquidate what's left of the insurance industry. Seriously, what's private insurance left to do?
3. Make it a civil right to join, or not to join, a labor union.
Remember: organized labor is not our base. The working people of the country are our base. We have to repackage labor law reform, even over the protest of organized labor itself. Except for those in the big white buildings in Washington, few working people understand the Wagner Act. Few understand card checks or secret ballot elections or mandatory first-time arbitration. Few labor lawyers understand it. So make it simple: instead of trying to fiddle with an old 1935 law based on a collectivist view of the world, let's bring labor law up to date. How? Let's amend the Civil Rights Act of 1964 to give the same individual type of civil right to join—or, yes, not to join—a union.
Elsewhere I have argued that letting working people hire their own lawyers, go to court, take discovery, rifle the files and get awards of legal fees would do more to bring back the labor movement than to go on bottling it up in a single federal agency like the National Labor Relations Board. If we amend the Civil Rights Act and let people go to court for any employer reprisal to block a union, and to let the rank and file get their own lawyers and start handing out subpoenas, we'll get back a labor movement fast.
Keep in mind: the works councils and other forms of worker control fervidly supported by unions now in Germany at first did not have much support from unions there.
But how to sell it?
Tell people their rights will trump the rights of the union as an institution.
That includes the right not to pay dues, not to pay a cent, i.e., a completely voluntary labor movement. "My God, unions will never survive." I want to say, Nonsense: they all survive in Europe. But it's true; Europe really is different. For one thing, there is nothing like our unbalanced US Senate to block labor friendly laws (see 9 below). And it is easier to bargain for large groups of workers. Still, the people who benefit from such large-scale bargaining in a country like Germany are free not to pay—and many don't. So what? Many do—up to 20 percent of the workers in the country. Yet collective bargaining covers more than 50 percent of workers.
So, what do we do about the free riders? Let them ride.
Yes, I worry it won't work here. I don't propose to tear down the existing compulsory dues structure all at once. After all, I have to make a living representing unions. But I think ultimately there is no alternative, in a culture so radically individualistic, but to opt for a voluntary model, whether we have European-type labor laws in place or not.
Otherwise, if it is not voluntary, as it is in social democratic Europe, it is hard to see why Americans would vote in yet another institution they cannot influence democratically. Albert Hirschman, the great Princeton economist, contends that to be accountable, institutions have to offer either "voice" or "exit." That is, people either need to really run the institution or to have an easy way out. Organized labor offers neither. That's why people distrust it.
I'd prefer to increase voice, to let the rank and file rule. But it's still impossible to get real union democracy. So the only way to do it seems to be the European way, to let people opt out and make membership voluntary. If that happens, unions here will behave like socialist-type unions in Europe, constantly trying to market themselves and please the members so they will keep paying dues.
People in this country are desperate for a labor movement. They are waiting for a Democratic Party to give them one they can control.
4. Put in a usury cap of 16 percent.
Again, aside from doing something for our base, it meets the other three FDR-type rules.
First, it's simple. Unlike the Dodd-Frank Act, this is easy to explain.
Second, it's universal—who can live without a Visa or MasterCard?
Third, it fits into a bigger plan—to shrink the big returns of a financial sector that's drained so much of the investment that used to go into the "real economy." After all, our plan has to be to make the country globally competitive, to bring down the trade deficit. And we can't do that until we put limits on the returns of a financial sector that is in danger of sucking up all the invested capital that used to go into manufacturing.
Well, at any rate, it's simple.
5. Set up small government banks like the German Sparkasse.
Ironically, in this time of bailouts, the failure of so many small banks has reduced the lending the country needs. In Illinois alone, thirty-seven banks have failed since the Wall Street crack-up. The big ones like Citibank, Bank of America and JPMorgan Chase are not just "too big to fail" but too big to lend.
How to fix that?
Set up small, government-run banks all over the country, like the little Sparkasse banks one sees all over Germany.
It would do something for our base. It's simple to understand. It fits into a plan—to make the country more competitive so we can bring down the trade deficit. In Germany the Sparkasse banks are especially designed to help small manufacturers compete—the kind of small but high-value-added firms that the big banks like Deutsche Bank ignore but that play an important role in racking up a favorable trade balance for Germany.
And if all that is too abstract, think about this: the Sparkasse hand out credit cards with low interest rates.
Isn't that the ultimate "public option"? A government credit card, at a lower than Bank of America rate.
Yes, it's simple. It's universal—everyone can use a credit card. And it adds up to a plan, to create a fair and just economy that can lift the middle class by increasing sales abroad.
6. Give everyone the right to six days of vacation—six consecutive paid working days.
Why six consecutive days? Well, we need five so we can connect the two weekends. And we need a sixth so we have something to trade away in the Senate.
I'm kidding. Let them filibuster. What could be better for the Democrats?
It does something for our base. It's simple. And it fits into a plan, to make us more competitive.
If we had more vacation time, as the Europeans have, we might even visit and get to know these countries we have to compete with. If we had time off to go around the world, we might be more competitive.
7. Let employees sue corporate officers for breach of fiduciary duty to the corporation.
Under federal law, directors of our corporations owe a duty of "loyalty, care, diligence and prudence"—they have to pursue not their own interest but the best interest of their firms.
But in fact, they loot them.
And the firms go belly up and workers end up on the streets. We become less competitive.
As officers and directors loot our companies, we have fewer stockholders willing to stop them. With the rise of mutual funds and fund managers who don't seem to care, the old model of corporate governance is broken.
If stockholders do nothing, unions don't even exist. Our corporate boards are self-perpetuating. Directors keep re-nominating themselves with no real check or balance.
Yes, the Dodd-Frank Act gives mutual funds a shot at electing an occasional outside director. But even if—a big if—there is a lonely dissenter on a board, that won't fix the model or do much for workers.
It's this broken model that has hurt us so badly in competing with Germany and China, the two biggest exporters in the world. The German model has "co-determination," with workers making up half the board. The Chinese model is even simpler: over there, Big Brother is either directly or indirectly in charge; if a Gordon Gekko pops up there, he's taken out and shot.
In Germany, even a corporate rock star like Josef Ackermann—who pays out a relatively small bonus to a fellow officer—can be prosecuted for pillaging the firm.
If we can't do what the Germans and Chinese do, what can we do to stop the looting of our corporations?
Let workers—not stockholders but the people who get the W-2s, even the janitors—have the right to sue officers who loot the firm. Right now, only stockholders can sue; and the fund managers don't care. But the people with the paychecks are out on the street. Now I admit, the threat of a lawsuit, even a class action one, is not as good as the checks that the Germans and Chinese use. But why not bring a little folk justice to American capitalism? People are entitled to a bit of revenge.
So it does something for our base—it puts a weapon in the hands of some who are starting their second year of unemployment. It's simple. It's available to everyone, postgrad or janitor. And it's part of a plan—to make the country more competitive by making managers pay if they try to loot the firm.
And by the way, this may open up a check on corporate contributions too. Right now, the Democrats are flummoxed about Citizens United v. FEC. As the Court ruled 5 to 4, corporations have a First Amendment right to dump money from the corporate treasury directly into the pockets of the candidates. But the Supreme Court did not change the old legal fiduciary duty—in place since Queen Elizabeth I—that in effect requires managers to use money only for "legitimate" corporate purposes, the ones that are set out in the articles of incorporation.
How does buying off a politician serve any legitimate purpose set out in these corporate articles?
Consider the litigation if workers had the right to sue for each use of corporate money that does not serve a "legitimate" corporate purpose, one that is at least set out in the articles of incorporation. Every time BP gave cash to a politician, a guy out on the oil rig could sue Tony Hayward directly, to get his own money back.
"Oh, but the suits may not succeed."
Maybe, or maybe not—but I would not want to be a director defending any of the suits. And whether the money served my own or a corporate interest would make for a nice seven-hour deposition.
Even to put them under oath would give some pleasure to our base.
8. Pass a College Bill of Rights.
It would replace the GI Bill of Rights. If we can't get free college, at least let's make college more accountable. Why Race to the Top so that colleges can soak these kids and let them drop out? Our colleges are happy to take the money and dump the kids of working families after one or two years—deeper in debt, worse off than ever.
What rights should these kids and their parents have?
Make colleges advertise dropout rates.
Make colleges tell which courses actually "work," i.e., help students improve some verbal or other skill.
Make them have outside auditors to prepare reports on this and make such reports public.
Create a kind of Federal Trade Commission to go after colleges and universities that take large sums of tuition but fail to have the overwhelming if not exclusive purpose of ensuring that these students, deep in debt, get a degree. One can define "unfair" or "deceptive" trade practices in this part of our bloated not-for-profit economy just as in any other. While one might not let students and parents sue directly, they could at least file for individual and "class-type" relief with this FTC.
But above all it's time for Barack Obama to tell the country we don't need everyone to go to college. After all, only 27 percent of adults have a bachelor's degree, and there are not enough jobs for them. The only way for the Democrats to stay in power is to stop demoralizing our base and tell people we will create an economy in which a high school degree will mean something.
9. End the filibuster.
Or else, as to all the rest, there really is no point.
10. Get the country out of debt.
Finally, we have to take back the GOP's big issue, the federal debt. Indeed, for every kind of debt—government, consumer, trade—the Democrats have to be the party that gets the country out of debt. That's the only way to bring back a fair and just economy that lifts the middle class. As debt piles up, even our base is freaking out. Deep down, people grasp that America got into this mess with too much private debt. "Hey, if we're all trying to get our own debt down, how does it make sense for the government to run it up?"
"Oh," some of us will say. "These poor unenlightened ones—they don't understand Keynes." Maybe we don't understand Keynes. Keynes would never have happily urged a serious debtor country to go deeper into debt. This is not your great-grandfather's Great Depression. In 1936 Roosevelt could and should have gone into debt—but didn't. We were the biggest creditor country in the world. In World War II we ran up a colossal debt—but it was a debt to ourselves. We baby boomer kids never even noticed. That's why Keynes was so relaxed in 1936 about our going into debt. But otherwise Keynes spent much of his life trying to get debtor countries out of debt—Germany, his own Britain after the war. If one looks at his career, it is clear that Keynes never told a debtor country to go deeper into debt.
As he would point out, much of the debt we pile up in Washington has little or nothing to do with putting people back to work. Much of it is just to balance the books. Because we buy more than we sell, we have a trade deficit. So the books have to balance, right? Someone has to make up the difference. Under Bush we had consumers go into debt to do it. But they're tapped out. So now Washington has to go into debt instead.
But at at some point even Washington is tapped out. What happens then?
We turn back to consumers: "Hey, we're done going into debt. Now it's your turn to go into debt."
No wonder our base freaks out—there isn't any plan to get us out of debt.
When we have a big trade deficit, the feds can't run up a debt just to re-employ Americans. As long as we've so much trade debt, we have to figure that a distressing amount of any stimulus will go ultimately to re-employ the workers in China, Brazil, Japan and even Europe, who fill the gap between the "demand" we pump up and what we actually "supply." When we have a big trade deficit, it means that the more we prime the pump, the more we drain out this distressing amount of our national wealth.
And why else did the stimulus run out of steam?
It was probably not big enough, but an even bigger one might have run out of steam. The bigger the trade debt, the less punch there is in running up a deficit. You can't just blame the GOP for cutting the stimulus down.
What's more, on this debt to pump up foreign "supply" we also have to pay out interest to foreigners. The deeper in debt we go, the more likely we are to end up in the clutches of foreign creditors. Don't believe me? The time may come on the left that we'll miss the days when we could rail at Goldman Sachs instead of the IMF.
Yes, in ten or so years the renminbi or even the euro (thanks to Germany) could replace the dollar as the world currency in which we denominate our debt, and our fate will be up to central bankers in foreign countries.
This is no joke: a Babylonian-type captivity for our country is but a presidential term or two away.
What to do? Well, the first duty of a Democrat is to defend the country. We have to win our independence back. The president should give a wartime talk: how over the years, president after president has compromised the sovereignty of our country. And the big reason this happened is that we have too much debt—consumer debt, federal debt, trade debt—because we can't pay our way in the world.
For years, the economic advisers at Harvard et al. told their student presidential advisers-to-be, "The trade deficit doesn't matter."
Well, it does matter. We don't have the same freedom of maneuver in the world.
How do we get it back?
Items 1 through 9 above are all parts of a bigger plan to get us out of debt, every kind of debt. We have to bring back exports, so consumers and Washington don't have to keep coming up with the cash to pay for the trade deficit. That's the "plan." We have to punish investment in the financial sector—if it can even be called true investment at all, and not speculation or a way of holding on to savings, as Keynes once argued.
And we have to reward investment in manufacturing by lowering labor costs in what is left of our globally competitive industry. Yes, along with the stick we need a carrot—to increase the manufacturer's profit margin by taking over nonwage labor costs.
So, for example, we should push for Medicare at 55 to remove that burden on global companies, as we did when we lifted retiree healthcare for Chrysler and GM. (Yes, it makes us more competitive globally, and it's all legal under the World Trade Organization.) Likewise, while we should limit the deductibility of any debt for leveraged buyouts or flipping companies, we should keep it for investment in tangible manufacturing-based production. We should lower labor costs not by lowering wages—goodness no, for that would be a disaster in the Keynesian or any other sense—but by having the government (yes, taxpayers) assume the nonwage healthcare and other costs—the only way to send a signal to investors that they had better get out of financial speculation and into manufacturing.
As Keynes would tell us, play on their psychology. Let investors know the "water is friendly"—not by penny-ante things but the big stuff. Yes, we on the left should even propose steep cuts in corporate taxes in manufacturing and offsetting them with higher taxes on financial firms, to give an even bigger Keynesian-type shock to get investment in manufacturing.
And we need a new corporate model—which gives human capital at least some modest check, as in Germany, over the allocation of financial capital.
That's the plan—to sell more abroad so we can all get out of debt.
From now on, this country has to be lean, mean and stripped for global competition.
And if we, the great-grandchildren of the New Deal, can bring all these things to pass, then FDR will smile upon us and say, "At last, children, you've done something for your base." Then our base will be glad to let us take on other things—perhaps even, before it's too late, to dial down global warming.
But we have to be in power. So if we want to save the planet, we better save the country first.