Give me that steering wheel

This post on HuffPo by Robert Borosage caught my eye today. It's another one of those semi-informed economic policy rants (Stirling Newberry at TPMCafe is my favorite for these), titled - a little too ironically - "How Democrats Go Wrong." Borosage's rant is a blueprint for exactly how to do that. His siren song is so seductive (and therefore so dangerous) for the Democratic party that I thought it would be worthwhile to sit down and dissect it.

Borosage is warning to Democrats to ignore the economic advice of Robert Rubin, who was Bill Clinton's Treasury Secretary and is now an executive at Citibank:

[Rubin] presided over the Clinton economy, which riding on the dot-com bubble, moved the economy to full employment, and helped lift wages even at the bottom, while generating a budget surplus.

This sentence already lays the groundwork for bashing Clintonian policies. By saying the American economy "rode on the the dot-com bubble," Borosage is implying that the 1990s were a lucky break, a one-off windfall, not representative of true progress. But productivity gains were real and permanent during that era, and didn't disappear when the NASDAQ crashed. The 1990s were no dot-com-driven flash in the pan - they were the culmination of a long, sustained investment in scientific and technological progress that began in the early 80s. The companies that became household names in the 1990s - Microsoft, Intel, AMD, HP, Yahoo, Amazon - are still around and (mostly) doing quite well. The wage gains American workers made in that era have not vanished. And our government did a lot to lay the groundwork for that era - by investing in technology, taming inflation, balancing the budget, etc.

So Borosage is already heading straight for the Magical Land of Full-of-It.

He then issues a warning:

Rubin's economic advice is likely to mislead Democrats on policy and on politics. Like most bankers, Rubin advocates balanced budgets uber alles. He'll lock Democrats into "pay-go" budgeting, shackling them to show where how [sic] they will pay for any investments they want to make.

So, if I read Borosage right, he's advocating more deficit spending? Isn't worry over the exploding budget deficit one of the main reasons that the Republicans just got tossed out of office a couple weeks ago?

But Borosage's bigger worries are related to globalization and trade. He writes:

Rubinomics has no answers for the current crisis America faces. What do we do in a global economy that has added billions of very low wage, disciplined workers to the workforce supplied with technological capacity by global corporations?

Well, according to this interview, Rubin's anwer includes increased investment, balanced budgets, and health care reform. It's not clear what Borosage's answer would be, as he declines to give one.

What do we do with sustainable global deficits - likely to reach nearly $1 trillion next year - that have left us dependent on the whims of Chinese and Japanese central bankers? [Balancing the budget isn't answer; the trade deficits went up under Clinton when the budget was in surplus] What do we do about the shredding of the corporate social compact - family wages, secure jobs, health care, and paid vacations, pensions - which were the basis of America's middle class?

Borosage gives no answers to these questions either, and with good reason: he doesn't have any. No one does. There is no obvious government policy that will ensure that everyone has paid vacations, job security, and pensions. You can stop firms from firing workers, but that might just drive unemployment up, as it has in France and Germany. You can insure full pensions, but that can just lead to massively bigger deficits. The corporate social compact was just that - a corporate compact. It's not clear that government could step in and replace that compact, even if everyone wanted it to.

And Borosage is wrong when he says that balancing the budget won't stop those mountains of foreign-owned bonds from growing. The 90s trade deficit was driven by investment - foriegn companies investing in America because it was such a great place to do business. This decade, it's mostly been foreign central banks buying our national debt. Big difference.

Now for the final volley:

Rubinomics is also bad politics. It favors the Wall Street wing of the party at the expense of the main street voters. Democrats were propelled to victory in this election in part because of growing public dismay over an economy that doesn't work for them.

So, "main street voters" recoil from the dreaded menaces of education assistance, health care reform, wage insurance, portable pensions, and balanced budgets? Is that what the diabolical "Wall Street wing of the party" is trying to force down honest Americans' throats?

And does Borosage really think that voters marched to the polls in 2006 to reject Rubinomics? Does he think that it's Rubinomics that Bush has been carrying out for the past 6 years?

He concludes:

Voters - including independent voters of the supposed "center" - are overwhelmingly in favor of aggressive trade policies, and are looking for help on wages, health care, pensions, and holding Wall Street moguls and corporate CEOs accountable.

Finally, a sentence I agree with. But as I see it, the only one of these where Rubin and Main Street would diverge is trade policy - and it's not clear at all what Borosage means by "aggressive".

Basically, Rubin's economic advice would be "Do what worked in the 90s." That's not going to work as well as it did back then (at least, not immediately), in no small part because of Bush's depredations over the last few years. But even a weaker form of Rubin's magic wouldn't be bad for the country. Quite the contrary.

Borosage represents a wing of the Democratic party that views economics as if it were a social justice movement - gains for "Main Street" only come at the expense of "Wall Street," and vice versa. It's a simple pseudo-philosophy:

Trade = helps the rich, hurts the middle class
Cutting government spending = helps the rich, hurts the middle class
Deregulation = helps the rich, hurts the middle class

But, seductive as this worldview might be, it misses the complexities of the world in which we actually live. Trade may have held down wages in the last 6 years, but it's increased the average American's wealth by leaps and bounds over the last 60. Bush's government spending is no help to Main Street - it's borrowed from future generations and funneled that money to well-connected cronies' pocketbooks. And regulation can be a very mixed bag; red tape for it's own sake never did anyone any good, and certainly won't help those alternative-energy companies that everyone wants to see take over from Exxon.

There are plenty of progressive economic ideas out there that are much smarter than blind business-bashing.

The reality is that even our best minds (like Rubin) don't yet know how to solve all the problems wrought by globalization and the changing labor market. But that doesn't mean we should throw our best minds out on the street, because they're a damn sight better than our worst minds, who are currently running the show. I'd gladly take half a 1990s over ten of what we've got right now. I have a feeling that so would Main Street.

Rubinomics may not lead us to the land of milk and honey, but it sounds like a good place to start. Better than what Robert Borosage's got, anyway.