Your Economy or Your Life

By G. Pascal Zachary, AlterNet. Posted May 18, 2006.

Jared Bernstein is the conscience of the American economy. In his new book, "All Together Now: Common Sense for a Fair Economy," he advocates an increase of government involvement in American life: primarily our economic lives. Given the public's current low expectations for government effectiveness, it sounds like a leap of faith. Bernstein says it's a leap well worth taking. Government, he says, is the only institution that can enable us to meet the challenges of health care, globalization and rampant economic inequality.

A strong country puts people's needs before corporate profits, he says. In order to make that happen we have to ditch what he calls the Bush administration's YOYO philosophy ("you're on your own") and replace it with a kinder, gentler alternative: WITT ("we're in this together").

G. Pascal Zachary: You're all about bringing fairness to ordinary workers and having an economy that serves people over profits. In your book, you say that unions do a good job of achieving many of the goals you favor. If the benefits of unions are so clear -- higher wages, stronger benefits -- why don't we have more?

Jared Bernstein: A majority of work force say they'd like to be part of a collective bargaining unit. The desire is pervasive. The problem is in the difficulties in forming such units. The playing field is very steeply tilted against those who wish to form a union. The power to tamp down a union organizing drive is very large. Employers have lots of tools to tamp down a drive to form a union. It's a steep uphill climb.

Zachary: How can the playing field be leveled? How can more workers get unions?

Bernstein: We can start by making them jump through fewer hoops. Card check, where a majority of employees sign a card saying they want a union and the union comes, is important. Then there would be fewer chances for employers to oppose a union drive and retaliate against pro-union workers.

There should be much tougher penalties on employers who fire workers who are trying to form unions. Employers who do this should be quickly punished. Right now all they get is a slap on the wrist. To get more unions, you need to increase the cost of illegal behavior by employers.

Zachary: In the absence of stronger unions, what can working people push for?

Bernstein: One of the most important sources of bargaining power these days is a full job market. When the job market is tight, the job market itself serves a similar role as unions. Workers have more clout over matters of pay, benefits and working conditions. They can switch jobs more easily. The clout workers have is severely diminished in a weak job market. So what workers can do is to advocate for better macroeconomics. This gets to the heart of my book. Workers should sign onto an agenda that elevates full employment to a critically important national goal.

Zachary: How can they do that?

Bernstein: For example, they can press the Federal Reserve to show concern for higher employment. The Fed really doesn't do that, though they are supposed to. No one calls them on this failure. The pressure on the Fed tends to be to keep inflation low and much less to keep employment full. The question gets back to whose economy is it? If a lousy job report helps to boost the stock market [because high unemployment undercuts demands by workers for raises and thus promotes corporate profits], ask yourself which market has the most constituents, the stock market or the job market?

Zachary: In your book you pit individualistic approaches against communal, cooperative approaches to government. But aren't you really talking about Republicans versus Democrats? Aren't you really against everything the Republicans stand for economically and fiscally?

Bernstein: There are ways that Democrats also are failing to pursue the agenda I outline. But it is definitely true that the Republicans are failing more often. They have no clue when it comes to eco-management, actually. The Republicans are promoting a kind of Robin Hood in reverse. They are trying to enrich their friends and donors. Along the way they're shifting risk from government's shoulders onto individuals. The Republicans are pretty much dividing the spoils among themselves and their donors and leaving the rest of us to fend for ourselves.

Zachary: What about the Democrats? Aren't they in favor of your approach, and haven't the voters rejected it?

Bernstein: I don't think either Kerry or Gore [the last two Democratic nominees] sold a program of economic fairness in a way that reached people. A presidential candidate needs to communicate to the electorate that he or she understands the economic insecurities they face and has a plan to reconnect their living standards to the growing economy. Bill Clinton did that. [John Edwards, Kerry's 2004 running mate,] can do that. Barack Obama does that. Hillary Clinton comes to mind. She can connect with people on these issues, but for some reason it doesn't come across in the media. She convincingly expresses the kinds of thoughts I'm talking about.

Zachary: With the economy booming, with housing prices still healthy, why should voters embrace economic alternatives? Or is our perceived economic health a fraud? Is the economy simply held together by foreign investment, high deficits and low-interest rates? Do we have a Ponzi scheme economy, as the economist and columnist Paul Krugman repeatedly suggests in the New York Times?

Bernstein: Fundamentally I don't think we have a Ponzi-scheme economy. One of most important variables is productivity growth [whereby the economic value of a worker's time is growing at a much faster rate than in the past]. But even though I believe we have a new productivity growth curve, there are absolutely some shaky fundamentals. You hit on them. The extent of exposure to foreign debt in particular. That's one of our major exposures. We're depending on outsiders to finance 7 percent of our spending because we as a country are consuming more than we are producing. That's unsustainable. So the question is how does this unwind … with a bang or a whimper?

Zachary: What do you think?

Bernstein: I see a middle ground, somewhere in between a bang and whimper. That still isn't pretty. We'll be looking at slower growth.

Zachary: This new Bush tax cut, moving through Congress this week, seems like madness. Can the government simply keep piling up more debts and nothing happens? When is the day of reckoning coming, and how bad will it be?

Bernstein: The day of reckoning is far enough away that these guys feel they can cut taxes with impunity. No one has proved to them that they can't. Maybe this November the electorate will send them a message that this profligacy won't stand. You can't justify this latest tax cut on any rational economic grounds. Yet it is hard to see what stops them. Where are the political forces that are pushing against this craziness?

Zachary: You say in your book that you want our very divided country to come together and embrace an economic platform that puts people's needs before corporate profits and gives more help to the poor and disadvantaged. Yet the country seems headed in the opposite direction. Are you sensing some kind of "darkness before the dawn" scenario that other people are missing?

Bernstein: I think I am. What motivates this book is the vision that we're going down the wrong path, and that it is within our power to change. So yes, I think we are at a "darkness before the dawn" moment.

The polls support this idea. There is a growing sense by a majority of Americans that something is fundamentally wrong in how we are running our affairs.

The war is out of hand. There's a large and growing disconnect between the economy and the people in the economy. Add to that a pervasive sense that the Bush administration is incompetent. Even if you like Republican ideas and values, you can't support the administration's actions. Even when government intervention is undeniable, like in the Katrina situation, the Bush administration can't handle the job, and of course that makes people more insecure and unsettled, and they start looking for another path.

Zachary: So there's an opportunity here for progressives?

Bernstein: There are clear openings for progressives. The failure of social security privatization and health savings accounts -- that suggests there are openings. When those initiatives by Bush fell flat, it led me to think that people are rejecting the values embedded in those initiatives and have a desire for alternatives.

Zachary: Why does the majority of the electorate vote against its own class interests? Or even if we grant that a majority of people doesn't vote against class interests, a significant minority certainly does. What's wrong here? Are Americans just dumb?

Bernstein: Not at all. It's not even clear to me that people even do vote against their class interests. I won't believe that until I see a candidate express class interests in a way that hasn't been done yet. When that person loses, then I'll question my belief. For a long time, the economic debate has been so foggy that you can't tell who votes against what. Take the last election. I don't think Kerry was a bad candidate, but he didn't convincingly present economic alternatives. Any candidate who does represent the class interests of the majority will be a winner, I believe.

Zachary: When will the failure to come up with alternative sources of energy hurt the economy and crack the consciousness of ordinary Americans?

Bernstein: I am a complete disbeliever in almost every conspiracy theory, but the energy industrial complex does seem extremely entrenched. It's clear to everyone who looks at the problem that we have to end our addiction to oil. Even Bush has said so. But the question is what are we doing about it. The problem is we can't do anything about reducing our dependence on oil if all the paths forward are blocked by moneyed interests.

Clearly, conservation steps ought to be taken right away. Like better gas mileage in cars. But oil interests keep that from happening. And why not make a big public-private partnership to push for energy independence? Like the Apollo Alliance? Like when we said in the 1960s we'll land on the moon in 10 years? Well, we can't have such a crash program when your political funders are blocking that path. We have pure shortsighted politics in the energy area.

Pricing is another problem. Gas at $3 a gallon apparently isn't the tipping point to change people's behavior. Maybe gas at $5 to $6 a gallon does it. The price right now doesn't cause enough pain to enough people. Unless that changes -- maybe through a higher tax on gasoline -- we'll probably still stay on the path were on.

Zachary: Are Bush and Cheney bent on wrecking the federal balance sheet as part of a nefarious, diabolical plan to permanently cripple the capacity of the U.S. government to get anything done, and thus force the U.S. down a path of smaller government, or are Bush and Cheney incredibly stupid? Or are both true?

Bernstein: I don't think it's diabolical or stupid. It is pure politics. Bush and Cheney have made a political calculation that deficits don't matter and that spending helps them. They are very much driven by politics, not economics. Besides, spending helps them. So does cutting taxes for your rich supporters.

Zachary: But isn't the legacy of this to permanently constrain the federal government, to limit what government can do?

Bernstein: If you have to shrink government politically to live within your means, that's fine with Bush and Cheney, too. But they are leaving that possibility to other generations. That's not their problem.

Zachary: But it is ours as a nation.

Bernstein: There's nothing new in government spending like a drunken sailor. What I've outlined is a different set of purposes. The economic policies we need should not simply be concerned with efficiency or getting out of the way so the individuals can fend for themselves. We need to be concerned with equity and opportunity too.

G. Pascal Zachary is the author of "Endless Frontier: Vannevar Bush, Engineer of the American Century."

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