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We Forget What It Was Really Like Under the Clintons

NAFTA failures; deregulation of banking and ENRON's rise; "Welfare Reform" that led to more poor people. This and more is what the Clintons gave us.
 
 
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Twelve days before the Iowa caucuses, the New York Times Magazine cover, in large white letters on a deep black background, carried the single word title of its lead article: Clintonism. In the article Matt Bai, the Times reporter on all things Democratic, with a big D, made one undeniable assertion and two highly debatable ones.

Bai's contention that Bill Clinton's "wife's fortunes are bound up with his, and vice versa" is incontestable. The primaries and even more so the general election, if Hillary is the nominee, will be a referendum less on Hillary than on Clintonism, the philosophy and strategy that guided the White House for eight years. Hillary clearly welcomes such a prospect, as demonstrated by her constantly reminding voters that she was "deeply involved in being part of the Clinton team."

Bai's much more problematic assertions involve his evaluation of the nature and impact of Clintonism. Bai begins by mocking "Clinton's critics on the left" for displaying "a stunning lack of historical perspective." Yet it is Bai, who demonstrates a remarkable lack of historical knowledge, a dangerous shortcoming for a reporter with his portfolio.

The most glaring example is Bai's bizarre assertion that Clinton "almost single-handedly pulled the Democratic Party back from its slide into irrelevance." The historical fact is that when Clinton took office, the Democratic Party controlled both houses of Congress and a majority of state governorships. By the time he left office, the Republicans controlled both Houses of Congress and two-thirds of the governorships. By the numbers, it was Clintonism that relegated the Democratic Party to the shadows.

Bai's other dubious assertions is that Clintonism was good not only for the Democratic Party but for the nation as well. He applauds Clinton's "courage, at the end of the Reagan era, to argue inside the Democratic Party that the liberal orthodoxies of the New Deal and the Great Society, as well as the culture of the anti-war and civil rights movements, had become excessive and inflexible. Not only were Democratic attitudes toward government electorally problematic, Clinton argued; they were just plain wrong for the time."

But then, astonishingly, in his 7,000-word piece, Bai does not describe the many legislative initiatives Clinton undertook to reverse the New Deal and the Great Society.

Clinton himself summed up the principle guiding his initiatives in his famous declaration, "The era of big government is over."

The Telecommunications Act of 1996 was the first major overhaul of United States telecommunications law in nearly 62 years. The broadcasting industry couldn't get the legislation through under Reagan or George H.W. Bush, but it succeeded under Clinton. The day he signed the bill into law, Clinton boasted, "Landmark legislation fulfills my administration's promise to reform our telecommunications laws in a manner that leads to competition and private investment, promotes universal service and provides for flexible government regulation."

The Act removed the legal barriers to local and long distance phone companies acquiring each other. The results were immediate and massive. In 1996 there were eight major U.S. companies providing local telephone service and five significant long-distance companies. By 1999, these 13 companies had merged into five telecommunications giants, in a series of record-breaking merger deals.

Prior to this law, tightly regulated broadcasters could own just 40 stations nationally, and only two in a given market. Suddenly, without the FCC's input or any public hearings, ownership limits on radio stations was eliminated and a feeding frenzy took place.

By 2001, there were 10,000 radio station transactions worth approximately $100 billion. As a result, 1,100 fewer station owners were in the business, down nearly 30 percent since 1996. Two companies -- Clear Channel and Viacom's Infinity Broadcasting -- controlled one-third of all radio advertising revenue; in some individual markets their stations commanded nearly 90 percent of the ad dollars. Clear Channel alone owned nearly 1,200 stations, the result of buying up 70 separate broadcast companies.

In 1999, the Financial Services Modernization Act overturned the Glass-Steagall Act of 1933. The Act effectively barred banks, brokerages and insurance companies from entering each others' industries, and separated investment banking and commercial banking. The law was enacted in response to revelations of gross corruption and manipulation of the market by giant banking houses that organized huge corporate mergers for their own profit, leading to the collapse of the stock market in 1929.

The Wall Street Journal celebrated the agreement to end such restrictions with an editorial declaring that the banks had been unfairly scapegoated for the Great Depression. The headline of one Journal article declared, "Finally, 1929 Begins to Fade."

The unleashed and deregulated financial services sector boomed, bringing us the speculative boom that in turn gave us the temporary budget surplus of the late 1990s and the finance-led booms and busts since then. The hedge fund was not invented in the 1990s, but it was under Clinton that they were transformed into their modern form, with the Clinton White House cheerleading that transformation. In 1998, when the hedge fund, Long Term Capital Management, collapsed, leading to federal intervention, the president established the Working Group on Financial Markets. In February 2000, it concluded that hedge funds needed no regulation.

Clintonism never saw a sector it didn't want to deregulate. Wholesale electricity deregulation began under George H.W. Bush, but Clinton worked relentlessly to extend it and bring it to the retail level. We forget that Ken Lay, the founder of Enron and the driving force behind electricity deregulation was a friend of and mentor to Clinton as well as George W. Bush. Enron gave $420,000 to Clinton's party over three years and donated $100,000 to his inauguration festivities.

Clinton's appointees on the Federal Energy Regulatory Commission (FERC) aggressively deregulated the electric grid system, even refusing to step in when Enron and other electricity traders' manipulation of prices drove California to the edge of bankruptcy.

And then there was welfare reform. During his 1992 presidential campaign, Clinton promised to "end welfare as we know it." Four years later he proudly pushed through the Personal Responsibility and Work Opportunity Reconciliation Act, which, for the first time in 60 years, eliminated the federal safety net for the poor. The legislation set work requirements for most welfare recipients and limited the length of time they could collect assistance.

The economic bubble of the late 1990s hid the impacts of this legislation during its first five years. But even then, the studies were mixed. A 2002 report by the Chicago, Ill.-based Joyce Foundation found that while hundreds of thousands of welfare recipients in the Midwest went to work since 1996, most had "taken jobs that pay low wages, are part-time, or don't last ... As a result, most of those who have made the transition from welfare to work remain poor."

Wendell Primus, an outspoken critic of the original legislation, resigned from the Clinton administration over welfare reform. A few years later he maintained that "while many families had earnings gains under welfare reform, a significant number would have done better without welfare reform under the expanding economy of the 1990s." Noting that the rates of child poverty dropped more in the 1992-1996, pre-welfare-reform period, than they did in the post-reform period, from 1996-2000, Primus said, "In the aggregate, there is absolutely no evidence that it (reform legislation) increased household income."

There is no question that welfare reform has succeeded in reducing welfare rolls in the states. But 10 years into welfare reform, "the number of people living in poverty had not," noted Robert Wharton, president and CEO of the Community Economic Development Administration. "At the same time, the safety net of services and support that once protected the poor lies in tatters."

The law also led to the privatization of welfare systems in many parts of the country. And an unfamiliar provision of the law called "charitable choice" allowed religious organizations to receive government funding for providing certain welfare-related services. The month he took office, January 2001, George W. Bush's faith-based initiative opened the doors to religious organizations to get government grants to provide services previously made available by government agencies.

And of course there is NAFTA, a key piece of legislation that Bai mentions only in passing. In retrospect, we can view it as a simple extension of Clintonism's obsession with deregulation, in this case deregulating trade and borders.

NAFTA was enacted despite the opposition of Clinton's own party. Two-thirds of House Republicans voted in favor while 60 percent of House Democrats voted against. In the Senate, Republicans voted 4-1 in favor while a slim majority of Democrats voted against.

I discussed the impact of NAFTA 10 years after in an earlier AlterNet piece. The slogan of those who championed a North American Free Trade Agreement was, "Trade, not aid." NAFTA would solve our problems, the White House insisted, with little or no transfer of funds from richer Canadians and Americans to poorer Mexicans. By raising Mexican living standards and wage levels, Attorney General Janet Reno predicted NAFTA would reduce illegal immigration by up to two-thirds in six years. "NAFTA is our best hope for reducing illegal migration in the long haul," Reno declared in 1994. "If it fails, effective immigration control will become impossible."

NAFTA did what it was intended to do. Trade volume soared, from about 30 percent of Mexico's Gross Domestic Product in 1990, to about 55 percent in 2005. Foreign investment increased by over 225 percent. Free trade theory teaches that these achievements should have led to universal prosperity. In the real world, opening up the borders between two exceedingly disparate economies leads to disaster.

Which is what happened here. Real wages for most Mexicans are lower than when NAFTA took effect. And Mexican wages are diverging from, rather than converging with U.S. wages, despite the fact that Mexican worker productivity has increased dramatically. From 1993 to 2003, worker productivity rose by 60 percent. In the same period, real wages declined by 5 percent.

As NAFTA intended, Mexico became an export-dependent economy. But this has not benefited most Mexicans. Sandra Polaski of the Carnegie Endowment for International Peace points out that Mexican manufacturing is increasingly based on a production model in which component parts are imported, then processed or assembled and then re-exported. In the maquiladora sector, which accounts for most exports, 97 percent of components are imported; only 3 percent are produced in Mexico. The spillover effect of such operations on the broader economy is very limited.

The only thing that saved Mexico from collapsing into economic and social chaos was the massive emigration of Mexicans across their northern border.

Illegal migration has camouflaged Mexico's economic weakness. Between 1994 and 2004, Mexico's working-age population increased by a little over 1 million per year, but the number of jobs expanded by only half as much. The annual exodus of 500,000 to 1 million Mexicans kept unemployment at least to manageable levels.

Migration has served another even more important salutary function: national financial safety net. In 2005, Mexicans in the United States remitted some $20 billion home, about 3 percent of Mexico's national income. Remittances now exceed tourism, and the maquiladoras, and until the recent runup in oil prices, even oil as the country's top single source of foreign exchange. It turns out that it is aid, not trade, that is keeping the Mexican economy afloat.

NAFTA's designers promised it would keep Mexicans at home. Yet its very objectives undermined that possibility and spawned the waves of illegal migrants that have become one of the most divisive issues in the 2008 campaign.

And then there is healthcare, an issue that Bai did comment on. History has been rewritten in regard to the Clintons' health initiative. Today it is viewed as a bold but failed effort. Even Michael Moore's movie, Sicko, paints this picture. Nonsense. It was Hillary who concluded that it was politically impossible even to argue for a single-payer system. Whether a single payer initiative would have won is unclear, although the national educational effort around it would have been of unparalleled value. But as it was, Hillary's political miscalculation led not only to the idea of universal health care coverage being taken off the table for the next 13 years, but the loss of the House of Representatives and the coming to power of Newt Gingrich and the Republican right.

Matt Bai views Bill Clinton as a profile in courage for taking on the Democratic Party. But if we review his behavior in office, there is one characteristic that stands out above any other: cowardice. Whenever the powerful objected, he beat a hasty retreat. His first year set the pattern. Gays in the military. The btu tax. The jettisoning of Lani Guinier as nominee for assistant attorney general for civil rights, refusing even to allow her to confront her critics.

Bai quotes Jonathan Cowan, of the Third Way, "the next iteration of the D.L.C." As Bai approvingly describes it, "Clinton's politics have basically become the DNA of Democrats seeking the White House, and it's almost certain that they would all govern from that Clintonian center if they actually became president." I desperately hope that is not the case. In the 2008 primary and general election, a key question is, "How can we get back what we have lost without confronting those who took it?" To my mind, the only candidate who seems to understand that is John Edwards, who seems to represent Democratic DNA still untouched by Clintonism's experiment in genetic engineering.

David Morris is co-founder and vice president of the Institute for Local Self Reliance in Minneapolis, Minn., and director of its New Rules project.

 
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