How Progressive Is the 'Pro-Growth Progressive'?

Reading Gene Sperling's "The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity" ignited a battle between the opposing factions that inform my worldview.

I have an inner tinkerer -- call him the Swedish Centrist -- who believes that working within the existing system can bring broader prosperity to millions of poor Americans. The Swede believes that pragmatic, technocratic policy adjustments can address middle and lower class pain.

I also have within me a Radical Reformer -- a voice whispering that the system as we know it is beyond repair, that too much power and wealth are concentrated in too few hands to hope that a just economy is possible without a sea-shift in our political culture and economic arrangements.

"The Pro-Growth Progressive" thrilled the Swedish Centrist in me, and left the Radical Reformer hitting his head against the wall in abject frustration. Because while the book, on one level, is a simplified, largely jargon-free book of wonk -- progressive economics for dummies -- it is also an illustration of the disconnect between the leftover Clinton establishment in Washington and the millions of real people struggling to make ends meet under the legacy of its policies.

Sperling, whom Bill Clinton called the "MVP" of his economic team, is certainly a part of that establishment. But he also has a track record that progressives can't ignore. While there's much to criticize about the Clinton era, when he said that in a fair economy "the rich should get richer and the poor should get richer too," he followed that up with policies that produced results.

As Sperling happily notes, Clinton oversaw an eight-year respite from the assault on working families' wages. Between 1979 and 1993, the top 20 percent of earners saw their incomes increase by 28.4 percent, while the bottom fifth of the income spread saw theirs drop by 13 percent. But under Clinton, "Those in the bottom fifth saw the largest income growth of 22.5 percent." African Americans enjoyed the highest income growth at 33 percent. By the late 1990s, poverty among blacks and Hispanics was at its lowest point in the history of the republic.

That was due in no small part to smart progressive policies like the refundable Earned Income Tax Credit, a program that's pumped $100 billion in wage benefits to working families since its passage and keeps 5 million Americans above the poverty line. As an insider's insider, Sperling guides the reader through the twists and turns of getting the EITC past GOP opposition. (Much of the book is a behind-the-scenes peek at the fights, the victories and the missed opportunities in Bill Clinton's go-go 1990s economy.)

Sperling talks about the increasing difficulties two-earner families have juggling child raising and career, and notes that the burden falls disproportionately on women and the poor: "Mothers are often prevented from moving up to the varsity level after taking time off or reducing their hours to raise children."

"Many workers lack even the most basic protections like sick leave or the flexibility to attend a parent-teacher conference," he adds. "Seventy-six percent of low-wage workers have no paid sick leave, and 41 percent have no paid leave of any kind."

Sperling proposes a range of policies under his "Work Family Balancing Act," including a $3,000 fully refundable "newborn leave" tax credit to allow new parents the flexibility to take time off to bond with their babies, expanding the number of workers who are eligible for family leave and establishing universal pre- and after-school programs.

He also cautions that the United States is at risk of losing its competitive edge, and calls for more technology infrastructure, a renewed commitment to education and a reversal of the Bush administration's cuts to basic research funding. "Over the past two decades," Sperling writes, "the share of workers with at least a college degree grew by 50 percent; over the next two decades it will grow by only 4 percent."

Sperling points out that the United States, having started the digital revolution, has fallen to 16th in the world in broadband access, and asks: "Why should we ever lose even a single American job because there is better broadband in Bangalore than in Buffalo?"

What warms the Swedish Centrist's heart more than anything is Sperling's focus on addressing the monumental -- and growing -- wealth gap in America. Accumulated wealth is far more lopsided in its distribution than wages, as high-income families can provide their children a head start that poorer families aren't able to. Economic inequality gets compounded over generations.

The United States as a whole had a negative savings rate last year, but it's the middle class and low-income earners who are unable to save. Current policies, Sperling rightly argues, are the exact opposite of what they should be -- he calls them "upside down."

"Today we spend about $150 billion in tax expenditures -- exceptions to income tax -- to encourage retirement savings," he writes. "Of that amount, only about 10 percent goes to the bottom 60 percent of taxpayers and an astoundingly low 3 percent goes to the bottom 40 percent … the 57 million filers struggling the most to save."

Sperling has long been an outspoken advocate of "universal 401Ks," a modest version of which Clinton tried to introduce as "USA Accounts" in his second term. The idea is to give every citizen a private account at birth. An automatic, fully refundable "starter credit" could begin the kitty, then the government would match people's contributions on a sliding scale: The poor would receive matching funds on a two to one basis, middle class earners would get one to one matching and so on. The idea is not a new one -- similar proposals have been around since Michael Sherraden and Fred Goldberg, Jr. made independent proposals to use private universal accounts to spread wealth in the early 1990s -- but it's a good one.

Yet, all of the ideas in "The Pro-Growth Progressive" are confined by Sperling's uncritical belief in the fundamental soundness of America's socio-economic arrangements, a belief that had my Radical Reformer hurling the book against the wall. It started with his title -- are we to believe that there are progressives who are instinctively anti-growth? -- and continued as a through narrative to the end of the book.

There's a fundamental disconnect between Sperling's reality and the reality most Americans live. "The Democratic Party should disband," he writes, "if it ever stops being the party that stands by the little guy, leads the fight against racial and economic disadvantage, sticks by working families when times are tough and takes on those with privilege who don't play by the rules." He doesn't grasp that the Democratic Party has evolved to become a party that, at best, can claim to be slightly less beholden to the corporatocracy than the Republicans.

Sperling has accepted most of the prevailing wisdom inculcated in us by the Chamber of Commerce. He believes the New Economy is a natural phenomenon, he talks about the "inevitability of change" while ignoring the fact that the changes we've seen in the American economy have been shaped by a small number of stakeholders. His test of sound policy is the "most pro-growth alternative" test, which "requires examining how progressive policies can be achieved at every step while maximizing economic growth and minimizing negative unintended consequences for the very workers, employers and investors our policies are designed to empower."

The narrative is: What's good for employers and investors is good for workers. But while one group has been all-too-empowered in the New Economy, the other has been widely disempowered. Nowhere in the book are the words "union-busting." For Sperling, job outsourcing comes from a "management that is facing painful competitive solutions," but he doesn't mention that some of the companies shedding the most jobs do so while posting record profits.

At one point, Sperling approvingly quotes an executive who says we can win a race to the bottom in terms of wages:

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A handful of years ago, 15 percent of our direct cost was represented by direct labor. Today it is 5 percent and headed lower. I ask you: Does it take a genius to conclude that if it gets down to 1 percent or less, it doesn't matter very much if we build the product in Indonesia or Indiana?

The starkest illustration of Sperling's disconnect with progressives' vision of the world is in his discussion of trade. After the book was published, Sperling claimed that he had tried to deal honestly with the complaints of trade critics; "I tried to avoid straw man arguments," he said. But in fact, Sperling simply ignores any criticism of the international trading regime that doesn't come from organized labor in the richest country in the world (to be fair, he proposes several good policies for helping American workers displaced by trade).

A passage about facing protesters at the 1999 G8 summit in Cologne sums it up better than any other:

Many of the protesters seemed to disagree more with each other than with our administration's position. Those calling for more market access for poor countries were saying that more open trade helped the world's poor, not less. They simply wanted to see a global trading system where the rules aren't rigged against the poor. Implicit in their argument was the need for a coordinated global body to set the rules for the international system -- essentially the WTO.

In fact, the No. 1 critique of the WTO is exactly that it's not a fair system for defining the rules, the rules are very much "rigged against the poor." By expressing surprise that G8 protesters aren't wild-eyed "anti-globalization" zealots, Sperling proves to be a true believer in the well-constructed but entirely false narrative that the debate is one between "free-traders" and "protectionists."

For Sperling, there is no arm-twisting in the WTO's infamous "green rooms," where rich countries strong-arm countries into accepting lopsided deals in the interests of the developed states. The "policy coherence" in which developing countries are offered carrots and harsh sticks by the IMF and the World Bank for acquiescing to onerous "reforms" on trade simply doesn't exist.

And Sperling goes a step beyond: It's the human rights and environmental activists demanding stronger protections for workers and cleaner methods of production that are pushing "a counterproductive imposition on sovereignty." "Freedom," he writes, echoing those who opposed the sanctions regime against Apartheid South Africa, "will come through exposure to our values, not by denying access to our markets until a nation gets in line."

Sperling embraces the fantasy wholeheartedly. He writes that "We often take moral issues into account when establishing our trade relationships; we did not trade with the Taliban in Afghanistan," but ignores the fact that Unocal tried to do business with the Taliban (after having success building a natural gas pipeline in cahoots with Burma's brutal dictatorship). He calls for U.S. companies doing business in China to adopt "voluntary codes of conduct, monitoring factories and standing up to worker suppression," as if adopting "voluntary codes" and "monitoring" factories hasn't long been industry's preferred way to weasel out of any responsibility for their production in low-wage countries.

I can't say whether Sperling is genuinely ignorant of these criticisms, or as is more likely, he ignores them because he doesn't have an answer that trade activists will accept. Whatever the case, he adds little to what he calls "a polarized, impoverished debate."

This doesn't invalidate Sperling's contribution to our economic discussion. His final chapters cover Social Security, a comprehensive set of policies to deal with our aging populace and the need for fiscal discipline. These are great ammo dumps for arguing the merits of Bushenomics and Clinton's economy with that right-wing nut of a neighbor or relative in each of our lives. Sperling slices and dices the Bush economy -- and especially the insane fiscal policy coming out of the White House -- as only a wonk steeped in the fine points of economics can.

And while there's no denying that "The Pro-Growth Progressive" is a book intended to blunt the left's frustration with Clinton's inability to consistently "stand by the little guy," Sperling still makes me proud to fly the Swedish colors during these miserable Bush years.