IT'S THE ECONOMY...
AUGUST 28, 1996
Paul Solman gets a view of Bill Clinton's economic record from two people who helped shape it, Jeff Faux and Robert Shapiro.
A RealAudio version of of this NewsHour segment is available.
Complete NewsHour coverage of the economy.
Complete NewsHour coverage of the '96 elections.
Complete NewsHour coverage of the Democratic National Convention in Chicago.
Complete NewsHour coverage of the Republican National Convention in San Diego.
PAUL SOLMAN: Okay. And we're joined by two economic thinkers who influenced the Democratic Party's policy on economics, Robert Shapiro, the founder and vice president of the Progressive Policy Institute, and Jeff Faux is the president of the Economic Policy Institute. Welcome to you, both. We were just listening to John Sweeney, Jeff Faux. Is that your economic program, and is it Bill Clinton's?
JEFF FAUX, Economic Policy Institute: Yeah. I think that John Sweeney has it just about right. We've had a good recovery. We've created 10 million jobs. We've got the unemployment rate down. Profits are up. Productivity is up. But it's still not being shared, and that's the problem, and I think that's what defines the next Clinton term.
MR. SOLMAN: Do you agree, Rob Shapiro? Do you think, would you add any achievements to the list?
ROBERT SHAPIRO, Progressive Policy Institute: Absolutely. It's important to remember that Bill Clinton began by getting the basics right. His economics, his economic program has been organized around, sustained fiscal discipline, sound money, and expanded trade. These are the basic principles of mainstream economics. He got the fundamentals right, which is why we now have full employment, sustained full employment with low inflation, the strongest investment-led recovery in thirty or forty years, and finally real wages beginning to pick up. He's not done, but he has finally reestablished a sound foundation for the economy, a foundation that had really been eroded by 10 years of policies that bore no resemblance to real economics.
MR. SOLMAN: But that isn't or the economic program of the union at least in the time I've--the years I've been watching, you know, Democratic conventions, is it?
MR. FAUX: The economic program of the union movement is to raise wages, and that's been the traditional focus of Democrats.
MR. SOLMAN: Right.
MR. FAUX: But we've seen over the last 15 years real wages eroding, and they are still eroding. This is a long-term problem that the Clinton program has not solved.
MR. SOLMAN: Do you think Clinton could have solved it? I mean, do you actually blame him for this?
MR. FAUX: No, I don't blame him for this because it was actually worse under Reagan and Bush. We've got a strong recovery. The first thing you've got to do is create a demand for jobs. Now the problem here is that we don't have enough demand. We are not at full employment, and therefore we have a wage rate that's still not rising. As a matter of fact, we have somebody in the Federal Reserve who I do blame for this who will--
MR. SOLMAN: Well, he's not here, so--
MR. FAUX: As soon as someone gets a raise in this economy, threatens to raise interest rates and slow down economic growth, that is a big problem.
MR. SOLMAN: But you weren't talking like this four years ago, were you? I mean, were you saying, look, we have to have fiscal responsibility, we have to get growth going? I mean, I never heard you say stuff like that.
MR. FAUX: I would say that there's one big lack in Clintonomics, and that is the abandonment of the public investment program. We are still--
MR. SOLMAN: --talk about for years and years and years.
MR. FAUX: That's right. It is still true. Bill Clinton was right in 1992 when he said we have to spend more infrastructure, on training, and on education. We have to spend even more right now. I think that's the one place where this hasn't worked.
MR. SOLMAN: And Rob Shapiro, you think that's not true? I mean, when you guys were concocting strategy a few years to move towards the center? Was that not part of the program?
MR. SHAPIRO: Well, of course, it was part of the program because it's part of sound economics to invest in the things that make an economy more productive and make it grow, which is education and training and basic research and basic infrastructure. This is the program my institute put together, that President Clinton ran on. This is absolutely sound, modern economy economics.
MR. SOLMAN: Because you're investing in human capital and people and--
MR. SHAPIRO: Yes, and, in fact, I mean the real difference now between the Republicans and the Democrats is that the Republicans are caught in this kind of time warp, a model of the economy from the 1950's that says the only thing that matters is, is business, plant, and equipment investment. Modern economics has no human capital, the capacity for innovation, supporting that capacity for innovation, and supporting the skills of every worker count more in growth than business fixed investment.
MR. SOLMAN: Yeah, but you didn't, that is, President Clinton didn't invest as much as you point out your institute suggested, I mean, and came up with as a plan. So--
MR. SHAPIRO: He's come forward with I think a lot of important innovations in education and training with, um, the Goals 2000 program, now with the, the National Service program, to send kids to college, with the new tax, tax preference for tuition, with the attempt to have everyone spend an extra two years in schooling with the program, the transformation of government training programs into vouchers for people.
MR. SOLMAN: So some stuff but certainly not what was promised.
MR. SHAPIRO: It's beginning. It's beginning. Well, the fact is--
MR. FAUX: Certainly not enough, and the problem is not just with Clinton; the problem is with the Democratic Party. In some ways there's a shadow over this convention, and it's the economic shadow of Ronald Reagan. Ronald Reagan put the Democrats in a bind. When he cut taxes, raised military spending, and promised to balance the budget, which he didn't do in 1984, one of the things he said is that if we fail, the Democrats will never be able to invest in their constituencies again. And we are still paying off the debts here from Reagan. As a matter of fact, it's the Democratic constituency that's paying off the debts that Reagan incurred for his constituency in the 1980's.
MR. FAUX: It wasn't just the Democrats who were put in a bind; it was the entire American economy that was put in a bind. It was all working people, Democrats, independents, and Republicans, and Bill Clinton had to reestablish the foundations of sound macroeconomic policy. He's done that, and I think the second term we can now go on to rebuild the structural factors that can deliver, restore upward mobility for a lot more people.
MR. SOLMAN: So you mean the deficit was something that he had to contend with, that he didn't expect to contend with, and that's why he hasn't been able to do what Democrats haven't been able to do, what they traditionally have supported.
MR. FAUX: I think that here we have a deficit--
MR. SOLMAN: We just have a few seconds.
MR. FAUX: Yeah. We have a deficit now that's the smallest in the industrial world. Instead of going through a lock step to the year 2002, to zero budget deficit, we ought to now start investing in that program that we were promised in 1992.
MR. SOLMAN: All right. Well, gentlemen, thank you both very much.