Back to Work - Bill Clinton [1]
Unless we restore robust economic growth, we’ll be stuck in this economy for years, and nothing we do will solve the longer-term debt problem, regardless of how we try to do it.
In short, we’ve got to get America back in the future business.
PART I
Where We Are
CHAPTER 1
Our Thirty-Year
Antigovernment Obsession
I DECIDED TO WRITE THIS BOOK after the 2010 midterm election not because my party took a beating, but because of what the election was about. The bad economy, the high cost of keeping the recession from falling into full-scale depression, the fact that the recovery had not yet begun to improve many lives—all these ensured that anger and anxiety would be at high tide on Election Day, and that’s always bad news for the party in power.
What troubled me is that with so many people hurting and so many challenges to be faced, the election season offered few opportunities for a real discussion of what went wrong, what the president and Congress had actually done or failed to do in the previous two years, what the two parties proposed to do in 2011 and 2012, and what the likely consequences would be in the short and long runs. Nor was there much of substance said on the larger issues on which these questions would have an impact: How do we propose to restore and maintain the American Dream at home? How do we ensure America’s economic, political, and security leadership in the more competitive, complex, fragmented, and fast-changing world of the twenty-first century?
Instead, the election seemed to occur in a parallel universe of inflated rhetoric and ferocious but often inaccurate attacks that shed more heat than light. The Republicans seemed to be saying that the financial crash and the recession that followed, as well as the failure of the United States to fully recover from it less than eighteen months after the economy bottomed out, were caused by too much government taxing, spending, and regulating, and that all would be well once we cut the cancer of government out of our lives and pocketbooks. They portrayed Democratic congressional incumbents and the president as big-government liberals who had brought America to the edge of destruction and, if given two more years, would push us over into the abyss.
The attack proved to be very effective in the election, but I thought it was all wrong. First, the meltdown happened because banks were overleveraged, with too many risky investments, especially in subprime mortgages and the securities and derivatives that were spun out of them, and too little cash to cover the risks. For example, Bear Stearns was leveraged at thirty-five to one when it failed; traditionally, commercial bank lending is leveraged at ten or twelve to one, investment banking a bit more. In other words, there was not enough government oversight or restraint on excessive leverage.
Second, the meltdown did not become a full-scale depression because the government acted to save the financial system from collapse. The Federal Reserve made massive investments of about $1.2 trillion to stop the financial collapse, including buying securities and guaranteeing loans. The often-derided Troubled Asset Relief Program (TARP) was originally authorized to spend up to $700 billion and spent a bit over $400 billion. Most of the TARP money has been paid back, with only $104 billion still outstanding. In a July 8, 2011, Washington Post article, Allan Sloan and Doris Burke estimated that the final cost of the TARP program would be just $19 billion and cited an analysis in Fortune magazine concluding that the Federal Reserve’s income on its investments would produce a net profit for the taxpayers on the bailout of between $40 billion and $100 billion.
Third, according to most economic studies, the stimulus, along with the rescue and restructuring of the auto industry, succeeded in keeping unemployment 1.5 to 2 percent lower than it would have been without it. Of course, the stimulus didn’t restore the economy to normal levels. It wasn’t designed to. You can’t fill