Bill Clinton: How to Tame the Debt Without Screwing the Poor and Middle Class

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Bill Clinton speaks at the Fiscal Summit in Washington, DC.
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Go ahead and sue me, but I really like listening to Bill Clinton. The former president sat down for an interview with Tom Brokaw yesterday at a conference in Washington D.C., and was the voice of reasoned experience. I don’t agree with everything he said, but I agree with most of it. And I can’t think of anyone else who so deeply understands the intersection of policy, politics, world affairs, and human nature right now.

Here are a few points I thought deserved elaboration:

Go ahead and plan for deficit reduction, Clinton said, but trigger it to actual improvements in the real economy.  You want your deficit to temporarily go up in recession to make up for the fact that consumers and businesses aren't spending enough. Then you want it to come down when the economy is really picking up.  But pivot to deficit reduction too soon, and you're asking for trouble. As Clinton himself put it: "You see in Europe now that if you impose austerity when interest rates are zero and there is no private demand, revenues will drop more than you can cut spending."

• We’re cutting certain types of spending too deeply.  Congress has already agreed to north of $2 trillion of spending cuts over the next 10 years, and many of those cuts come from programs that help people who really need the help right now and in the future -- we're talking stuff like Head Start, work-training programs, Pell Grants for low-income students. Clinton: "Both sides have been shorting out the future budget and putting poor and vulnerable people in a bind…. I don’t think it’s a good idea to have NDD [the non-defense discretionary part of the budget] at its lowest level since Eisenhower, when we’re 15th in computer-download speeds and we’ve fallen from 1st to 12th in college graduation rates."

Unfortunately, the fact is that if you take defense and new tax revenues off the table, as the House Republicans are insisting, and you cordon off entitlements, as some Democrats insist, you’re left with NDD, the part of the budget that doesn’t have rich benefactors to fight for it, but is one of the few areas that invests in giving vulnerable folks a leg up.

• When it comes to assigning blame for our political dysfunction, face it: both sides are not equally guilty. Clinton, who knows a little bit about governing amidst divided chambers, hit very hard on the roots of our current dysfunction. "There have been two independent analyses that say that if you believe there was a center in my second term, the Senate GOP has moved three times further away from that center as the Democrats, and in the House the GOP has moved twelve times further away."

 • The electorate is responsible, too. "Americans go around saying how sorry politicians are," he said to Brokaw, "but they voted them in.  We listen to the rhetoric of politicians, but we don’t really listen to their specific proposals.  The Tea Party Caucus in the House has an 18 percent approval rating, but they’ve only done what they promised to do in 2010.  So the American people need to take more ownership." 

• Reform entitlement programs. Here, Clinton gets it both right and wrong. He wants reform of Medicare, Medicaid, and Social Security to be on the table, and he’s right, especially regarding our health care programs, as that’s where the long-term budget pressures are coming from (though let’s be clear: this is an economy-wide problem – health care costs are soaring – not just a government one; in fact, as Clinton stresses below, health spending is better controlled in the public sector). 

And he correctly and importantly rejects the favored approach of conservatives from Ryan to Romney: "premium support," or voucher plans. "The problem I have with premium support is pretty straightforward: Medicare costs have gone up 400 percent over the past 40 years; private insurance has gone up 700 percent.  If you privatize it with a fixed voucher, you’re putting people in a more expensive system, so there’s no way the population won’t end up being poorer and sicker."

Health care reform can get way too complex, but it really comes down to this:  You can cut the government’s costs by just shifting them onto individuals, but that’s really just moving deck chairs. To actually bring down system wide costs, you have to get under the hood of the current delivery mechanisms that stress quantity over quality – more care over effective care – and incentivize waste and duplication over effectiveness.  The Affordable Care Act tries to do that; let’s hope we have a chance to see if it works.

 Where President Clinton goes wrong is in regards to Social Security.  He strongly endorses – says he "loves" – the Bowles-Simpson commission’s recommendations for achieving Social Security solvency.  He particularly likes the fact that their plan achieves significant savings by cutting benefits for wealthy folks like him, who "can afford it."

What's the problem with this? In fact, Bowles-Simpson is way too harsh on middle- and lower-income beneficiaries, as my colleagues describe here.  Two-thirds of the 75-year savings from the BS (!) plan come from benefit cuts to Social Security, leaving a minority of savings to come from tax increases.  Benefits of middle-income earners would fall by almost 20 percent by the time the plan is fully phased in.  As I point out here, there are much better ways to ensure that Social Security stays healthy while continuing to be provide a vital guaranteed pension for its beneficiaries.

OK, I’m down in the weeds here, but that’s where Clinton will take you, while never losing sight of the bigger picture, the role of government, private enterprise, and the basic values of the democracy.  He’s far from perfect, as all the world knows.  But he has evolved into one of our wisest statesmen, and we should all be heeding him very closely.