THE LISTENING POST: AN INTRODUCTION TO THE NDN

AN INTRODUCTION TO NDN
The New Democratic Network: http://www.ndn.org/
New Politics Institute

NDN Globalization Initiative

Hispanic Strategy Center

A Responsible Immigration Policy

Meeting the Conservative Challenge

NDN Futbol
NDN Blog: The ISG Report is a Modest Step Forward (12/7/06)
NDN Blog: The Rise of the Shiites (12/5/06)
NDN Blog: The Politics of Exurbia (11/30/06)
Voters deliver a mandate for a new economic strategy (11/10/06)
Post-election analysis: Republicans no longer the dominant party (11/8/06)
NDN Blog: TV ads feel different this cycle, and are (10/29/06)
NDN Blog: Immigration Reform - how the GOP lost its way (10/19/06)
Poll: Miami Cubans Hail End of Castro Era (10/2/06)
Crashing the Gate with foreword by Simon Rosenberg (9/26/06)
NDN Statement on Immigration Reform (9/12/06)
Our Mission (6/7/06)
The State of Conservative Government, 2006 (1/31/06)
"Brownie, You're Doing a Heck of a Job" (9/12/05)

Deploying the Latest and Best New Tools

NDN affiliate the New Politics Institute's New Tools Campaign is helping progressives master a new set of tools that will help us make sure our message is heard in the 21st century media world. Visit the revamped NPI site, learn more about the campaign and read the four memos: “Buy Cable,” “Engage the Blogs,” “Use Search” and "Speak in Spanish."

Bringing Hope to Millions

For over a year, NDN has stood firm against the anti-immigration onslaught, working with our allies to support comprehensive immigration reform. Now, following Republican failure to turn immigration into a political issue in the recent elections, it is up to us to make sure comprehensive immigration reform happens in 2007. Read our latest memo on immigration and check out media coverage of NDN's continuing advocacy work on this important issue.

ECONOMIC ISSUES: NDN PERSPECTIVES:
MAKING GLOBALIZATION WORK FOR ALL AMERICANS

In February of 2006, NDN formally launched an exciting new Globalization Initiative. Under the leadership of former Under Secretary of Commerce Dr. Robert J. Shapiro, this multi-year effort will bring together progressives from across the country and the political spectrum to discuss and debate how globalization works today, and determine what policymakers can do to make sure corporations, capital and the American people all prosper in the 21st century global economy.

The Globalization Initiative builds on an extensive body of economic work that NDN has produced over the past several years, including our path-breaking agenda for progressive leadership and a series of cutting edge economic memos and reports.

RELATED NDN FEATURES

WHY SUSTAINABLE GROWTH ISN’T PRODUCING MORE JOBS AND WAGES GAINS
October 30, 2006

Remarks delivered to Back to the Economy: Confronting America’s Growth Challenges, A conference organized by the New America Foundation, 30 October 2006. The remarks were delivered to a panel session entitled “Averting the Next Recession: “Putting the Economy on a Sustainable Growth Path.”

NDN JOINS CAMPAIGN TO RAISE MINIMUM WAGE IN AZ, CO
October 5, 2006

We are proud to announce that NDN is joining a broad coalition of progressive organizations in campaigning for an increased minimum wage. Though Republicans in Washington have repeatedly blocked efforts to raise the national minimum wage, voters in several states this year have an opportunity to pass ballot initiatives that would raise wage in their state and help hundreds of thousands of families take another important step up the economic ladder.

CHALLENGING THE REPUBLICAN ECONOMIC RECORD
September 28, 2006

Today Rob Shapiro and I are releasing a new memo – Challenging The Republican Economic Record – where we compare how little the income of the average American family has increased over the last four years, with four years of comparable GDP growth during President Clinton’s terms. We find that the dismal Republican record has cost the average family $5,054 in income gains.

REBUILDING THE NATIONAL CONSENSUS ON TRADE
September 14, 2006

This is a critical time for those of us who believe in open markets and trade liberalization. This detailed memo outlines why Democrats and Republicans must act now to reverse President Bush’s failed leadership, and lays out a strategy to help rebuild our valuable national consensus on trade in the future.

THE BUSH ECONOMIC RECORD
September 7, 2006

The Bush Era’s economic record has been one of bad policy decisions and important challenges unmet. In this area, like in so many others, Bush and his allies have left America and its people weaker than they found it. This report tells the disappointing story, and offers some ideas for what to do to strengthen our economy.

ONCE AGAIN: IT'S THE ECONOMY, STUPID
August 30, 2006

A lot of attention this week has gone on two of the worst failures of conservative governance, the anniversary of Hurricane Katrina and the civil war in Iraq. But there is a third problem that is also beginning to rise up the agenda: the fact that economy is not working for most Americans.

This administration seems almost indifferent to the fact that even as GDP and productivity have increased, the wages and incomes of most Americans have declined. And while the economic story is the most complicated of the three, its long-term damage to the country will be no less severe.

THE EMERGING PROGRESSIVE ECONOMIC CONSENSUS ON WAGES
July 25, 2006

NDN was one of the first progressive groups to link stagnating wages during a time of economic expansion with significant changes in the global economy. Building off of today’s Financial Times article featuring Rob Shapiro, this memo looks at the changes in globalization that are at the root of this phenomenon and Republican failure to understand this pivotal economic issue.

LABOR IN A GLOBAL WORLD (CLICK TO SEE VIDEO OF THE EVENT)
May 3, 2006

Union Leader Andy Stern, described by Business Week as a man who wants to “radically retool the U.S. Labor movement”, discusses with NDN Globalization Initiative head Rob Shapiro the significant challenges facing unions in a world of fierce global competition and stagnant domestic wages.

KEEPING AMERICA COMPETITIVE (CLICK TO SEE VIDEO OF THE EVENT)
March 14, 2006

Globalization creates huges challenges for the future of America's economic prosperity. New Mexico's Senator Pete Bingaman joined NDN's globalizrion initaitve to discusses plans in Congress to Protect America's Competitive Egde, including promoting new technologies, reducing healthcare costs and improving educational achievement.

THE LANDSCAPE OF GLOBALIZATION (CLICK FOR FULL REMARKS AND TO SEE VIDEO OF THE EVENT)
February 23, 2006

Read Rob Shapiro's remarks from the launch of NDN's Globalization Initiative.

RELATED RESOURCES

Can Anyone Steer This Economy?
(Business Week, November 20, 2006)

Seeking Shelter: Why Democrats are in Retreat from their Free Trade Record
(Financial Times, November 3, 2006)

Sustaining Economic Growth
(The Intangible Economy, November 2, 2006)

End of the Road for 'Easy Money' Global Rebalancing Fixes?
(Economic Dreams-Economic NIghtmares, November 2, 2006)

The Commercial Licensing Epidemic
(New Republic, October 31, 2006)

NDN: Krugman's Remarks at the New America Foundation Economic Conference
(Economist's View, October 30, 2006)

The Pretenders
(New York Times, May 9, 2006)

The Economics of Henry Ford May Be Passé
(New York Times, April 5, 2006)

Snow Defends President's Handling of Economy
(Wall Street Journal, March 20, 2006)

It's Economic Security, Stupid
(TIME, March 5, 2006)



NOVEMBER 20, 2006

COVER STORY: BUSINESS WEEKCan Anyone Steer This Economy?

Global forces have taken control of the economy. And government, regardless of party, will have less influence than ever
Sometime next year--perhaps around Christmas 2007, if current trends continue--the U.S. will hit a milestone. For the first time in recent memory, the cost of imported goods and services will exceed federal revenues. In other words, Americans will soon pay more to foreigners than they do to their national government.

Slide Show >>

We're almost there now. Imports cost us about $2.2 trillion a year; the federal government collects $2.4 trillion in revenues.

Why is that important? Because for the past 70 years, Washington has been the 800-pound gorilla, more powerful by far than any other force in the U.S. economy.

That's not true anymore. The federal government remains plenty influential, but the global economy is more so.This will come as a rude shock to Representative Nancy Pelosi (D-Calif.), the presumptive Speaker of the House, Charles B. Rangel (D-N.Y.), the likely chairman of the House Ways & Means Committee, and other newly enfranchised leaders in the Democratic Party. Sure, they're likely to have the power to pass legislation, including boosting the minimum wage.

But such a measure, even if President George W. Bush signed it, would help only a small fraction of the workforce. It would do almost nothing to ameliorate the weak wage growth that has plagued most Americans, including college graduates, in recent years.

The broad-based drop in incomes is being driven more by the rise of China and India and the intensification of global competition. And there is little Democrats can do to reverse these trends.No matter which party you belong to, or which Big Idea or school of economic policy you subscribe to, one thing is clear: Globalization has overwhelmed Washington's ability to control the economy.

Whether you're a Republican supply-side tax-cutter, a Wall Street deficit hawk of either party, or a Silicon Valley techie type, your preferred levers of economic policy just don't work as well as they once did.As recently as 10 years ago, the U.S. economy was still relatively self-contained.

Then-Federal Reserve Chairman Alan Greenspan--often called the most powerful man in the world--could be sure that the U.S. economic machine would eventually respond when he called for higher or lower rates. Tax and spending decisions made in Washington could set the course for growth, while economic events in the rest of the world, such as the Asian financial crisis of the mid-1990s, were felt as minor bumps.

That has changed. Since 1995 imports have risen from 12% of gross domestic product to about 17%. And foreign money finances about 32% of U.S. domestic investment, up from 7% in 1995.

In other words, the U.S. is more open to the global economy than ever before, and the links run in both directions. Now many of the levers affecting the U.S. economy are located not in Washington but in Beijing, London, and even Mexico City.Greenspan and his successor, Ben S. Bernanke, have found this out the hard way.

To restrain economic growth and cool the housing market, the two Fed heads have raised short-term interest rates 17 times since 2004, for a total increase of more than four percentage points. But even as the Fed tightened up on the domestic money supply, foreign investors made up the difference.

As a result, the interest rate on 10-year government bonds today is 4.6%, exactly where it was in 2004, when the Fed started raising rates. Good news for home buyers who want mortgages. Not so good news for the policymakers trying for a soft landing.

PRESIDENT BUSH ENCOUNTERED a similar problem. His huge tax cuts poured hundreds of billions into the economy and kept output rising at a decent clip. Nevertheless, the fiscal stimulus generated far fewer jobs than anyone expected, as more and more production headed overseas.

"Traditional macro policies are less effective than they used to be," says Robert S. Shapiro, a top economic adviser to President Bill Clinton who now runs a Washington economic consulting firm. "We don't know how to ensure strong job creation and strong wage growth anymore."Pelosi and the congressional Democrats, who embraced fiscal restraint as their pre-election mantra, shouldn't expect much better economic results by pulling the deficit-cutting lever.

On the campaign trail, Pelosi promised to contain the budget deficit, telling one Washington audience that "if American families are expected to balance their checkbooks, so, too, should the Congress of the United States." While that commitment may resonate politically, there's growing economic evidence that reducing the budget deficit won't do much to jazz up business investment and growth.

A new study from the Federal Reserve Bank of New York, as nonpolitical an organization as you will find, reports that "investment has exhibited only a tenuous response to fiscal policy changes."Even the Big Idea of devoting more tax dollars to research and development to make the U.S. more competitive--an idea repeatedly advocated by such tech leaders as John T. Chambers of Cisco Systems Inc.CSCO and John Doerr of venture capital giant Kleiner Perkins Caufield & Byers--is beginning to look economically and politically troublesome.

True, increased funding for r&d appears to be a rare area of agreement between the two parties: Pelosi and the House Democrats came out with their "Innovation Agenda" last November, and Bush followed with his innovation-based "Competitiveness Initiative" in the January State of the Union speech.

But in the brave new world of the global economy, where companies move factories and facilities around the world like game pieces, it's no longer a given that U.S. workers benefit directly from U.S.-funded research.

One worrisome example: Despite federal outlays of over $125 billion for medical research over the past five years, the U.S. has a large and growing trade deficit in advanced biotech and medical goods. "The era in which we could assume that increased U.S. public investment in r&d automatically generates domestic growth is over," says Jeff Faux of the liberal Economic Policy Institute.

Policymakers now face the unenviable task of managing the economy in the face of an overwhelming flow of goods and money back and forth across national borders. "The federal government affects the economy only on the margins," says Charles R. Black Jr., Republican consultant and outside adviser to President Bush. Adds Timothy J. Penny, a former Democratic representative from Minnesota who is now at the University of Minnesota:

"Washington is far less relevant than it used to be. You don't have to be an economics professional to see the evidence."And get this: We don't even know how to measure whether we as a country are succeeding or failing.

The traditional metrics for economic security and prosperity are capturing impressive signs of life. Unemployment, inflation, and interest rates are low by historical standards. The stock market is rising, and household wealth is higher than it was at the peak of the 1990s boom, even after adjusting for inflation. To a large extent, this is thanks to the global economy, which has been fueling the U.S. expansion with cheap goods and cheap money.

Yet real wages are down over the past five years, the trade deficit is enormous, and there are widespread worries about America's continued ability to compete.Washington has responded to these concerns, in large part, with a series of small fixes, like tinkering with the pension system. But what's needed is a new Big Idea for economic policy--or two or three competing Big Ideas--that accounts for the verities of the global economy.The first step is to get a better handle on what's really happening to U.S. workers and businesses in today's economy, where wealth is as important as income, and where events in Shanghai are as important as events in Chicago.

If the value of a family's home goes way up, but its income dips a bit, is the family better or worse off? If a U.S.-based company opens up an r&d facility in India or China, does its employment of American workers go up or down--and, does its overall contribution to U.S. growth increase or decrease? We don't have the statistics needed to answer these questions.

Second, we need to take hold of the main unused lever of economic policy: health care.

Politicians and economists have mainly thought of health care as a cost that is dragging down competitiveness. Health-care spending is the main source of long-term federal, state, and local budget deficits, the prime gobbler of national savings, and one of the biggest tax distortions, in the form of the tax exemption for company-provided health insurance.

All these things are true. But health care is also a huge source of private sector jobs, one of the most technologically advanced sectors of the economy, and frankly, the provider of a service people can't get enough of. It can even be thought of as an investment, to the degree that better health allows Americans to work longer and to better enjoy their lives.

We have to view health care as a force for growth, rather than an impediment.

Finally, a Big Big Idea--probably too big to even consider right now--would be the creation of global institutions for governing the world economy.

History tells us that market economies are prone to financial crises, to which the only solution is a strong central bank. During the Asian financial crisis of the 1990s, for example, the Fed played that role.But with the explosive growth of China and India, that sort of role for the Fed is no longer feasible, and no new institution has arisen to take its place.

As former Treasury Secretary Robert E. Rubin, now a top official at Citigroup, recently said: "There's no policy mechanism for bringing together the countries that really matter in the global economy." The best solution would be some sort of global central bank with real powers--but that's not going to happen until there's a big enough financial crisis to truly scare people.

ECONOMIC POLICY, IN THE SENSE that we understand it today, is a comparatively recent invention. It started with John Maynard Keynes in the 1930s. He put forth the Big Idea that governments had the ability to soften a downturn. Keynesian economics, as it was termed, calls for reducing interest rates, cutting taxes, and hiking government spending to ease the worst effects of recession.

Today, Keynes's prescriptions could be called Policy Classic, since even diehard free marketeers agree that fighting recessions is the right thing for governments to do. What's more, Policy Classic still works in the modern global economy, up to a point. When a fire starts in your house, you should still try as hard as you can to douse it with water, even if your hose is leaky.

Consider how Washington responded to the recession of 2001. One could quibble with the exact timing of Greenspan's rate cuts, and the Democrats weren't particularly happy with the Bush tax cuts. But there's no disputing that massive amounts of fiscal and monetary stimulus made the 2001 downturn one of the mildest on record. And the recovery hasn't been half bad, either.

Since the economy peaked in the second quarter of 2001, economic growth has averaged a decent 2.8%.Yet the recovery could have been a lot stronger, given the amount of stimulus pumped into the economy. Consumers and businesses aren't fools: They used their extra money to buy cheap imports rather than more expensive American-made goods and services.

Between 2001 and today, imports rose by three percentage points as a share of GDP, one of the main reasons that job growth was so slow. By comparison, the import share rose by only one percentage point or so in the recoveries of the early 1980s and the early 1990s.In an open economy, Policy Classic loses its punch.

The inability to create jobs after a recession is bad enough. What really should concern us all, though, is what might happen in the next recession. Foreign investors have been extraordinarily willing to put their money into the U.S. But let's suppose, just for the sake of argument, that a recession here makes other countries look like a better bet. Then foreign investors pull out their money, pushing interest rates way up and the dollar way down.

The higher rates slow the economy, and the lower dollar makes imports more expensive, triggering higher inflation.Poof! Instant stagflation. And what's worse, Bernanke and the Fed will be forced to keep interest rates high to fight inflation.But enough of cataclysmic scenarios that might or might not happen.

The question to ask is this: How does globalization affect the long-term policies for growth, both liberal and conservative, rolled out by the U.S. in recent decades?

Probably the best known is supply-side economics, which originated in the 1970s and achieved prominence under President Ronald Reagan in the 1980s. Like all Big Ideas, the logic behind supply-side economics is clear: Lower tax rates give workers an incentive to put in more hours, encourage savings and investment by increasing the aftertax rate of return, and spur entrepreneurs to expand their businesses by allowing them to keep more of the profits.

According to Kevin A. Hassett, director of economic policy studies at the American Enterprise Institute, globalization actually increases the pressure to cut taxes. If tax rates are too high, "corporate income is so mobile that the money just leaves," says Hassett.

"There's an international tax competition, and everyone is playing."Yet economists are hard-pressed to find evidence that tax cuts have a big effect on growth. Last summer, the Treasury Dept. released a study that looked at the long-term impact of extending President Bush's tax cuts, which are due to expire at the end of 2010.

The study concluded that extending the tax cuts indefinitely would boost GDP by only 0.7% over the long run. That's less than a rounding error.It's also clear that having a low tax rate is only one factor among many determining international competitiveness.

It's equally important to have an honest government, or an efficient health-care system, or an educated workforce. "There isn't a single blueprint for a successful economy," says Robert E. Hall, a Stanford University economist who was one of the main advocates of a flat tax in the 1980s.

On to the next Big Idea: deficit reduction, a mirror image of supply-side economics that the Democrats have made the centerpiece of their political and economic agenda. "Fiscal responsibility is important for the long term," says Bruce Reed, president of the Democratic Leadership Council. "The overall economy is going to pay a price if the country is going broke.

"The case for deficit reduction as a long-term growth strategy is also straightforward. Smaller budget deficits are supposed to boost national savings, which leads to lower interest rates, smaller trade deficits, increased investment by businesses, and more job creation. And certainly that's the way it worked in the 1990s, when Rubin was running economic policy under President Clinton--hence the name Rubinomics.

But this line of reasoning doesn't hold up so well in an economy that is far more exposed to global forces than it was in 1993, when Clinton took office. The financial markets have become far more seamlessly global, making the U.S. budget deficit a much smaller influence on interest rates.

Today's roughly $250 billion deficit would use up about 14% of U.S. national savings. That's a big deal, but it's only 2% of global savings.

The ease with which capital flows across national borders helps justify the Bush Administration's relative lack of concern about budget deficits or even personal savings. "What starts to break down is the simple link between encouraging savings and encouraging investment," says James S. Poterba, a Massachusetts Institute of Technology economist appointed by Bush to his tax reform commission in 2005.

"If Joe in Pittsburgh saves, we can't say that we benefit this factory in Harrisburg. The jobs we generate might be jobs somewhere else"--like overseas.So if globalization weakens the usefulness of tax cuts and deficit reduction as policy tools, what's left?

The New Economy boom of the 1990s was driven by technological change and innovation. The logical way to rekindle the magic, then, is to boost government spending for r&d and education. Just listen to Daron Acemoglu of MIT, the most recent winner of the John Bates Clark Medal, given to the best economist under the age of 40. "The U.S. is a frontier country," says Acemoglu, meaning that its competitive advantage comes from being at the forefront of new technology. As a result, he says "if any policy is going to have a beneficial effect, it has to help the innovation sector."

This Big Idea was first suggested by Paul Romer, now at Stanford University, in the 1980s, and named New Growth Theory. That term fell out of favor after the tech crash--perhaps because it sounded too much like the New Economy--and the Big Idea now goes by the prosaic name "innovation policy."

The problem is that it's tough to make a direct connection between federal r&d spending and the creation of high-tech jobs. Despite the U.S. prominence in medical research, the pharmaceutical, biotech, and medical devices industries have added only 19,000 workers in the past five years.

THE TRUTH IS, CHINA and India are increasingly attractive places for companies to do research and development (using ideas, perhaps, that were originally developed using U.S. tax dollars). Money is following as well, with U.S. venture capitalists investing more than $400 million in Chinese and Indian companies in the third quarter alone, according to the National Venture Capital Assn. There's a growing sense that at a time of scarce resources, the U.S. may not be getting enough bang for its buck from R&D spending.

"The question about funding basic R&D for health care is the same as for funding other basic R&D," says Robert B. Reich, Labor Secretary under Clinton and now at the University of California at Berkeley.

"How long can and should the U.S. continue to subsidize the rest of the world?"

This question becomes especially pressing if the newly resurgent Democrats carry through on their promise to put in place a "pay-as-you-go" budget system whereby new spending cannot be financed by increased borrowing. Who is going to vote an increase for science if it means raising taxes or cutting spending for children?

The last bout of meaningful deficit reduction, during Clinton's first term, did serious damage to R&D spending, which dropped by 3.9% in real terms.Education poses a different set of issues. Clearly, education is key to competitiveness. "

If an educated population is the engine of change, then we're doing a really, really lousy job," says Claudia Goldin, a Harvard economist who is co-authoring a book about education and technology. "We have been un-subsidizing higher education for some time."

There are two problems. First, real wages for young Americans with a bachelor's degree have declined by almost 8% over the past three years. Nobody knows the reason for sure, but some economists suspect that global competition has something to do with it.The other problem is that education is closely tied, in tricky ways, to the hot-button issue of immigration.

Despite post-September 11 restrictions, foreign students with temporary visas still account for almost 40% of new graduate students in science and engineering. We still need to spend more on education, but in an era of labor mobility the decision about where to put our resources is not a slam-dunk.With the Big Ideas under assault by globalization, economists have responded by focusing on smaller goals. "

Are there places where we can make sensible improvements that don't require big philosophical changes in what we are doing?" asks Poterba of MIT. For example, the new pension bill encourages companies to automatically enroll new hires in 401(k) plans unless they opt out. Economists believe that will greatly increase savings by workers. Not as big a deal, perhaps, as full-scale tax reform, but a gain.Beyond that, the idea of a national economic policy may be fundamentally out of date in a world of global markets.

Washington is no longer the center of the economic universe. That's a basic fact that Democrats and Republicans alike will need to get their heads around.

QUICK POST-ELECTION ANALYSIS: REPUBLICANS NO LONGER THE DOMINANT PARTY

To: Interested PartiesFrom: Simon Rosenberg Date: November 8, 2006Re: Quick post-election analysis: Republicans no longer the dominant party


Last night the American people made it clear that they had grown weary of the failures and partisanship of the Bush era, wanted a new direction, and got one. After giving Republicans the nation in 1994, the *American people just gave the nation back to the Democrats. Democrats now have a majority in the House, among governors and state legislative chambers, and apparently the US Senate.

* WATCH OUT FOR ALL THE EUPHORIC SPIN SHORT TERM ANALYSIS BEING WIDELY OFFERED. THE ELECTION RESULTS ARE COMPLEX AND FOR DEMOCRATIC GAINS TO BE MAINTAINED, WE ARE GOING TO HAVE ESTABLISH OURSELVES WITH ACTIONS AND SOLUTIONS, NOT WORDS AND POSTURING! - Precinct Master Ed. -

*With these Democratic gains in all regions of the country the American people have not only choosen a new direction, but a more progressive one.

While many of the newly elected Democrats will join the Blue Dog and New Democrat caucuses, in almost every instance the Democrat who won their race was ideologically to the left of the Republican they beat.

Every type of Democrat won last night, Northeastern, Midwestern, Southern, Texan, Western, liberal, moderate, conservative and many whose ideology defies easy description and should be best described just as a Democrat.

*The Republicans can no longer be called the dominant party in American politics, as Democrats are now clearly competitive in all regions of the country. 42 of the 50 states either have a Democratic Senator or Governor (The 8 states without a major statewide Dem are AK, AL, GA, KY, MS, SC, TX and UT). The country remains, however, very evenly divided.

Both parties now competitive in all regions of the country, with Republicans largely holding on their advantage in the South and Democrats making gains in Florida, the North, Mid-West and West.

It is fair to say that heading into 2008 neither party hold a significant advantage, and the *GOP/conservative ascendency has ended. It is a "jump ball" for control in 2008 with both parties starting out evenly matched, without a great advantage and Democrats perhaps having a little more wind at their back.

It was a day of reckoning for the conservative movement. As we wrote yesterday in an election day essay, "Given the extraordinary failure of conservative government to do the very basics - keeping us safe, fostering broad-based prosperity, protecting our liberties, balancing the books and not breaking the law - I think history will label this 20th century conservatism a success as a critique of 20th century progressivism, but a failure as a governing philosophy.

It never matured into something more than an ivory-tower led and Limbaugh-fed correction to a progressivism that had lost its way."

The exits showed that voters had many issues on their minds - Iraq, corruption, terrorism and the economy. There was no one single issue driving the outcome, but the unexpectedly high number of people citing "corruption" or "scandals" signals to me a real desire for leadership that focuses on solving the people's business rather than playing politics.

In many ways this is the most important message of the election, and from listening to Pelosi and others last night one Democrats clearly understand.

The Republicans lost because their government did not what it needed to do for the Ameican people. To succeed Democrats will have to focus not on politics and positioning but doing everything they can to work with the Republicans to solve the many problems facing the nation.

Most of the gains for Democrats in the House came in the Mid-West and Industrial North, the older and more settled regions of the country.

Democrats won two Southern seats, two in Florida and three in the Southwest but overall did not make major gains in the Sunbelt. More gains in these areas may come with the 8 or so races in recounts right now. All but Florida’s 13 District now Settled.

Democrats got their new House majority without making major gains in the South, and are now the first non-southern based Congressional Majority since 1955. The Senate followed a similar pattern, with most of the gains in the older regions of the country.

The new Democratic Congressional Majority has all the attributes one normally associates with majorities - ideological, generational and regional diversity. This new Democratic team is a diverse lot, from all regions of the country, from rural, exurban, suburban and urban areas.

Leading this team isn't going to be easy, nor will it be easy to predict where it goes on major issues. An early test of Speaker Pelosi will be to guide her new team towards consensus on Iraq and the budget.

Looking ahead to 2008, it is clear that Democrats have strengthened their position in the electoral college. Their base in the North has deepened; the great swing state of Ohio has become much more Democratic; they continued to make gains in the West; add an angered and trending Democrat Latino population, and an already trending-Democratic Southwest looks much more Democratic.

The Republican Presidential field took a big hit last night. Allen and Frist now seem damaged beyond repair, but the big loser of the night was John McCain. He has hitched himself to the President's failed Iraq policy, which will be seen today as the main reason why the Republicans did so poorly at the polls.

Even the two good stories for the GOP last night, the CA and FL governor's races, have bad news for Bush and his brand of Republicanism. Both Arnold and Charlie Crist publically distanced themselves from Bush, with Crist doing it very publically just this past Monday before the election by not showing up at a Bush rally designed to help him.

The Democratic bench has gotten much deeper and stronger in the past few years. Not only are there many more Democrats elected to offices across the country, there are many more powerful and compelling leaders emerging.

In addition to already successful Democrats like Warner, Edwards, Napolitano, Granholm, Richardson and Sebelius we now can add Deval Patrick, Eliot Spitzer, Cory Booker, Kirsten Gillibrand, Martin O'Malley, Bob Menendez, Rahm Emanuel, Barack Obama, Artur Davis, Antonio Villaraigosa, Gabriel Giffords, Gavin Newsom and many others to the growing pool of exciting, next generation leaders with a big future ahead.

A sign of changing times. Our new Speaker is a woman, the Democratic frontrunner for President in 2008 is a woman, and the possible Presidential candidate with the most buzz is a young African-American Senator from the Mid-West.

The last year has seen a broad, progressive campaign highlighting the ways in which this administration’s economic policies have left America weaker and stalled economic progress for most Americans.

While a great deal of attention has been paid to the failure of the new conservative's foreign policy, it is now also clear that their economic strategy has failed. And voters agree. On November 7th, the American people delivered a clear and unmistakable mandate for action on the economy.

With Democrats now holding power in Congress and the 2008 elections looming, what should be the real economic priorities for progressives?

What role did the economy play in the recent campaign?

And with the American economy perhaps heading into a slowdown and the housing bubble continuing to deflate, what should be the Democrats' strategy for ensuring the broad-based prosperity the country needs?

CHALLENGING THE REPUBLICAN ECONOMIC RECORD
by Simon Rosenberg, NDN President and Robert J. Shapiro, Globalization Initiative Director
September 28, 2006

Click here for the PDF version of this memo

To: Interested Parties
From: Robert J. Shapiro, Globalization Initiative Director and Simon Rosenberg, NDN President
Date: September 28, 2006
Subject: Challenging the Republican Economic Record

Under George Bush, the American economy is not benefiting most families. It makes a big difference: We compared how little the income of the average American family has increased over the last four years, with four years of comparable GDP growth during President Clinton’s terms. We found that the dismal Republican record has cost the average family $5,054 in income gains.

This “prosperity gap” of more than $5,000 per family helps explain why President Bush’s economic approval ratings remain low and why, throughout this campaign, Democrats must speak loudly and clearly about the economy. Whether gas prices rise or fall over the next five weeks, progressives must hold conservatives accountable for their major failures of economic stewardship -- stagnant wages & incomes; fiscal mismanagement, and misunderstanding globalization.

A recent CNN poll showed that the economy is the voter’s number one concern this election season. Despite four years of healthy GDP and productivity growth, the latest CBS / New York Times poll found that only 37% of Americans approved of the President’s handling of the economy.

It’s unsurprising, given how little most Americans have benefited from that growth. This morning’s Wall St Journal reports that “President Bush appears to believe that the economy ranks among Republicans' strongest weapons in the 2006 fight.” If so, they’ll be shooting with blanks -- and running desperate attacks ads claiming once again that Democrats will raise people’s taxes.


We have to fight back, based on a real understanding of why Americans are so concerned about their economic lot. There has been a lot of talk about falling gas prices – and lower prices at the pump are great news for the American people.

Gas prices have not greatly influence the President’s ratings. In fact, there’s really very little connection between the two. The last time gas prices fell sharply in the fall of 2005, the President’s rating stayed flat – as it has this time.

What is the reason real reason for the President’s weak ratings? We think it is the huge gap between how much most families benefited from the last economic expansion, and how seriously they’re struggling this time. You only have to compare the last four years of strong economic growth under President Bush (20002-2005) with the final four years of strong growth under President Clinton (1996-1999).

Under President Clinton, the real income of the average American household rose 10%; under President Bush, it’s actually fallen 0.5%. If average incomes over the last four years had risen as much as they did during comparable years in the latter 1990s, the average American family would be better off by more than $5,000 today.


Progressives should take this economic message on the road over the coming month, and hold Republicans accountable for their three major economic failures.

1. Stagnant Wages and Incomes. Adjusted for inflation, most Americans earn less today than when Bush took office. GDP, productivity and corporate profits all have shot up. But the most recent Census Bureau data show that the median income in 2005 was 5.9% lower than it was in 2001, when President Bush took office.

While the prices of many middle class necessities continue to rise, hourly and weekly wages remain stuck where they were in 2001 (see Figure 3). If GDP growth begins to slow significantly – and there are signs that it’s happening already -- this could be the first economic expansion in modern times that produces no real gains in average wages. As it is, this administration has the worst record on incomes and wages of any since World War II, and it should be held accountable.

2. Poor Fiscal Management. Under President Bush, our Government has to borrow more than a billions dollars every day, much of it from foreign governments, to keep itself going. And trade deficits under this administration are even larger than their budget deficits.

Yet, with all this stimulus and all this debt that our children and grandchildren will have to pay down, this administration also has the worst record on job creation of any presidency since the Great Depression. Even today, job growth is running at just half the rate it did at a comparable point under President Clinton. Just as Bill Clinton did in 1992, progressives should hammer their Republican opponents for the ballooning deficits and rising debts of this administration.

3. Managing Globalization. This is a time of profound changes and the strongest growth on record for the global economy. Yet Republicans have done nothing to help the American people share in the enormous worldwide gains from globalization. The administration doesn’t understand or doesn’t care how Americans are affected by the entry into the global economy of hundreds of millions of new Chinese and Indian workers.

Nor do they understand or care about how or why two of the central relationships in our economy - between how fast productivity rises and how much wages go up; and between how fast GDP grows and how many new jobs are created – have broken down. They even stood by while the Doha trade talks collapsed, threatening our national consensus on the importance of expanding trade.

This administration’s economic record is most notable for its bad decisions, weak understanding, and unmet challenges. In this area as in many others, President Bush and his allies have left America weaker than they found it. Their record represents a historic failure of economic stewardship. This election year, American voters must hold them accountable.


SENATOR EVAN BAYH'S BLOG
Debating The Bush Economic Record: Education Matters More than Anything
Submitted by Senator Evan Bayh on Fri, 09/08/2006 - 12:11pm. Economy

Today, a worker with a High School diploma earns on average $27,915, one with a college degree earns $51,206 and those with an advanced degree earn $74,602.

In a global economy that values ingenuity and technical know-how, a college degree is as important as a high school diploma was 50 years ago. Now we must make it as common.

This is what we did during my time as Governor of Indiana. In 1990, even in the depths of the last recession when the budget was tight, we created the 21st Century Scholars. What it says to every child whose family qualifies for the free or reduced lunch program – and who in 8th grade signs a written pledge to graduate from high school with passing grades, every one of those children is entitled to a full college scholarship to the public university of their choice, and those scholarships are fully transferable to the private university of their choice.

This program helped Indiana move from 40th in the country in the percentage of our kids who go on to higher education to 9th. We are literally lifting up more than a hundred thousand poor children and saying to them, if you believe in yourself, if you do your part, you can count on us to do our part too. They are better workers, better taxpayers, and better citizens. It’s good for us all. We should do that for every child in this country – each and every one.

We also need to help middle class families pay for college. Today the average student graduates with $19,300 student loans. This is a crisis that needs to be addressed. Over the last five years, average total tuition and fees have increased by 32 percent at private four-year colleges and universities, 57 percent at public four-year colleges and universities, and 33 percent at public two-year colleges. Parents can no longer meet this burden; many of them are faced with the daunting task of paying for college and taking care of their parents at the same time.

Government must step up and meet this challenge with them. By providing a $6,000 tax credit for college, we start to ease the burden on parents and students and make a college education an attainable goal and put them on the path to the American dream.

Education is the path to success for our children. To lead in the global economy America must produce the best and brightest the world has to offer. Companies should not have to recruit engineers in India because they cannot find enough in Indiana.

This is a guest contribution as part of NDN's ongoing debate about the economy. Read our new report The Bush Economic Record here.

DEBATING THE BUSH ECONOMIC RECORD: BUILDING AN INNOVATION ECONOMY, PROTECTING INTELLECTUAL PROPERTY
Submitted by Senator Evan Bayh on Fri, 09/08/2006 - 9:20am. Economy
Globalization has changed the world and for the American economy to stand at the forefront of this transition - we must commit ourselves to an innovation economy that harnesses the power of the Americans ingenuity, creativity, and hard work.
We need to look through the prism of innovation in all that we do to ensure that we can be more rapid, more nimble, in terms of bringing new goods and services to the market, and when we do that we need to ensure there is stringent protection for our intellectual property rights abroad. All too often, that is not the case. We can succeed – and prosper – in the global economy, but if continue to allow our good ideas to be stolen by our competitors.

Intellectual property theft is a major threat to our economic and national security; we can no longer treat it in the dismissive fashion adopted by this administration. Studies show that more than 80 percent of business software in China is pirated.

We cannot allow a situation to develop where, when we do our part through research and development, through education, through fiscal sanity, through increasing our own domestic savings, through becoming more competitive and innovative, the fruits of that labor of that American genius are stolen by those abroad through violating our intellectual property rights. That cannot be allowed to continue.

I have introduced legislation that would elevate the way we treat intellectual property theft to the same level as money laundering and other black market crimes. As well as creating one organized task-force to combat Intellectual Property theft, that for the first time would include members of the Office of Terrorism and Financial Intelligence.

Today's global economic shifts present America with unparalleled opportunities and serious challenges. America stands as the country most poised to take advantage of the new global economy if we have the right leadership and stand up for the American worker as they have stood with us in making this country great. The first step in realizing their potential is offering an aggressive approach to stopping IP theft, while protecting American jobs and our national security.

This is a guest contribution as part of NDN's ongoing debate about the economy. Read our new report The Bush Economic Record here.

REBUILDING THE NATIONAL CONSENSUS ON TRADE
by Robert J. Shapiro, Globalization Initiative Director and Simon Rosenberg, NDN President
September 14, 2006
Click here for the PDF version of the memo

This is an important time for the cause of open markets and trade liberalization. The current global trade negotiations, the Doha Round, have collapsed; and we will soon learn whether the Administration and other leaders can restart them. As British Chancellor of the Exchequer Gordon Brown wrote recently in The Financial Times “the world economy faces an uncertain autumn … not only the impact of terrorism and geopolitical uncertainty on our economies, but also a surge of protectionism.”

On this side of the Atlantic, Brown’s warning should have the distinct ring of truth. In the wake of five years of accelerating globalization, during which American wages have stalled and job creation has slowed, the national consensus to continue to liberalize trade – one that has made America stronger for more than fifty years – is now unraveling.

We need a clear vision, strong leadership and a serious program to ensure that working Americans benefit as much from globalization as American businesses. This memo analyzes what went wrong and highlights a number of areas– including a strong push to restart Doha – that can begin to rebuild our national consensus once again.

THE COLLAPSE OF DOHA

On July 25, 2006, the Doha Development Round of world trade talks were officially suspended without any final agreement or schedule to meet again. In Geneva, the six main participants, including the United States, the European Union and the largest developing countries, could not find a way through their negotiation impasse. Pascal Lamy, the head of the World Trade Organization, announced that he could not “hide the sad truth: we are in dire straits.”

The Doha Development Round began in 2001 with the explicit intent of helping the world’s poorer countries by boosting their trade and, with it, economic growth.

The talks were meant to persuade the world’s rich countries, especially the United States, the EU and Japan, to reduce their domestic subsides and other protections for agricultural goods produced in the world’s developing nations – and in exchange, less developed nations would reduce their tariffs and quotas on the finished goods and services of the richer countries.

Officially the end of the talks in July was, in the words of Mr. Lamy, a “time out”. But realistically the odds of a final deal are fading fast. The President’s authority to negotiate a “fast-track” deal for an up-or-down vote without amendments in Congress expires next July. It will be very difficult to restart those negotiations, conclude them and then persuade Congress to approve the results in such a short time – and it’s even less likely that other countries will agree to negotiate with us if we cannot ensure them that the results will not be amended in Congress. And given the current political environment it seems unlikely that Congress next year will extend the President’s fast-track negotiating authority.

At a time when global growth may well be slowing, a successful Doha could add $287 billion to the world economy, by the World Bank’s estimate. Developing nations would gain the lion’s share from expanded agricultural exports and cheaper imports of western goods, while here in America, consumers would enjoy lower food prices and exporters larger markets.

Doha’s collapse, if left standing, could also erode confidence in the World Trade Organization (WTO) and the process of multilateral negotiations. No government or organization has been more critical than the WTO to the basic process of globalization, including opening up countries like China, India and Brazil to much greater foreign investment and competition.

The WTO dispute-resolution process is also a powerful tool for protecting America’s interest against countries that trade unfairly. Most recently, the WTO supported the United States position that China’s currency is overvalued. We should not allow confidence in the WTO to ebb.

THE ALTERNATIVES TO DOHA AND GLOBAL MULTILATERAL TRADE NEGOTIATIONS

Stung by its failure to resolve the outstanding issues at Doha, the Bush administration has offered the prospect of new bilateral or regional trade deals. But the record of most bilateral trade deals shows that they can distort and divert trade flows, usually require a “spaghetti bowl” of rules that American businesses must untangle, and can increase the cost of doing business.

These bilateral deals also eat up the political capital for globalization at a time when the national pro-trade consensus is fraying. Noted economist Jagdish Bhagwati of Columbia University recently described the view of these deals held by most trade experts, in

Foreign Affairs:

It is almost insane to present Congress with a string of piffling FTAs and ask representatives to go to bat for trade liberalization again and again. Each time they do so they use up some political goodwill….These bilateral and less-than-multilateral FTAs are therefore dangerous…nearly all first-rate economists have now begun to tire of them and consider them to be a pox on the trading system

At a time when “economic nationalism” is increasing in Europe, and when Latin America countries have rejected the Free Trade Area of the Americas and increasingly cater to the anti-American and isolationist Hugo Chavez, it could prove very dangerous to undermine multilateralism.

WHY DOHA FAILED (1) - A FAILURE OF PRESIDENTIAL LEADERSHIP

President’s Bush’s failure to exercise presidential leadership on trade is at least part of the reason why we face our current predicament. To be sure, the governments of many European nations resisted compromise at Doha, as did a number of major developing nations. These are conditions that only a committed and far-seeing President of the United States, as the world’s premiere economy, can change. In July, as Doha entered its final critical phase, The Economist called on him to do just that:

At this eleventh hour, Mr. Bush may be the only person capable of breaking it. A dramatic display of political courage by the world's biggest economy and the traditional leader of the multilateral trading system could still jolt the round from apathy to action.

No such display of political courage and leadership was forthcoming from President Bush. Instead, he gave his key trade negotiator, Rob Portman, a new job, creating an impression that America had given up on Doha.

The President and his officials talk frequently about the benefits of free trade. Treasury Secretary Henry Paulson has twice made robust speeches in defense of trade since taking office. But the collapse of Doha was not the first time that the Bush Administration declined to “walk the walk” for trade liberalization.

While calling on other nations to reducing their tariffs and subsidies, President Bush in March 2002 imposed a 30 percent tariff on steel imports, in apparent violation of WTO rules.

Experts estimate that the tariffs cost nearly 250,000 American jobs in companies using steel products, more than all of the jobs in the U.S. steel industry.

Two months later, he signed the Farm Bill, dramatically increasing subsidies to large agribusinesses just as the Doha round started talking seriously about reducing agricultural subsidies.

And while the administration did manage to pass a flawed CAFTA agreement last year, they refused to consider reasonable amendments that could have maintained the real bipartisan support for such measures seen in the 1990s.

WHY DOHA FAILED (2) - DECLINING BROAD-BASED SUPPORT FOR TRADE

The Bush administration also has not made the case for trade liberalization to the American people. The vast increases in trade have produced cheaper electronics, clothes, computers and cars for American consumers. But the administration’s indifference to the subtle effects of global competition on American jobs and wages has further eroded the support of the American people for liberal trade.

While cutting taxes for the wealthy and running up big budget deficits, President Bush has ignored the way that global competition, combined with rising health care and energy costs, squeezes American companies’ ability to create jobs and raise wages. The result: despite strong GDP and productivity gains, this administration has the worst record in more than 50 years for job creation and income gains.

At the same time, the administration’s huge budget and trade deficits have made America dependent on foreign lending, especially from the Chinese, Japanese and Saudi governments. Our large and growing dependence on foreign lenders not only reduces our leverage with them in negotiations such as Doha; it also could produce a “dollar crisis” that would dramatically slow the U.S. global economies. It’s little wonder that under this administration, support for globalization and liberal trade by American businesses and the American people is at its lowest ebb in generations.

REBUILDING THE NATIONAL CONSENSUS ON TRADE

For the past half century, trade liberalization has been a crucial part of the formula for global peace and prosperity; and America’s greatest leaders have maintained a broad, bipartisan consensus against protectionism.

FDR and Harry Truman created the architecture for an open post-war system.

JFK launched the modern series of multilateral trade talks. President Reagan began the Uruguay Round and the NAFTA negotiations – and President Clinton enacted both with bipartisan support.

And progressive Presidents from FDR to Clinton understood that liberalizing trade was an essential part of the formula that built the post-war period of relative peace and prosperity.

President Bush has failed to show any comparable leadership through the Doha Round and his broader economic policies. Whatever we do, globalization is not going away or even slowing down.

As FDR, Harry Truman, JFK and Bill Clinton all understood, liberal trade and globalization are ultimately progressive causes. Progressives need to rebuild the national consensus for trade and globalization with a new program that will ensure that all Americans can benefit from both. In the coming months, six specific issues provide those who support trade liberalization with an opportunity to make our case.

1. A New, Final Push on Doha. One last push to save Doha is the single most important step to support trade. No previous trade round has failed. Severe consequences would follow the failure of this one. US Trade rep Susan Schwab has promised America will “do what it takes.” President Bush must now demonstrate his commitment, by doing the same.

2. Passing the Vietnam Trade Agreement. In November 2000 Bill Clinton became the first American President in a generation to visit Vietnam. Despite the drawbacks of bilateral agreements, passing this deal would be a victory for trade liberalization and a momentous step towards welcoming Vietnam back into the mainstream global community. The act is currently being held up in Congress. Republicans and Democrats should work together to ensure it passes swiftly.

3. Caution Over A Slowing Economy. As the U.S. economy continues to slow, and the administration’s dismal record on wage gains and job creation grows even worse, anxiety about trade will increase. This could provide another pretext for companies to plead for special trade protection, ultimately reducing competition and raising prices for Americans. All concerned must be careful not to scapegoat trade policy.

4. Avoiding Restrictions on Foreign Investment Flows. Earlier this year, Congress torpedoed the Dubai Ports deal. Whether this was the right thing to do or not, many members have now called for legislation that would explicitly and permanently politicize the process of approving flows of foreign investment through the “Committee on Foreign Investment in the United States,” or CFIUS, to prevent foreign ownership of “critical infrastructure.” Free flows of foreign investment are at the heart of modernization in the developing world – and our own ability to run large current account deficits. Congress should stay out of this.

5. Finding The Right Reaction to China’s Currency. Economists agree that China’s currency is undervalued relative to the dollar, giving her exports an unfair competitive advantage, especially with exports from other developing nations. Steps should be taken to encourage a revaluation. But they cannot provide a pretext for punitive tariffs on Chinese-made goods consumed by every American, similar to those threatened by Senators Schumer and Graham.

6. Reforming Agricultural Subsidies. In 2007, Congress will have to decide whether to renew the 2002 Farm Bill or take steps to roll back some of its subsidies. Doha would have required that the EU, Japan and the United States pare back farm subsidies that make food more expensive for Americans and impede agricultural trade in every developing country. Retain the current system will make future multilateral negotiations even harder. Congress should produce a farm bill that supports needy rural communities but doesn’t make passing Doha, or the live of impoverished African farmers, more difficult.

In the long-term we need to develop policies that ensure that the American people both understand and feel the benefits of a liberal trade regime in a more competitive global economy.

The first part of this equation requires real political leadership to ensure that the American public appreciates the benefits they receive from existing global integration: cheaper consumer prices; low domestic interest rates; the ability to borrow foreign capital, higher productivity gains; and so forth.

Yet this is not enough. As Federal Reserve Chair Ben Bernanke said recently “the challenge for policymakers is to ensure that the benefits of global economic integration are sufficiently widely shared.” To achieve this we need a fundamental rethink of economic policy, and a new national plan to ensure that gains from trade are broadly shared.

Progressives can re-build our national trade consensus by focusing on three core areas: restoring the economic integrity of the nation, fixing our rising cost crisis, and helping Americans adapt and adjust to globalization.

First, fiscal discipline must be restored to lessen American reliance upon foreign lending, lower the budget deficit and increase national savings.

Second, reform is needed to lower pension, health and energy costs for businesses and workers; only by doing so will more of the benefits of open trade be passed on to American works in higher wages and benefits.

Third, and perhaps most importantly, more must be done to help people adapt and adjust to the impact of globalization by investing in the human capital of American workers and working to lessen the risk of unemployment.

We believe an open global economy offers America great benefits. And there is no turning back: globalization is here to stay. Yet the benefits of globalization are currently not being shared fairly, and the national consensus for liberal trade policies is under threat. With strong leadership and new ideas we can rebuild that consensus, and ensure that globalization works for all Americans once again.

NDN Senior Political Advisor James Crabtree contributed to this memo. For more information e-mail jcrabtree@ndn.org or visit our blog at http://www.ndnblog.org/

THE EMERGING PROGRESSIVE ECONOMIC CONSENSUS ON WAGES
by Dr. Robert J. Shapiro, Globalization Initiative Director and Simon Rosenberg, NDN President
July 25, 2006

Click here for the PDF version of this memo

There is a new progressive economic consensus emerging about changes in the American economy, and the mistakes Republicans have made in trying to deal with them. The “Americas” section of this morning’s Financial Times (see below) leads with a story about the growing prominence of flat wages and incomes in the ongoing debate about America’s economic future. The article reports a meeting today of the Hamilton Project at the Brookings Institution, and notes that the issue of wages “is starting to catch fire among a number of prominent US groups.” NDN was the among the first Democratic groups to publicly press this issue, and the article prominently quotes Rob explaining the phenomenon as follows:

“What we are seeing is a major structural shift in the way the US economy works,” says Rob Shapiro, head of the New Democrat Network’s Globalization Initiative, a centrist advocacy group. “The ripple effects caused by the supply shock of the entry of hundreds of millions of Chinese workers into the global economy has changed the way American workers benefit from trade.”

For over a year now, NDN has pressed the case that President Bush’s economic policies are failing ordinary Americans, and Republicans don’t understand the nature of the new global economy. At the launch of our Globalization Initiative earlier this year, we again stressed the important issue of stagnant wages. We pointed out that while businesses were doing well in this recovery, prosperity was not shared widely by most Americans. Now, as the Financial Times article makes clear, former Treasury secretaries Bob Rubin and Larry Summers are throwing their weight behind the issue. And a collection of other progressive organizations – including the Hamilton Project, the Democratic Leadership Council, The Center for American Progress, The Center for Budget and Policy Priorities, and the Economic Policy Institute – also are putting this issue at the heart of their agendas.

Given the issue’s new prominence, we at NDN wanted to outline three important elements of this debate: first, the nature of the consensus itself; second, the way Republicans fail to understand this issue; and third, why we at NDN believe that today’s stagnating wages can be traced to deep changes in the global economy. This debate marks a real opportunity for progressives. It allows us to point out how conservatism is failing our economy. But, just as important, we must turn back pressures for protectionism and global disengagement, as we work to ensure that globalization works for all Americans.

THE NEW CONSENSUS

The basics of the new economic consensus flow from the way the American economy is currently performing. After the recession of 2001, American workers and businesses did their job: GDP and productivity have both grown at very sound rates. Yet, despite these achievements, most working families are not benefiting from these gains.

Wages have been flat or declining on average for 5 years now. As the Financial Times story points out, we have had 5 years of economic growth, but the amount the median American worker earns every week has fallen by 3.2 per cent, adjusted for inflation, since the start of the recovery in November 2001. For the first time ever, the real wages of American workers have declined through more than four years of strong growth. Calculations by NDN show that the average American earned $480 a week when President Bush came to office. Controlling for rising prices, the average American still earns exactly $480 today. So while the American economy has been growing, the incomes of most Americans have been standing still.

The result is an economy where prosperity is not broad based. Corporate profits are at their highest levels on record, both absolutely and as a share of all national income. And after 6 volatile years the stock market is nearly back to the levels of the Clinton years. Yet, the real incomes of ordinary Americans have stagnated or even declined, while the costs of energy, healthcare, college tuition and other essential middle-class goods have soared.

The Republican Response: Denial and Spin

How have Republicans responded to the recent record of declining incomes, in the midst of healthy GDP gains? Realizing that his economic record has become a problem, President Bush has spent the last few weeks engaged in a public relations offensive to try to turn around his dismal economic approval ratings. He went to Chicago earlier this month to trumpet what turned out to be disappointing jobs figures. And he used a White House press conference to highlight a new, lower than expected deficit projection, fueled by growing tax revenue from the wealthiest Americans. But on the issue of wages and incomes – the real issue for millions of working people – THE ADMINISTRATION’S RESPONSE HAS BEEN A MIX OF DENIAL AND SPIN.

First, we have the denial. Treasury Secretary Henry Paulson, in his Senate confirmation hearings, was asked directly whether he was concerned about declining real wages. In response he simply denied the problem, saying that ,“I'd be optimistic that if we keep this economy growing, have good GDP growth, good employment growth, that we will see wage growth for the middle class Americans you're talking about.” We see no reason for such optimism from all recent economic data.

Second, we have the spin. Speaking at the White House during Paulson’s swearing in, President Bush argued -- against all available evidence -- that consumers trust his economic record, and that wages were rising: “Consumers and businesses are confident in the future. Productivity is high. That's leading to higher wages and a higher standard of living for our people.”

This distortion was quickly picked up by the Wall Street Journal on July 11th, whose editorial “Good Jobs at Good Wages” was a perfect example of the conservative spin machine in action. They argued that wages were rising, citing Bureau of Labor Statistics incomes data for June that did not take account of inflation. When inflation is taken into account, hourly wages once again were lower than a year earlier.

The Challenge of the Global Economy

What is causing these problems? At NDN, we think that much of the answer lies in the changing nature of the global economy. It is the reason we set up our Globalization Initiative. We believe that the entry of hundreds of millions of Chinese, Indian and Central European workers into the global work force since 2000, and the rapid modernization of those economies, has directly or indirectly intensified competitive pressures on businesses and workers everywhere else, including the United States. These new global economic conditions are changing the way the American economy operates.

Globalization is changing two of the most basic economic dynamics in our economy. First, it weakens the long-standing connection between increases in the productivity of American workers and the wages they earn. Since 2001, labor productivity in the United States has grown, on average, more than 3 percent a year. That’s the best performance in decades. Yet, despite five years of strong productivity growth, wages are stuck. Even when we include the value of health insurance premiums and pension contributions, the compensation of an average American worker has increased little, for all the economy’s productivity improvements.

Second, globalization has measurably weakened the relationship between growth and job creation. The first evidence came in the 2001 recession, when job losses relative to the actual decline in economic growth were six times greater than in previous postwar recessions. Five years into the current expansion, job creation is still running at half the rate of the preceding recovery. Despite this historic slowdown in job creation, the official U.S. unemployment rate remains low – but only because the number of working age people looking for jobs has also declined, even as the economy has grown.

The American people know there’s a serious problem. A June poll by the American Research Group found that the President’s economic policy is even less popular than the President himself: 36% of Americans approved of the way Bush is performing overall, while only 34% approved of his economic policies. Put another way, two-thirds of Americans have no confidence in the way the President is managing their economy.

As Rob said at the launch of the NDN Globalization Initiative in February, “as far as globalization goes, the current administration is doing virtually everything wrong. The purpose of this project is to show the American people that we understand how to get it right.” This new consensus amongst progressive groups is a good start. It highlights an important issue.

NDN is proud to have been part of the debate from the start. Now we have to move the debate to a new level, both to show the American people that progressives have better solutions and to ensure our continued commitment to a free and open global economy. NDN looks forward to meeting that challenge working with our allies in the progressive movement.

******Additional Resources

NDN Globalization Initiative
Daily Commentary on these issues at the NDN Blog
The DLC American Dream Initiatve

ONCE AGAIN: IT'S THE ECONOMY, STUPID
by Simon Rosenberg
August 30, 2006

A lot of attention this week has gone on two of the worst failures of conservative governance, the anniversary of Hurricane Katrina and the civil war in Iraq. But there is a third problem that is also beginning to rise up the agenda: the fact that economy is not working for most Americans.

This administration seems almost indifferent to the fact that even as GDP and productivity have increased, the wages and incomes of most Americans have declined. And while the economic story is the most complicated of the three, its long-term damage to the country will be no less severe.

This week we’ve seen new data on incomes and wages. Yesterday the Census Bureau released figures that confirm deep economic problems for most Americans. The Bureau reported one of the smallest increases in median income on record for this stage in an economic recovery.

Yet, even after this increase, median incomes are still 5.9% lower today than when President Bush took office. Even more worryingly, yesterday’s rise is entirely explained by gains for richer and older Americans. The median incomes of people of working age actually fell, by $275, over the last year. In short, our growing economy is not working for ordinary Americans.

Declining wages lie behind yesterday’s disappointing figures. As NDN’s Robert J. Shapiro said at the launch of our Globalization Initiative earlier this year “we’ve seen the strongest four-year growth spurt since the early 1970s – with no meaningful increases in real wages.”

In fact, four full years into an economic expansion, real wages are actually falling for most Americans. If the economy begins to slow significantly there is a very real chance that this will be the first economic expansion in modern times with no real increase in American wages.

Put simply, most Americans are getting paid less than when Bush became President.

This administration has the worst record on incomes and wages since World War II.

Does the administration have a plan to fix this? No. In fact, not only do they rarely admit the problem, they are actually deceitful in presenting the figures. Yesterday Bush’s budget director Rob Portman was quoted as saying “wages are rising” in America. The President himself, speaking on July 10th, said productivity gains were “leading to higher wages and a higher standard of living for our people.” Yet anyone who saw the front page headline of Monday’s New York Times – “Real Wages Fail to Match a Rise in Productivity” – knows that the Republicans are not being truthful with the American people over wages.

Most Americans aren’t gaining from this economy today. But long-term the situation looks even worse.

America is borrowing billions of dollars daily from foreign governments to fund our huge current account deficit.
The debt is up more than $2 trillion, passing the bill onto our children.

Nothing has been done to prepare for the retirement of the Baby Boomers.

Healthcare costs continue to rise, while the number of insured falls.

The Doha round has failed, the cost of the war in Iraq grows ever larger, more Americans live in poverty, and the price of basic goods continue to go through the roof.

All of this represents an historic failure of economic stewardship.

PROGRESSIVES HAVE AN OBLIGATION TO HELP AMERICANS DO BETTER.

And we all have an obligation to hold the administration to account for its three biggest failures of governance: Iraq, Katrina, and the economy. Next week NDN will be releasing a report which will give an overview of the administration’s economic failure. We are doing our bit to put the economy – and the issue of declining wages – on the agenda. We hope that everyone in our community will help us to continue to put these conservative failures front and center before the new Congress as you did in the run up to November’s elections.

PLACES TO GO AND THINGS TO DO SITES
AMERICAblog
American Prospect
Center for American Progress
Daily Kos
Daou Report
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