Back To Work

"Government must do all that is necessary, but no more than is necessary" Ronald Reagan, 1984 Republican National Convention

The title of this post is also the title of former President Bill Clinton's latest book. Since I am fascinated by the marriage of government and private sector economics (which makes me a first rate nerd), I thought this would make an interesting read. At the beginning of the book, the former President asks the right questions, primarily, "How do we propose to restore the American Dream at home?"(Ch. 1, p.3). I really love the bigger question that goes with it: "How do we get back in the future business?" What I most liked about this book is Mr. Clinton's focus on ideas that would actually create jobs, something sorely lacking in either political party these days. Mr. Clinton is particularly enthralled with the idea of public/private partnerships that he claims could create many jobs. Mr. Clinton does spend plenty of time in his book on partisan political jabs, but if you can read through that jibberish, he presents some solid ideas. However, my own biases would be more reflective of President Reagan's quote above, and would temper Mr. Clinton's enthusiasm for more government.

I want to focus on three areas that Mr. Clinton addresses that I believe are good ideas: cleaning up the mortgage mess, transforming the energy industry, and trade. His first idea for getting back in the future business is to clean up the mortgage mess. I could not agree more. The housing industry is essentially stagnant right now because up to 25% of homeowners are underwater on their mortgages, many more are behind on their mortgages, and many others are either foreclosed or about to be foreclosed. Government agencies and GSE's should allow principal writedowns for those mortgages underwater. In normal economic times, I would disagree, but these are not normal economic times. Right now, a perfect storm exists that is slowing housing turnover to a crawl, is greatly suppressing new housing, all of which will result in lower housing values for us all. Of course, this will cost a lot of money (although Mr. Clinton says it will not). In the end, it may create more money than it costs through interest savings to consumers, a return to normal housing market activity which will help boost home values.

Mr. Clinton spends a lot of time on energy policy in this book. I completely agree with the idea of building a "smart grid" that will provide electricity more efficiently through the energy spectrum. He also advocates tax incentives to finance building retrofits so that older building can become more energy efficient. This would create jobs and help us become more energy efficeint. He also spends time talking about how the Pentagon could save millions on energy, and they will need to with inevitable budget cuts coming as we wind down wars in Iraq and Afghanistan. Mr. Clinton also makes known his love of solar panels, windmills and other forms of "green" energy. I am also favorably inclined to green energy. I see fossil fuels as a sunset industry. However, green energy is also far from price parity with fossil fuels. Until green energy can come close to price parity, and harness energy much more efficiently, it really is not a viable alternative.

Finally, Mr. Clinton spends a great deal of time on trade. He rightly identifies the need to increase exports. But he goes much deeper than this. He calls for tax incentives to repatriate money back to the US from multinational corporations headquartered in the US. If corporations would invest money here, they would create jobs here. He also believes that enforcing trade agreements would create jobs, but points out that it is tough to enforce trade agreements with China and Japan when they are our national bankers. At the same time, we are their biggest customers, so maybe it is in their interest to live by trade agreements.

I like that Mr. Clinton has some good and thoughtful ideas. I believe that he is an underrated President, particularly given what has followed, with both Bush, Jr. and Obama. However, three criticisms of Mr. Clinton's ideas, and they relate to his partisan jabs. He is highly critical of President Reagan's tax cuts in the 1980's. Here, Mr. Clinton is not connecting all the dots, in my opinion. Mr. Reagan's tax cuts flooded the venture capital industry with money, much of which was spent on new tech start ups. I believe this helped fuel the tech boom of the 1990's that benefitted our economy greatly during Mr. Clinton's term in office. Of course, the whole "Y2K" computer conversion helped, too. I also believe that he is overlooking fossil fuels. I believe a strategy of drill now has to be a part of our overall energy production. Oil drilling creates many high paying jobs, and reduces our dependence on imported oil, much of which comes from countries that wish to do us harm. Finally, Mr. Clinton overlooks his role in the mortgage crisis that hit in the 2007-2008 time frame. In 1994, Mr. Clinton proposed amendments to the Community Reinvestment Act that mandated Fannie Mae and Freddie Mac to increase purchases of subprime mortgage securities.

I would recommend this book for those interested in the partnership/conflict between the government sector and the private sector. Overall, this is an interesting read for those who are interested in real solutions to the unemployment crisis in the US. Political bickering on both sides is not getting anything done. Both parties are "do nothings". I do not agree with all of Mr. Clinton's ideas, but he proposes some solid solutions, and he understands that the private sector has a critical role to play. I applaud his effort to look for solutions rather than just exlusively bash those with whom he disagrees. I do not agree with the idea that the government must always be at the center of every solution. As I referenced up top, the government must do what is necessary, but no more than that.