Lessons for Steve Rattner from Folks Who Actually Remember the 1990s

December 02, 2020

Steve Rattner used his NYT column to tell progressives that they should not try to pressure President-Elect Biden to implement progressive policies with noisy protests. He argues that compromise with the Republicans is necessary and argues that the Clinton presidency after the 1994 Republican takeover of Congress is a good model.

“Progressive history has not treated kindly President Bill Clinton’s decision to work with Republicans after their enormous midterm victory in 1994. But taxes got cut, the budget was balanced for the first time in decades, and the late 1990s is remembered as a period of strong prosperity.”

There are several important points here that apparently Mr. Rattner has forgotten. First, the economy was driven in the late 1990s by a stock bubble that crashed in 2000-2002. While that recession is usually considered by economists to be short and mild, from the standpoint of the labor market, at the time, it was the worse recession since the Great Depression. We did not get back the jobs lost in the recession, which began in March of 2001, until almost four full years later.

The stock bubble was also the origin of the underfunding problem of many pension funds today. Pensions assumed that the market would continue to rise even in the bubble. (That’s what Clinton’s all-star economists told them.) When the market crashed, they suddenly faced serious funding shortfalls, which no one wanted to make up with increased pension contributions in the middle of a recession.

This was also the period when partial deregulation of finance (the industry always wanted their government protection against failure safety blanket) was in full bloom. We saw the fruits of the Clinton era deregulation in the housing bubble and the widespread abuses in the mortgage industry that fed it.

Rattner also touts the “free trade” of the era. Of course, Rattner does not really support free trade; he is fine with longer and stronger patent and copyright protections. And, I have never seen him object to the protections that allow our doctors to earn twice as much as their counterparts in other wealthy countries, costing us $100 billion annually in higher medical bills. Anyhow, it was the Clinton-Rattner version of free trade that cost us millions of manufacturing jobs, making large parts of the country into solid Trump territory.

Anyhow, many progressives have better memories than Rattner, which is why they are determined to not have the Biden presidency be a repeat of the Clinton presidency. We also get why people like him don’t like noisy protests, but for people who can’t attend $10,000-a-plate fundraisers, these protests are how you can hope to have an impact on politicians’ agendas.



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