By Reed Hundt and Blair Levin
101 pages; Odyssey Editions, 2012
A golden rule of politics is to never solve a problem until the voters are aware of it or else no one will get any credit. The $64 question is whether the majority of voters realize that the lack of U.S. economic growth is a problem we need our politicians to address.
I’m not sure we’re there yet. People know only that the current lack of jobs is a problem—or at least those without one know it. As a result, the politicians and pundits have been touting any number of ostensible job creation plans, most of which involve government spending (or “investing”) in various favored industries or in “infrastructure.” The quotation marks indicate the dubious nature of such plans, as well as the very notion that government spending can goose an economy like our own.
Throwing more government money into the economy is not a growth plan; it’s a short-term fiscal stimulus that won’t do much to boost aggregate demand and will do even less to make the economy more productive. And productivity is what economists mean when they talk about growth. The arrival of a book by two prominent, rock-ribbed liberal Democrats insisting that the lack of economic growth is a problem suggests that the tepid economic gains we’ve seen in the last four years are beginning to be noticed. Since the advent of the George W. Bush administration, liberals have been ambivalent to the notion that economic growth should be a top priority of government policy, insisting that the benefits of growth mainly accrue to the wealthy, that standards of living for the middle class have scarcely budged over the last few decades, and as a result focusing more attention to policies that redistribute wealth rather than create it. The notion that life hasn’t materially improved for the middle class over the past three or four decades—which a number of reputable economic papers purport to show—is absurd, as anyone who can hearken back to the days of Country Squire station wagons and AM radio can readily attest. Still, this meme has been a talking point for a goodly portion of Democratic politicians and liberal pundits for some time.
Reed Hundt and Blair Levin are not exactly politicians, but they have toiled in the upper regions of Democratic policy circles for the past two decades, so people pay attention to what they have to say. Hundt was a Federal Communications Commission member in the first Clinton term and helped to engineer a major reform of telecommunications law to nurture the Internet. Levin was his chief of staff at the FCC; more recently he helped author a major FCC study that laid out a broad framework for the next telecom reform—a paper that was well-received by wonks on both sides of the aisle, making it a rather remarkable threading of the political needle. However, the apparatchiks of the Democratic Party found portions of the study repellant, especially the section that suggested the heretical view that a small fraction of American households without access to broadband simply cannot be connected in anything approaching a cost-effective way and, therefore, the government shouldn’t spend tens of billions of dollars to subsidize them.
It’s a heresy that represents a hurdle to Levin becoming the next chair of the FCC, a spot for which he is eminently qualified and would be far better than the alternatives being bandied about. So one way to read this book is as an attempt to remind the Democrats in the White House (and Senate) that Levin played an important role in ushering in the telecom revolution, which worked out well for the country (and the Clinton administration to boot, as well as every politician who’s passed the hat in Silicon Valley looking for campaign contributions).
Of course, the parties have changed since the 1990s, and being a Clintonista—just like being an alum of the George H.W. Bush administration—risks tarring a person as being too centrist to be politically viable. So a cynic might see this book as a way for Levin to re-establish his liberal bona fides.
Investment problem | The book generally has the right diagnosis of what ails our economy: growth is low because investment is low; our tax system is inane; and we need to encourage more investment, especially in the energy and tech arenas. The U.S. tax code treats investment (and investment income) unduly harshly, especially compared to European countries. It does the same for income earned by U.S. fi rms with foreign operations, which covers all of our major technology and manufacturing firms.
The authors tend to gloss over the tax problem, which is fine—they’re tech guys. Instead, they approach the investment shortfall from another angle, which invariably involves government “investments” of one sort or another. Some of them I like; for instance, I too am a fan of using prizes to incentivize private activities with potential public benefits. However, using it to encourage communities to raise “complementary private investment” to create a broadband service faster than what they currently have is not terribly compelling. Why would this work better than competition between the cable carrier and the phone carrier? It’s not clear.
Hundt and Levin do make proposals involving minor government costs that do make a lot of sense. They suggest the federal government make sure there are no barriers that prevent doing telemedicine across state lines, for instance, and that the digitization of medical records be accompanied with a collection of anonymous data in the “medical cloud” that would be made available to any researcher who requests it, which ought to accelerate the ability of scientists to discern the efficacy and safety of various drugs. But for the most part, their book contains a laundry list of “investments” that the federal government needs to make. At the risk of sounding like a generic libertarian, anyone who believes that the government can do a better job than the private sector in borrowing billions of dollars and hastening renewable energy or improving broadband has a faith in government that is far superior to mine.
There’s also a tendency for the authors to lapse into cliché. They invoke the “race to the moon” analogy in a couple of different places, and inform us that government must be “of the people and by the people”—boldly challenging readers who yearn for absolute dictatorship, I suppose. Elsewhere, they claim that building the “knowledge and power platform” is one of the most potentially important events in our history, stating gravely that “only Franklin Roosevelt, Abraham Lincoln, and George Washington ever had a chance to lead the country in such a noble task.” To equate it with existential threats seems a bit much to me, but maybe they’ll be proven right in another century.
There’s more hyperbole. At one point they explain that new technology to capture carbon is important and worth public investment because if our atmosphere were to reach total global carbon emissions above 565 gigatons, we would reach a point of “irreversible calamity.” They support that claim with a confusing explanation in a reference to an International Energy Agency publication that didn’t appear to contain anything nearly that hyperbolic.
Quibbles aside, The Politics of Abundance matters because it represents an attempt by two reputable people on the political left to engage in a dialogue on how to return to the robust economic growth we saw in the 1990s and part of the 2000s, and to talk about it without merely rehashing Keynesian economics. In other words, they are actually thinking about supply-side issues and not demand-side stimulus.
They’re also spot-on in identifying where our economy seems to be lagging in investment and productivity, namely the technology and energy sectors, which tend to be capital-intensive industries. And they do make a case that’s hard to dispute for why improving our national grid should be a priority, and that it will be tough to accomplish without government involvement of some sort.
At times, conservatives can be maddeningly vague and off-the-mark in their discussions of economic growth (just like their liberal opponents). For instance, much of what’s been written on “tax reform” blithely assumes that investment incentives are just as evil as any other tax expenditure. Now that someone on the left is willing to get specific on what might constitute a Democratic plan to boost productivity, maybe the right can begin to debate amongst themselves—and then with Hundt and Levin— about how to accomplish that.