Hillary Clinton's Economics: Suddenly It's 1947

Michael Barone
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Posted: Jul 17, 2015 12:01 AM
Hillary Clinton's Economics: Suddenly It's 1947

Like it or not, Hillary Clinton is the single individual most likely to be elected the next president. So it's worthwhile looking closely at and behind her words when she deigns to speak on public policy, as she did in her July 14 speech on economics.

It contained quite a bit of chaff as well as some wheat. There were laments about the nation's current economic woes, without mention that they come in the seventh year of a Democratic administration; a few policies first advocated by Republicans (Jack Kemp's enterprise zones); and proposals that she admits are "time-tested and more than a little battle-scarred."

But laced throughout the sterile verbiage is an assumption that was more widely shared by policy elites and ordinary American voters in 1947, the year Hillary Clinton was born, than it is today, 68 years later. That is the assumption that government is capable of solving just about every problem.

You can understand why that confidence was strong in Clinton's early years. The United States had just won a world war and was facing not the widely predicted resumption of the Depression of the 1930s but the surging postwar prosperity that is still fondly remembered by many.

"We must drive steady income growth," Clinton said, as if that were as simple as popping those new automatic transmission shift levers into D. "Let's build those faster broadband networks," which private firms were doing until Barack Obama demanded an FCC network neutrality ruling. We must provide "quality, affordable childcare," as if government were good at this.

"Other trends need to change," Clinton said, including "quarterly capitalism," stock buybacks and "cut and run shareholders who act more like old-school corporate raiders." This sounds like a call to return to the behavior of dominant big businesses in the early postwar years, when they worked in tandem with big government and big labor -- and faced little foreign competition or market discipline.

As for new growing businesses, Clinton hailed the "on-demand or so-called gig economy," but said it raises "hard questions about workplace protections and what a good job will look like in the future." She endorsed the Obama extension of overtime to $50,000-plus employees and said, "We have to get serious about supporting union workers."

In other words, let's try to slam the growing flexible economy into the straitjacket of the rigid regulations and the union contracts of half a century ago. Everybody should punch a time clock and work the same number of hours, in accordance with thousands of pages of detailed work rules. That template hasn't produced much economic growth since the two postwar decades. But it would siphon a lot of money via union dues from the private sector to the Democratic Party.

On top of that, Clinton would expand paid family days, mandate more sick leave, increase overtime pay and raise the minimum wage even higher -- measures that would tend to subsidize or produce non-work in an economy that has the lowest work force participation in nearly 40 years. She would make "investments in cleaner renewable energy" -- Solyndra? -- and spend billions on universal pre-kindergarten even though researchers (including the Obama administration's Department of Health and Human Services) say it has no lasting benefit.

Clinton concluded by asking some interesting questions. "How do we respond to technological change in a way that creates more good jobs than it displaces or destroys?" And "what are the best ways to nurture startups outside the successful corridors, like Silicon Valley?"

"We" presumably means government, with the assumption that centralized experts can guide others to maximize production and innovation. There was some reason to believe that in 1947, when government had spurred technical innovation (the atom bomb). There's little reason to believe it if you look at the recent performance of the Department of Veterans Affairs, the Office of Personnel Management or healthcare.gov.

The problem with Clinton's "paleoliberalism" (columnist David Brooks' term) is that centralized planning just doesn't work. Government is increasingly (to use political scientist Steven Teles' term) a "kludgeocracy."

Clinton's policies can't tell us precisely where growth will occur, leading many Republicans to believe that her proposals, including higher tax rates and ever-increasing regulation, will discourage growth.

We are a more fragmented and personally, economically and culturally diverse country than the culturally conformist America of 1947 in which most adult men had just been mobilized in the military. Policies and approaches that worked then are not likely to work so well now.