The New Clintonomics

Two weeks ago, two policy think tanks based in the U.S. and the UK — the Center for American Progress, founded by Bill Clinton’s former Chief of Staff John Podesta, and Policy Network, founded by former Labor Cabinet Minister Peter Mandelson and a group of former advisors to the government of Tony Blair — hosted a meeting of Europeans and North Americans in London. Canada 2020 was invited to attend this summit as the only non-European, non-American participant.
The meeting was framed as a trans-Atlantic dialogue on some of the major issues facing progressives today, in particular how to tackle the fiscal crises in Europe and the United States in the context of weak economic growth, and in a manner that doesn’t betray core progressive principles and values. The conference was also designed to bring together a new generation of progressive thinkers and politicians from Europe and North America, to regenerate the trans-Atlantic Third Way dialogue of the late 1990s that Tony Blair and Bill Clinton led.
Fittingly, then, the keynote speaker was President Clinton. In a forty-minute address, Mr. Clinton provided a road map for how America should deal with the fiscal and economic issues it faces. His prescription could be seen as amounting to a  macro economic policy doctrine for the U.S. — a new Clintonomics if you will.
The foundation for the new Clintonomics rests on the notion that governments need to pursue what some might regard as two contradictory courses of action at once, what the President called “walk and chew gum’ economics. For Mr. Clinton, it is imperative that Washington invest significantly now, when US government borrowing rates are historically low, in the many things America needs to make it a more productive and competitive economy, notably infrastructure and education, but also in new industrial policy initiatives aimed at developing innovative sectors of the future. This investment will also provide needed short-run stimulus to an economy that is still operating well below potential over three years after the recession.
This bold investment agenda must, however, be anchored by a serious, credible, fiscal consolidation effort that will be planned, and expected, to kick in once economic growth takes firm hold. This, in Mr. Clinton’s view, is necessary in part to anchor expectations to help prevent the inevitable interest rate increases from rising too far and too fast and crowding out needed private sector investment.
While this was a serious policy talk from the President, he remains ever the pragmatic, centrist politician, not for a minute under-estimating the difficulty selling his economic remedy to the American public. Mr. Clinton observed that most Americans are fiscal conservatives, even if they are Democrats. Regardless of the economic merits of deficit spending in some situations, many Americans see piling on debt as immoral. As a result, those that argue for austerity now — the American right and the business community — will, in Mr. Clinton’s view, have an easier political sell to the American electorate than those that push for some variation of his agenda.
Nevertheless, the President made a compelling case that the complexity and variety of America’s core problems today — a grave fiscal situation, growing productivity and competitiveness issues, serious income inequality, and weak, post-recession growth — call for an equally complex range of actions, which might even appear contradictory to many people.
In the domain of American political economy, it seems walking and chewing gum is a lot harder than it sounds.