Article

Progressive Growth: Building a Prosperous World in the 21st Century

John Podesta's Keynote Address to the Boell Foundation

October 26, 2010
Good evening. Thank you Ralf Fuecks for that kind introduction, and thank you to the Boell Foundation for making this event possible. As always, it is a pleasure to share the podium with Cem Özdemir.

As you well know, the Boell Foundation was founded to advance sustainability and social inclusion in Germany and around the globe. And I wanted to start this talk by congratulating the foundation and all of you on your successful push to make Germany a world leader in clean energy specifically, and in sustainability more broadly. Even though Germany’s progressive policies have sometimes been contested, it’s heartening to see the German Green Party enjoy more support than ever before. And I think it’s a testament to your hard work that many of the energy policies advances by the Green and Social Democratic parties have become consensus positions in Germany. I wish that it were so in America.

The Boell Foundation and the Center for American Progress, the think tank that I founded in 2003, have built a valuable partnership on the global principles of progressivism. Last October, we launched our joint Global Progress initiative, bringing together some 200 progressive politicians, policymakers, business leaders, and academics to discuss issues ranging from climate and economic growth to global security and the direction of the modern progressive movement. In May, we reconvened to focus on greening the global economy. I’m very pleased to be given the opportunity to deepen our dialogue and to share my thoughts with you on the economic and political landscape in the United States, and what we progressives can do to fight for a more prosperous and equitable future moving forward.

The Center for American Progress and The Boell Foundation are united by common work, even if it takes place on different soil. Both of our organizations believe that economic growth and opportunity should be shared by all and that we must leave the world a better place for future generations.

In the U.S, we believe that building a more prosperous future lies at the very heart of what we call the American Dream—but I think it’s fair to say that this goal motivates people the world over. It’s a pretty simple equation: Work hard; contribute to your community; improve your lot; and you leave the world a better place for your children. These progressive values allowed families like mine to arrive in America, with little more than the clothes on their backs, to find jobs, work up the ladder, and make their new nation even greater. But let’s not sugarcoat this—many families worked hard but many were met with prejudice and adversity that undermined the country’s grand ideals.

When reality did not measure up to our nation’s great promise, progressive leaders fought hard to keep the American Dream alive. From the late 19th century reformers from Theodore and Franklin Delano Roosevelt to John F. Kennedy, Lyndon Johnson, and yes, my former boss Bill Clinton, progressives succeeded in adding another factor to the equation I’ve just described. They insisted that growth must be broadly shared and that when it’s not, government must ensure that hardworking families don’t get left behind.

So when we examine the current economic recovery in the U.S., it’s important to understand that the conservatives who allowed the U.S. economy to crumble did not work toward this condition of shared prosperity. By the time President Obama took office in 2008, the economy had been suffering from almost a decade of carefully orchestrated neglect. The conservative economic policies of the Bush administration fostered the weakest job, wage, and income growth since the end of World War II. Median income fell for the first time since the 1960s. Wages were stagnant for women, and they actually declined for men. Income inequality soared to levels not seen since 1928. Job creation under Bush was a mere tenth of what it had been under President Clinton and all that was before the bottom fell out, resulting in the worst depression in 80 years.

As a result of all of this, American families relied increasingly on debt and borrowed heavily, particularly against what became inflated values of their homes to maintain their standards of living. We all know now that skyrocketing home values were illusions, and that borrowing couldn’t create the broadly shared and sustainable growth needed for the U.S. to prosper. Unfortunately, the debt overhang built up during the Bush administration is so large that it may take years to pay it off—just to get American households back to where they were 10 years ago.

The stark realities of our government and household balance sheets do not bar recovery. I still believe that the Obama administration will get growth back to where it needs to be, and I will lay out why I think this is the case. But American household debt appears to be preventing the economy from growing as fast as we hoped it would. The American public remains deeply insecure in the aftermath of the Great Recession, resigned to soldier slowly through the deleveraging period that almost always follows a major financial crisis.

Of course, with unemployment high and consumer confidence low, the deleveraging challenge would be best met with strong job creating policies that would grow the economy and restore the confidence of our citizens. However, Republicans decided that from the minute President Obama was elected, the best way to win back Congress in the midterm elections was to block the administration’s agenda at every turn, and to try to redirect the economic misery they helped cause to the new administration grappling with the results of the worst economic crisis in 80 years. As a result, opportunities to create jobs and grow the economy have been lost amid partisan politics, which are worse than I’ve ever seen them in all my years in Washington.

Despite this lockstep obstructionism, President Obama made tough decisions that stabilized the economy while laying a firm foundation for future growth. He began by guiding the $787 billion Recovery Act through Congress, saving 3 million jobs that would have otherwise been swallowed up by the recession. This past spring, he won passage of landmark health care reform to give 32 million uninsured Americans affordable quality coverage, a historic accomplishment. The administration has taken strong executive action to curb climate change and jumpstart the transition to clean energy, even in the face of strong congressional resistance. And he signed a financial reform package in July that will greatly reduce the likelihood of future financial crises like the one we experienced in 2008.

And there is little doubt that the Obama administration’s swift actions prevented the recession from becoming much worse. A joint study by two top U.S. economists—one of whom was an advisor to John McCain’s presidential campaign—found definitively that the stimulus package combined with intervention in the financial sector and related executive actions by the administration and Federal Reserve prevented what would almost certainly have been a second Great Depression, saving nearly 9 million jobs. And thanks to the administration’s aggressive early efforts, the downward economic spiral has been reversed and the private sector is cautiously adding jobs. While they’re hiring much more slowly than I’d like to see, the economic picture is a far cry better than it was when President Obama took office, when almost 800,000 people were losing their jobs every month.

Despite accomplishing so much in so short a time, the recovery remains anemic. As I noted, households are still weighed down by debt, the national unemployment rate hovers around 9.6 percent, and the president faces significant political difficulties as a result.

I believe that once the recovery takes firm hold and the pace of job creation picks up, so will the president’s fortunes. But in the meantime, he faces numerous political challenges. When Americans go to the polls next week to vote in the midterm elections, they will remember the 15 million Americans who are still out of work. As the party in power, the Democratic Party is sure to face losses as a result.

This is particularly troubling because conservatives strongly disagree with us on the need for decisive action. Ignoring their central role in the financial crisis, they’ve simply blamed Democrats for the misery that they helped cause. Meanwhile, they’ve offered few ideas on how they’d improve growth or deal with the country’s long-term challenges. The one plan Republicans have laid out in any detail recycles failed Bush policies that have already been roundly rejected by the public—giving huge tax cuts to the wealthiest Americans, repealing health care reform, increasing the federal deficit by a whopping $200 billion in 2020. In short, it appears that the Republicans’ idea for jumpstarting the American economy is to return to the policies that nearly bankrupted the country in the first place.

In fairness, their lack of innovative policy is partly due to the lack of cohesion right now among conservatives. A new far-right wave is sweeping the Republican Party, and mainstream Republican candidates are adjusting their policies accordingly to court the growing number of new “Tea Party” conservatives. Conservatives have used deeply partisan attacks and, on occasion, outrageous positions to win the highly conservative Tea Party vote.

A recent state law, for example, gives police officers in the state of Arizona broad powers to detain anyone suspected of being in the country illegally, creating an open invitation for harassment and discrimination against Hispanics regardless of their citizenship status. The backlash against immigrants, of course, is not simply an American phenomenon. It is spreading globally and it is symptomatic of larger economic worries—and is being exploited by politicians across the world who are playing on the fears of their electorates.

Of course you are experiencing it here in Germany, where a populist push from the right is taking hold. Last week, German chancellor Angela Merkel told a young audience that the vision of a multicultural Germany had “absolutely failed.” In Germany, fears of immigration are particularly misplaced. On the one hand, migrants in this country make important economic, cultural, and political contributions, and it is impressive to see how the face of modern Germany is successfully changing to reflect this. On the other hand, Germany has experienced a net outflow of about 140,000 people a year over the past decade. With an aging and shrinking population, and a skilled labor shortage that the German Chamber of Commerce pegs at 400,000 workers, Germany cannot afford to lose a quarter-million working age entrants a year. As progressives, we must be vigilant to ensure that politicians at home don’t play to the anger of the times and punish some of the least fortunate among us with draconian immigration policies. Even more so, modern societies need to promote inclusion, not fan the flames of division.

In the U.S., we also face challenges in our democratic institutions that have exacerbated addressing our country’s problems including achieving comprehensive immigration policy. Far-right conservatives have literally chosen to throw sand in the gears of America’s democracy. Our legislative system is built around deliberation, consensus, and protection of minority views, so 60 out of 100 votes are required to move legislation forward in the Senate. But this “supermajority” system requires a degree of civility to function. When I first started working in Washington 40 years ago we saw one filibuster a year; during the last two years, we had 80 filibusters each year. Determined partisanship is able to grind congressional activity to a halt, and largely due to Republican obstructionism, this is currently happening in the Senate. Democrats lost their 60th Senate seat in a special election earlier this year and are sure to lose more seats in next week’s elections. As a result, they will continue to face a steep uphill struggle to enact even the most modest pieces of their progressive platform. And after two years of Republican filibusters and elusive fights to find that 60th vote, it is difficult to imagine that we’ll see a flurry of legislative activity following the midterms.

Let me be clear: Congressional roadblock and Republican majorities do not preclude progress. Yes, they complicate the political picture, and make the Obama administration’s job a lot harder. But President Obama and his team have the opportunity to break through this legislative blockade, to lay out a comprehensive path forward, and to actively work to build a cleaner, more sustainable, and more progressive economy. Despite the great challenges we face, progressives must take action and continue to rebuild our economy in a way that better reflects our ideals.

So faced with these great challenges, where do we go from here?

Historically, economic growth has centered on innovations that have changed the way we live and the way we do business. The automobile sparked a manufacturing boom that built the American middle class, a massive public investment in transportation infrastructure, and enormous public and private investment in housing. The computer set off trillions of dollars in innovation, built the service industry and the internet, and transformed health care, telecommunications, and the financial industries.

And while I think innovative technologies will undoubtedly continue to play a leading role in our world, I think we’re going to see future growth driven by innovative ideas. Specifically, I believe that sustainability will lie at the heart of economic expansion for the foreseeable future.

Creating the conditions and culture of sustainability goes far beyond climate and energy. It means challenging prevailing notions of economic development, global competitiveness, and the way we pursue prosperity over the long term. This will require a wholesale restructuring of the American economy, of American infrastructure, and American government to deliver higher levels of performance. It will necessitate a massive public and private investment that will change how we consume natural resources and produce energy, increase efficiency and productivity, unleash innovation, create new jobs, strengthen our communities and infrastructure.

The example Germany has set for the rest of us in this regard is striking. You jumped to take advantage of the clean energy opportunity early on, investing billions of Euros in new clean infrastructure and broadly realigning economic incentives to favor renewables over fossil fuels. I know these policies met stiff resistance in the beginning. Because of strong public policies, Germany has laid the necessary groundwork to meet impressive clean electricity targets—at least 30 percent of all electricity will come from renewable sources by 2020, and at least 80 percent by 2050. Strong export demand for German goods, including innovative clean energy technologies, has driven the largest economic expansion since reunification. In short, you’ve weathered the global economic storm much better than any other country in Europe, and better than most other countries in the world, all while rapidly transitioning your economy onto a cleaner and more sustainable path.

In the U.S., our experience has been less exemplary, but still notable in many ways. We are all too familiar with the Senate’s failure to pass comprehensive climate and energy legislation this year. Regulating carbon emissions remains a lightning rod in U.S. politics. And our continued reliance on coal and our patchwork regulatory system creates sharp regional divides that make reaching a national energy agreement a herculean effort.

But the ideas behind climate legislation remain tremendously popular. Americans want new jobs. They want a stronger economy and better infrastructure. They want more effective appliances and more domestic manufacturing. They want to end our addiction to foreign oil, much of which comes from hostile or unstable regimes. They want the country to be more competitive globally. Sustainability—not only in climate and energy, but in transportation, in security, in efficient governance, in the very way we consume natural resources—can satisfy all these needs. And it can do so while creating the jobs and growth that will make our economy strong again; and get wages growing again.

Ending our reliance on foreign oil and dirty fossil fuels is a good place to start. And building the infrastructure to produce, transmit, and store clean energy would help get us there.

But sustainability also means making our cars, buildings, and homes more energy efficient.

Sustainability means making our governments more efficient by better sharing information, encouraging innovation, and cutting programs that don’t work.

Sustainability means fixing our current infrastructure, from roads and bridges to schools and broadband.

Sustainability means building an American security force better suited to counter 21st century threats.

Sustainability means providing education that will keep America competitive for generations to come.

And sustainability means modernizing health care delivery and extending insurance coverage to keep Americans healthier and to dramatically cut down the costs of care.

If the U.S. wants to break through the economic slump, a comprehensive sustainability policy is the best way forward.

Given the congressional gridlock I described earlier, the executive branch will have to lead in meeting these sustainability goals in the short term. Both the administration’s words and deeds thus far prove they’re serious about doing all they can on the executive side, especially when it comes to energy. Aside from the $90 billion in energy provisions in the Recovery Act, the Obama administration has used its executive authority to set strong efficiency rules for a broad range of appliances. This will save the equivalent of two years’ worth of U.S. coal emissions over the next three decades. It also set strict new auto fuel efficiency and tailpipe emission standards. And for the first time ever, it initiated efficiency standards for heavy-duty trucks.

Looking ahead, regulating greenhouse gas emissions through the Clean Air Act legislation offers one of the best opportunities for the Obama administration to show that it’s serious about retooling the economy and moving the country forward. The U.S. Environmental Protection Agency enforces health and environment laws passed by Congress, and its efforts to implement new regulations under the Clean Air Act will be critical to cutting carbon emissions in 2011 and 2012. That’s because last year, the EPA found CO2 and other greenhouse gas to be threats to public health and the environment as defined by the federal statute, obligating the agency to regulate and reduce CO2 emissions from big polluters—a process that would have been unthinkable under the Bush administration.

Under the rules the EPA released this spring, the agency will begin regulating these pollutants from power plants and large industrial facilities starting next year. Following through and enforcing these rules will set off a chain reaction as big polluters make wholesale changes to their investment profiles to meet the new anti-pollution standards. Power plants and industrial facilities will have new and better reasons to install more efficient equipment, invest in clean energy infrastructure, and move toward cleaner, more modern operations altogether.

Without a price on carbon, however, and with ever-tightening federal budgets, we have to find more creative, cost-effective ways to invest in our sustainable future. That means that the government should encourage private capital to flow into clean energy, infrastructure, and efficiency projects without delay. To this end, the Center for American Progress has laid out specific plans on the energy side for setting up a Clean Energy Deployment Administration, or Green Bank. This bank would provide financing to open credit markets, mobilize private capital, and motivate businesses to invest again. This is a model that has worked well in Germany. Your KfW Banking Group is owned by the government, but is operated as a public-private corporation where public funds are used to leverage much larger private contributions to great success. President Obama floated a similar idea for a National Infrastructure Bank, which would get billions of dollars in federal and state funds out the door to priority infrastructure projects on a competitive basis.

But just as our nations must learn from each other, we must also work together. A successful sustainability strategy will also require a careful international approach.

While recent global meetings have looked bleak in some respects, they have been fruitful in others. A global climate treaty eluded negotiators in Copenhagen, but they did emerge with a broad global consensus on future investment. And the week after climate legislation collapsed in the U.S. Senate, our climate negotiators announced that the U.S. remains committed to our Copenhagen Accord targets of reducing emissions to 17 percent below 2005 levels by 2020. Even without comprehensive legislation backing up our commitments, nationally legislated measures to deploy clean technology and strong action from the states can enable us to meet or exceed this target. While I know this is much less than the minimum cuts we will see in Europe by 2020, the actual amount of cuts will be as great given the years of neglect.

There is also much room for specific collaboration between the U.S. and Germany in the international arena. For one, the U.N. process can still yield solid results. Reversing deforestation in particular is an area of great promise. We were very close to agreeing on key elements of reducing emissions from deforestation and degradation, or REDD, in Copenhagen, and it is still possible to get a final REDD agreement in Cancun. Many in the media might characterize this as only going for a minor “side agreement” and giving up on a full and final treaty this year. I disagree: an agreement on forestry would be far from minor. Emissions from deforestation are equal to the sum of worldwide transportation emissions. Just as we can’t solve the climate crisis without attending to transportation, we certainly cannot solve it without attending to forests.

Trade is another area where cooperation will be paramount. Earlier this month, the U.S. announced an investigation into China’s green technology industry in response to a United Steelworkers trade complaint. The complaint alleged numerous violations of international trade rules arising from China’s myriad forms of support for its domestic clean energy industry. The U.S. and the European Union are already engaged in formal WTO proceedings with China on the export of clean energy raw materials.

Utilizing our trade policies to investigate and counter unfair practices by our trading partners represents the legitimate use of an important policy tool. But the current controversy over China’s clean energy subsidies highlights two significant issues. First, it calls attention to the need for a comprehensive multilateral trade agreement on environmental goods and services between the United States, Germany, the EU, and China. In a similar vein we have suggested forming a joint EU-U.S. workshop to help reconcile our views and options on carbon-related border adjustment taxes in a paper I authored for the Boell Foundation last year. Opening up broader negotiations with China could ensure greater trade transparency and less favoritism toward domestic industries much faster than the current WTO talks on environmental goods and services.

Second, the trade investigation underscores the United States’ failure to sufficiently support our own domestic clean energy industry. Trade petitions and remedies are blunt and unwieldy policy tools that do nothing to address the underlying issue at hand—the U.S. can’t compete with China and Germany and other clean energy leaders unless it makes an assertive effort to build a more sustainable economy at home and abroad. Even if the Steelworkers’ complaint is fair, the trade complaint alone won’t create jobs in the United States. Only comprehensive policies that encourage investment in clean infrastructure and energy, attract domestic manufacturing, and promote efficiency and sustainability at every level of the economy will enable us to compete globally.

I believe that President Obama can be successful in this effort, and that progressives can be similarly successful in the U.S., in Europe, and beyond. The global economic recession makes this challenge much more difficult, but it has also brought the deep cracks in the old economic order to light. By forcing both our countries to find new and better ways to grow, the recession created an unprecedented opportunity to reshape and revitalize our two economies. With so much in front of us to be done, with so many shared challenges left to face, history calls on us to cooperate with our peers in government and our global partners to advance the progressive ideas in our ever-changing world.

I look forward to your questions. Thank you.

John Podesta is the President and CEO of the Center for American Progress.

 

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