But the New Covenant never got off the ground. As Adam Curtis uncovers in a documentary series he did for the BBC entitled The Trap, just a few weeks before Bill Clinton was to take the oath of office, he was paid a little visit by two notorious Royalists, the CEO of Goldman Sachs at the time, Robert Rubin, who would later become Bill Clinton’s treasury secretary, and Alan Greenspan, the chairman of the Federal Reserve. Rubin and Greenspan sat the young president down and explained to him that the Royalists were in charge.
Twenty years had passed since the Powell Memo was first circulated around corporate America. A Democrat just elected to the presidency made no difference to the shadow government of lobbyists, corporate-funded think tanks, and political fund-raisers. Clinton chose political expediency. He chose to carry the Royalist agenda forward.
In his First Inaugural in 1993, Clinton pledged, just as the Royalists wanted him to, to “cut our massive debt.”
Later in his presidency in 1996, sounding like Ronald Reagan, Clinton would declare that the “era of big government is over.”71 It was as though the Royalists had finally made the New Deal say “uncle.”
And then Clinton shot Santa when he “reformed” welfare. Buying into Reagan’s completely fraudulent myths of “welfare queens,” Clinton signed into law the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. The law undid LBJ’s Great Society legislation, which had succeeded in cutting poverty rates in America from 22 percent in 1963 down to 12.6 percent in 1970.
For the first time since the sixties, families in poverty were not guaranteed a lifeline. They eventually had to prove they were working in order to qualify for assistance. This sounded like a good idea in theory, especially during boom times such as the nineties, when there were lots of jobs available. But during recessions, when three or four people are looking for every one job opening, then a work requirement for welfare does a lot of harm to already struggling families.
The stats have borne this out. In the sixteen years after welfare reform, even more people have been kicked off benefits, yet poverty has increased. Before reform, 70 percent of impoverished families had access to a lifeline. But after reform, by 2009, only 30 percent did.72
This attack on the Great Society was the first of a long series of attacks on the social safety net.
But Clinton’s greatest betrayal of the middle class came when he didn’t listen to Ross Perot.
A Giant Sucking Sound
The year Reagan was sworn in, we were the richest nation in the world, and other than a few wobbles during the two world wars, our national debt had been relatively steady in inflation-adjusted dollars since the administration of George Washington.
We were the world’s largest creditor—more countries owed us money than any other nation on earth. Today, we are the world’s largest debtor nation, and our national debt nearly outweighs our annual GDP.
And here’s another startling figure: The year Reagan was sworn into office, 1981, the United States was the largest importer of raw materials in the world and the world’s largest exporter of finished, manufactured goods. We brought in ores and shipped out everything from TVs and computers to cars and clothing. Today, things are totally reversed: We are now the world’s mining pit, the largest exporter of raw materials, and the world’s largest importer of finished, manufactured goods.
This has resulted in an enormous trade imbalance, one that has grown from a modest $15 billion deficit in 1981 to an enormous $539 billion deficit by 2012.
From 1791, when our nation’s first treasury secretary, Alexander Hamilton, created an eleven-point plan for American manufacturers, all the way until just the last few decades, the United States protected its manufacturing base with high tariffs on imports and government support for domestic industries.
This “protectionist” approach to trade transformed the United States into the world’s largest exporter of manufactured goods, which built and sustained an enormous middle class of Americans working in factories collecting high wages.
Then the forces of globalization crept in, extolling the virtues of a world economy free from national boundaries and protections for domestic manufacturing.
With the Reagan Revolution in the 1980s, Alexander Hamilton’s eleven-point plan, yet another pillar on which the middle class was built, was scrapped. In 1986, Reagan lowered tariffs. He also secured a free-trade deal with Canada in 1988. He vetoed protectionist trade bills throughout his presidency. And he doubled America’s spending in the global economy.
But Clinton really did a number on working people.
In the 1992 presidential debate, third-party candidate Ross Perot famously warned about a “giant sucking sound” of American jobs going south of the border to low-wage nations once trade protections were dropped.
Perot was right, but no one in our government listened to him.
Tariffs were ditched, and then Bill Clinton moved in to the White House in the 1990s. He continued Reagan’s trade policies and committed the United States to so-called free-trade agreements such as GATT, NAFTA, and the WTO, thus removing all the protections that had kept our domestic manufacturing industries safe from foreign corporate predators for two centuries.
In the 1960s, one-in-three Americans worked in manufacturing, producing things of lasting wealth. Today, after jumping headfirst into one free-trade agreement after another, only one in ten Americans works in manufacturing.
Over the last decade, fifty thousand manufacturing plants in the United States have closed down and 5 million manufacturing jobs have been lost. They didn’t disappear, they just moved away to low-wage factories, such as Foxconn, in foreign nations.
I saw the damage firsthand when I was returning home from a weekend trip to New York City on the Amtrak regional train that runs about hourly from Boston to Washington, DC. I was sitting in business class, looking out the window and talking on the phone with my old friend Earl Katz, an activist and documentary-film producer.
A few months earlier, while in Germany, I’d taken a long train ride from Frankfurt to Kulmbach, involving three changes of trains during the course of the four-hour trip. The German trains were new, gleaming, the interiors done in twenty-first-century plastic-and-teak paneling, the carpets quiet and elegant, the power seats highly adjustable with state-of-the-art audio. Even the bathrooms were elegant. And the train was traveling at well over one hundred miles an hour, and perfectly smooth.
The Amtrak train, on the other hand—even with the most expensive seat in the train—was old and decrepit. The bathroom was ancient in its technology, the tracks so rough that it was hard to walk from car to car without being pitched into some poor, unsuspecting person’s lap, the carpet and seats soiled, the doors between cars loud and clunky. And for much of the trip, the train was going between fifty and seventy miles an hour, and bumping, jerking, and screeching all over ancient and poorly maintained tracks.
But the most shocking difference was what I saw out the windows.
On my trip across Germany, I’d seen vibrant factories, towns where about a third of all the rooftops were covered with solar panels (Germany has gone from no solar power production to the point where home rooftop panels produce more power than ten nuclear reactors in less than a decade), gleaming modern office buildings (built to strict energy-saving standards), and everywhere the bustle of prosperity.