The Many Crises of Clinton

Against the Current, No. 54, January/February 1995

A.J. Julius and Harry Brighouse

TWO PARADOXES CONCERN major-media observers of the Clinton disaster. They wonder, first, why Democratic control of the White House and Congress could not ensure legislative success — why, despite congressional majorities, executive prerogative, and the “mandate” of 1992, this administration came up so short so often.

Their second cause for perplexity is given by November’s returns: Why did a party, propelled to office by popular demands for fairness and change, pay in buckets of votes for the trouncing of those hopes, with the glory redounding to the Republican “obstructionists” seemingly at fault in the collapse of those hopes?

Common sense and an even casual familiarity with the events of 1992-4 suggest easy resolutions of these paradoxes — which, after all, trouble mainly those who get paid for their eloquent confusion. Clinton’s ambitions were diminished, then derailed, by the naked rule of cash; the resulting impasse fanned popular disgust with the administration rather than prompting a rally to its defense.

For most non-experts, this simple fact is explained by the patent insincerity of the original Clinton promise to “put people first.” In this article we will apply such common sense to the logic of late-Democratic misrule. To briefly summarize our analysis:

* The Clinton candidacy’s origins lay in a corporate coalition driven by diverse motives to a rejection of Reaganism. His `92 campaign was driven by those firms’ well-funded attempt at persuading a skeptical electorate that measures enhancing competitiveness and productivity were the answer to public pleas for jobs and health.

* The fragility of this alliance of capitalist visionaries and hapless voters showed up in the shallowness of the Clinton plurality and in the party’s failure to recapture significant working-class support from mass abstention and Perot.

* The inadequacy of Clinton’s original proposals to redress economic grievances — and the absence of concerted pressure for such redress, owing to the drastic decline of labor and popular organizations, their final marginalization by the party regulars, and the ill-advised quietism of the officials who run them — are further reasons to doubt that his victory ever offered the possibility of a Democratic Party reborn as the agent of reform.

* But the weakness of the popular component in Clintonism can’t by itself account for the string of defeats suffered by this presidency. If big changes were never on his mind, what explains the quashing of so many small ones? In particular, what checked the reform impulses signalled early on by Clinton’s backers in business?

We find our answer in the internal politics of a crisis-ridden U.S. business class, wracked by division, bent mostly on maintaining the rollback of regulation and redistribution launched fifteen years before, and detecting in Clinton’s weakness an unprecedented opportunity to take direct (if largely negative) control of government decision-making.

Once in office, Clinton’s proposals for restoring the competitiveness of U.S. manufacturers, rationalizing the provision of health care, and other profitability-enhancing reforms met with indifference or hostility from crucial sections of business.

Hastening the retreat was the commitment to closing the federal deficit, sworn to by Clinton on his accession to power and duly enforced by the financial interests claiming pride of place at his side. Such a distribution of power in the business class, mapped onto the balance of votes in Congress, ruled out reforms involving significant new government costs or inviting the opposition of trade associations and business lobbies.

The result was legislative dysfunction. The defeat of health care reform offered only the most spectacular example of a `general interest’ falling before the determined opposition of particularist blocs of firms. The disaster took on a life of its own as each defeat, by reducing the standing of Clinton’s presidency, reduced the incentive for individual Democratic legislators to follow its lead in the next confrontation.

Bereft of an actionable agenda beyond austerity and free trade, the administration emerging from these embarrassments gave ever-more-frequent play to the “New Democrat” refrains it hoped could hold the right at bay: fearless attacks on the undeserving poor, genuflection before the earthly family, a crime bill trading young Black lives for white suburban peace of mind.

But who imagined that Clinton could beat Gingrich at this game? Not the voters, who in November handed the defence of civilization over to Newt.

1992 Revisited

The Democrats turned right after 1972 and throughout the `80s. Party leaders chose less to oppose Reagan in the name of economic fairness or working-class living standards than to offer variants on his agenda. Their hopes lay in piecing together a coalition of capitals disgruntled by Republican policy, while recasting their own electoral appeal to fit a perceived white working-class rejection of racial equality and taxes. The party’s conquest by centrist business groups, begun in the mid-’70s employers’ offensive, was completed by the Democratic Leadership Council coup of the mid-’80s.

The “economy, stupid” campaign of 1992 might seem to mark a departure from this course. The lingering effects of severe cyclical downturn, a long-term decline in real wages, the erosion of job benefits and of the social wage, all lent urgency to “putting people first” — a campaign projecting job creation, public investment, universal health care, and progressive tax reform. To be sure, such pledges were invariably joined by “New Democrat” appeals to racism and anti-big-government sentiment.

Liberals’ high hopes for the administration turned largely on the popular vote rounded up by Clinton, and the anticipation that it would lead him to implement that reform agenda whose promise apparently won him the election.

Did Clinton’s 43% plurality represent the long-sought return of working-class affections to a Democratic presidential ticket? 1992 saw no significant rise in turnout by working-class voters. As for those who did vote, Ruy Teixeira has shown that among the crucial demographic categories corresponding to the Reagan-Democratic white working-class Clinton did no better, and in some cases much worse, than Democratic presidential candidates of the 1980s. Great numbers, especially among those hit hardest and longest by the decline in real wages, voted for Perot instead.

Especially from the perspective of 1994 and the defection of Clinton voters witnessed now, it is hard to see 1992 as bucking the long trend of the Democratic Party’s disarticulation from a wistfully-recalled working-class base. Exit polls this time showed a sharp erosion of working-class Democratic voting, accounting for much of the 1994 loss.

Democratic support among voters making less than $15,000 was down 7% from 1992; the decline in the Democratic vote among people making $15-30,000 was a full five points; and union households showed a similar drop. Among all lower-income brackets, 1994 continues a downward trend in Democratic voting that amounts to a drastic ten-point fall from 1982.

A record 20% identified themselves as :white born-again Christians,” casting 76% of their votes for Republicans, suggesting that such cultural conservatives made up a much higher percentage of the working class vote in 1994 than during the 1980s. Clinton’s failure to deliver on economic problems kept many other low-paid voters at home.

In any event, what about organized forces in the Democratic fold? The unions, the Black leadership, urban organizations, women’s organizations — who might have lent force to an interpretation of 1992 as mandating expansionary fiscal and monetary policy, redistributive taxation, universalized insurance, urban reconstruction, progress on race and gender equality, an end to state-sanctioned union rollback, trade policy that doesn’t pit U.S. against Third World workers, and so on — weren’t and won’t be levering any of this. Deliberately excluded from power in the Democratic Party, and neutralized by the decisions of their officialdom to back Clinton on the less malign of his ventures and wince silently through those most openly perverse, these forces don’t count in the policy-making equation.

Clinton’s Capitals

More than any illusory popular “base,” more certainly than residual sentimental attachments to popular organizations, Clinton’s friendships in certain corners of the business world set the direction for his campaign and provided its core program — a set of proposals for a new state role in restoring the profitability and international competitiveness of U.S. firms.

As Thomas Ferguson has shown in a careful reading of 1992 campaign finance records, this Clinton coalition comprised three key groupings of capitals: internationally-oriented investment banks, who led his fundraising and whose personnel went on to occupy key posts in the new administration; various state-dependent firms with large stakes in or direct ties to government policy — aircraft, energy, transportation, utilities; and a number of capital-intensive, high-tech exporters with interests in pro-competitiveness industrial policy and managed-trade curbs on foreign competition.

Conspicuously absent from the coalition were the traditionally Democratic real estate interests that in the `70s and `80s had backed what remained of DP redistributionism — urban aid, transit subsidies, and related points of “fairness” — and that had since been driven to abandon this politics by the real estate depression of the late eighties.

In Clintonomics the coalition’s diverse motives for rejecting Reaganism came together in a program of aggressive pursuit of trade deals reducing foreign competition; productivity-enhancing investment schemes; and reforms of welfare, training, and health care promising to cut and socialize business costs while raising the supply of skilled labor.

Politically, these desires uneasily coexisted with two additional prior commitments: promotion of various free-trade deals, and reduction of the federal deficit. But in somebody’s mind they once formed an intelligible whole: Reduce the deficit, freeing up funds for investment. Promote, by various new incentives, the direction of that investment into expanded productivity. Ensure that heightened productivity with state-promoted training and R&D. And then compete in the markets newly globalized, but under the shelter of bilateral agreements holding off especially heavy foreign competition.

The Limits

If we’re right about the feebleness of Clinton’s mandate and his campaign’s deep origins in the Reagan-era discontent of a group of business firms, it hardly makes sense to explain his subsequent career as the hazing of Rhodes-scholar social democracy by some monolithic Congressional reaction. Rather, we must look to the complicated internal politics of the business class, as articulated through the pre-existing commitments of the Clinton circle as much as the creeping conservatism of the 103rd Congress.

Here three especially exacting constraints on Clintonism stand out.

(1) Clinton’s has proved to be a bond-market presidency. Not the return to high-wage full employment, not reborn U.S. competitiveness, but deficit reduction has defined this administration. The commitment to fiscal austerity proclaimed by both parties for over a decade is at last receiving a limited enforcement in Washington.

Why? Why should the financial interests be heard above other voices? Part of the answer is the direct influence of financial interests on administration policy. Finance, after all, can play through either party with equally good results, and enjoys for this reason a credible exit threat against Democratic transgression of the terms of its goodwill. Pro-expansion capitalist interests are stuck with Democrats as the only available vehicle for their concerns.

Apart from desperation to please the bond market politically, it’s likely that the Clintonians believe their own argument for austerity, the wager that reducing the deficit will boost economic growth. The view predicts that deficit reduction can stimulate investment, resulting in growth large enough to counter the contractionary effect of the deficit reduction itself. This seemed borne out by a steep drop in long-term interest rates in the administration’s first months and growth shooting to 7% in the last quarter of 1993.

One consequence of deficit-reduction-worship, however, was a severe contraction of the room for maneuver in enacting other Clinton priorities, as the freeze on discretionary spending set in. A second was the danger of being outdone in hard-heartedness by Congressional opponents, once hard-heartedness had become the respectable defining frame of national politics.

(2) The slash-and-burn business politics of the 1970s and 1980s rules on in a Democratic Washington. What’s going on in the business class that’s been argued to be so important to the content and fate of late-Democratic power? Mostly more of what has been going on there for twenty years — a drive to slash unit costs, prompted by low profitability and heightened competition.

What once appeared interesting in Clinton was the possibility he suggested that the minimalist political program arising from the employers’ offensive<197>roll back unions, regulation and taxes — might be transcended by a group of firms interested in more sophisticated responses to U.S. decline such as the industrial policy that refused to call itself one, or the socialization of the health-care burden.

Yet moves to do more than trash the public power encounter a number of insuperable barriers. First there are the prohibitively high costs of organizing divergent business interests into a common front, which we discuss below for the case of health care. There is then the fact, discussed in this magazine by Robert Brenner (“The Meaning of Clinton’s Defeats,” ATC 46), that the decline of domestic manufacturing, and higher profitability of finance, services, and overseas manufacturing — by making the latter sectors far more attractive sites for investment — has diluted capital’s own concern over the infrastructural and macroeconomic conditions of U.S. industrial decline.

Finally there is the appearance that, in many sectors, the sweat-restructuring solution to the “competitiveness gap” has achieved its intended result, with no need for help from Robert Reich. Since 1985, U.S. unit labor costs, relative to those of the twelve leading industrial countries, have fallen by 62%. The drop is due, of course, more to the onslaught on wages than some burst in productivity. But U.S. output-per-hour did gain significantly on Japan and Germany, 35.8% as against 33% and 17% respectively. (We take this figure from Doug Henwood’s superb newsletter Left Business Observer.)

Given these bars to a post-slash-and-burn business politics, and the factors already discussed — weak working-class electoral support, crippling confusion about the requirements of its reconstruction, the sclerosis of labor and other institutional backers of reform, the commitment to deficit reduction — Clinton has depended, and seen no choice other than to depend, on the good will, not of “capital” as a whole but of each aggressive business concern pushing an idea of what he should do.

(3) The balance of votes in Congress and the vagaries of Congressional procedure deepened the administration’s vulnerability to capitalist particularism. Given the slim Democratic margin in the Senate, the power of the filibuster, the strategic significance of committee leaderships, and the drastic decline in party discipline, all it has taken to stop a reform initiative is a handful of “mainstream” Democratic legislators, easily rounded up by one or another lobby.

The incentive for the party’s right flank to save a weak president of its own party, especially before midterm elections, was dwarfed by the imperative to do right by business. And this could only get worse with each successive setback. The more poorly a particular bill, or the administration’s overall record, was faring, the less was the cost to individual lawmakers of a loss for the Democratic leadership. The rightward drift of the 103rd Congress owed its lawlike appearance to this self-reinforcing effect.

As capitalist interests found direct control of the legislative process easier to come by than at any time in recent memory, campaign-finance figures for the first half of 1994 showed an extraordinary shift in business dollars to Democratic incumbents. Before the prospect of Republican victory sent much of the money back in the opposite direction, business contributions to Democrats through June of 1994 were twice the figures for a comparable period in 1992, while the Republicans got less than half their `92 loot.

The Democratic intake was considerably higher than in congressional elections of the 1980s. Leading the trend were major Republican givers to whom large concessions had been made in the regulatory battles of the 103rd Congress.

The Disaster

Those aspects of the “putting people first” program requiring immediate fiscal expansion and not enjoying business backing were dropped or scuttled almost from the start: renounced with the “revision” of deficit projections, or excluded from the FY94 budget proposals, or forced out by the Congressional right bloc against only feeble resistance from the White House.

Thus a sixty billion dollar budget stimulus shrank to sixteen and then was offed altogether. Schemes for investing in roads and bridges and schools and smart workers soon dropped from sight. With a freeze on discretionary spending confining it to 1993 levels and pay-as-you-go requirements on entitlement increases and tax cuts, things could only get colder.

With the important child-centric exceptions of Head Start, the WIC feeding program, school aid and the family tax credit, social spending suffered considerably under the new arrangement, with cuts in elderly housing and low-income fuel providing special outrage. (And this despite the Congressional Black Caucus’s aggressive push for saving social spending). There has been no urban policy to speak of, unless tax breaks for corporations to set up minimum-wage jobs in selected disaster zones now go by that name.

Even before the arrival of the newly elected Republican majorities, debate has succumbed to a frenzied escalation of austerity talk, with each faction talking meaner than the last. Clinton’s freeze is now the liberal position, with a balanced-budget amendment and slashes throughout Medicaid and the federal workforce gaining increasing clout at the self-described “center.”

Inadequate support from the mainline business associations, together with the austere turn of budget negotiations, has meant little movement on most of the industrial policies sought by Clintonians. As mentioned, the public investment program died early in 1993. An investment tax credit dried up that summer when important business lobbies denied that having one would matter to their investment decisions. Surviving versions of a training initiative and national civilian R&D offer only the palest images of their former selves.

The failure of the “managed-trade” initiatives to reverse the U.S. trade deficit, once ranked high among the priorities of Clinton’s coalition, is similarly a huge (if seldom remarked) embarrassment for the administration. Negotiations seeking unilateral agreements on numerical targets for Japanese imports of U.S. goods resulted in a meaningless “framework” agreement. Meanwhile the administration has largely dropped its threat to punish Japanese intransigence, reverting to the Reagan- Bush approach: calls for a revaluation of the yen and a deregulation of the Japanese economy.

“Free trade,” by contrast, accounts for the bulk of the surviving Clinton project. Clinton (following in this regard the Bush example) decoupled China’s trade status from its human-rights record, as a revived Open Door lobby closed the door on Democratic good intentions. Consolidating a North American trade bloc and liberalizing the flow of investment through it proved the only collective project successfully taken on by business in recent years, and is for this reason one of very few legislative successes marked by this administration. (That the expedited passage of GATT was in question after the election shows just how deep the late `94 political crisis of Clinton had become.)

Case Study: Health Care Fiasco

The defeat of health care “reform” provides the clearest Clinton-era case of the internal politics of the business class playing out in a way that frustrates not only the population’s demands for security, but even the interest of a majority of firms in a profitability-enhancing reform.

That employers with health plans should be interested in a reform reducing these costs and extending them to their domestic competitors is obvious. The drastic inflation in health care costs (greater than that in any other country) punishes those companies with a huge and growing competitive disadvantage with respect to overseas competitors and domestic non-providers.

In fact, a full socialization of insurance would serve this interest best, by capturing administrative savings and removing these costs from competition altogether. That the large employers never pursued this plan might be explained by their happy American ignorance of this kind of welfare-state calculation. Variously, they perhaps thought to preserve, through employment-based coverage, “flexibility” — the freedom to cut benefits in bringing down hourly compensation, as could not be done with the payroll tax funding national insurance.

In any event, what mattered most was the administration’s announced intention, early on, to “reform” the system in a fashion preserving the Gang of Five of major insurers. The latter looked forward to a Clinton plan mandating universal coverage — handing them millions of new customers while reorganizing the industry to consolidate their control, locking out, through the regional pooling, their smaller competitors. (Indeed the wave of health-care mergers set off by the Congressional debate has not abated, so the second part of this program is going ahead).

The problem was that a commitment to preserving private insurance, together with the concern to reconcile the interests of large employers, subjected the resulting legislation to a daunting triple bind. First, it was impossible to premise both the preservation of private insurance and cost control, since the insurers moved immediately to drive any such measures out of the plan. In turn, without these controls, a full “employer mandate” was unthinkable since no employer would assent to an externally-imposed highly-inflationary cost. Finally, without the full employer mandate, a universalization of coverage (even redefined in tribute to Orwell as 95% coverage) could not be achieved except at huge new costs to a strapped federal government.

Add to these the intransigent opposition of small (nonproviding) employers to any extension of employment-based provision, and the opposition of the small insurers and other health-industry interests to any change in the current arrangement; and the inertia of things as they are appears too great to have been overcome by even a competent band of reformers.

More Debacles

Meanwhile the setbacks continued. September added a second loss for public-land reform, which was blocked by western legislators fronting this time for mining interests as they’d vouched before for ranchers. The loss joined a series of dashed attempts at restoring social regulation of the economy, the Superfund blowup, the failure of Clean Water Act extension, and demise of the BTU energy tax being other environmental examples.

A permanent striker replacement bill, OSHA reform, minimum wage legislation and real labor law reform restoring the right to organize are likewise gone from the picture for reasons of business opposition and Administration indifference. Suffering similarly meager administration support, campaign finance reform died after being held up by House Democratic opposition to setting a limit on PAC donations below $10,000.

The rules for post-reform Democrats say that when they’ve run out of ways to look aggressive on working-class living standards, they should get aggressive about welfare, crime and personal morality. Though Clinton had resorted to symbolic displays as “New Democrat” from his earliest ventures into national politics, in his administration a steady drift to right-wing moralism has tracked the diminishing prospects for substantive change. The reversal on gays in the military, the Guinier affair, the Supreme Court appointments, the crime bill, the readying of welfare reform, and their inane rhetorical accompaniment, augur horrors still to come.

Of course this brand of meanness and cant lands Clinton on firmly Republican terrain, where he is soon bested by their superior mastery of appeals to antisocial chauvinism and the fear of a black planet.

Without expectation of relief from government — and with harm piling up: real wages resisting a return to pre-recession levels, a continued decline in household incomes — the wage-earning electorate find scant reason to vote for this government. Daily talk-radio supplies them with reasons for voting against. Republicans take power, and the Bush-Clinton era in American politics enters its coldest phase to date.


The notion of many progressives that “critical support” for Clinton’s better initiatives could help hold the line ignored, fatally, the lawlike rightward drift of debate. As argued above in the case of health care, holding the line at Clinton’s position was usually impossible; progressives interested in reforms could have served them better by sticking to principles, such as the single-payer version of health care, dropped by most of the labor leadership at enormous cost to health-care reform in any version.

Even the more credible left-Democratic hope that the party’s progressives might yet drum up popular pressure for a redistributionist course — forcing it today on Clinton, or out-organizing the party regulars in some future presidential primary — has likewise fared poorly in two years of Clinton and the midterm election capping his failure. The larger limits to social-democratic politics in 1990s circumstances (suggested here by its failure even to register as an option under Clinton) tell against such a course.

Nothing says that the DP left will act on these insights. Given a long-term commitment to the Democratic Party, such calculations as the AFL-CIO’s decision not to punish NAFTA Democrats in the `94 elections (where its single goal was minimizing Republican power in the next Congress) make undiminished if desperate sense.

For those, however, who draw from the Clinton experience a very different lesson — the urgency of independent politics — the need to organize is immediate. The potential constituency for that message includes a majority of working-class Americans. Why wait any longer before organizing an alternative? The old politics is giving way. We should start the new today.

ATC 54, January-February 1995