What Price Stimulus? and the Politics of Strange Bedfellows

Editor's note: For those who read both our content and comments, you know of Randy as intelligent, curious and opinionated without being a hothead - exactly what the TPV community is. So when Randy offered a guest post, I didn't have to think twice to take him up on the offer.

With the Republican takeover of the House in 2010, and the Senate in 2014, many liberals and Democrats have predicted doom for any policies needed to promote an economic revival and recovery during President Obama’s administration. However, Obama, who has said he is motivated less by ideology and more by results and what works, is forging ahead with plans on various fronts – some of which, ironically, seem to be garnering more support from Republicans than Democrats.

Many liberals and Democrats fear the Asia (Trans Pacific Partnership or TPP) and Europe (Transatlantic Trade and Investment Partnership or TTIP) trade deals Obama is negotiating, arguing that, just like the North American Free Trade Agreement (NAFTA), they would undercut the interests of American workers and put them at a competitive disadvantage. Their argument envisions a NAFTA writ large: trade barriers with low-wage nations – with few protections for labor, the environment, and even U.S. national sovereignty (!) – would be lowered, thereby encouraging American jobs to be exported to cheap labor areas with poor labor and environmental practices.

But what if this were not the case? At the European Summit last year, a top-ranking Euro official expressed concerns that a trade pact with the U.S. would lead to a loss of European jobs, given the U.S. right-wing's preference for anti-union "Right to Work" laws and weakened environmental regulations. The man’s comment sounded like Ross Perot’s 1992 warning of that "giant sucking sound" a la NAFTA, but Obama assured him he had no intention of easing American environmental or worker protections or stealing European jobs.

But would a trade deal, even if it were conditioned on firm support for American workers and jobs, lead to WTO-style protests from the Left? Some liberals worry that some Republicans support granting President Obama fast-track authority to negotiate a trade deal, and see this as evidence that Obama is preparing to betray American workers and sell-out to Big Business and multinational corporations. 

Obama has countered that firms simply seeking cheap labor have already left America, and that the current situation, with protectionist policies in China and other Asian nations, disadvantages American firms, and that he plans to level the playing field. 

And could it be that Republicans support these deals simply because their backers seek expanded opportunities in developing markets? And might these corporations and investors, and Obama, have considered something that we have not? 

Consider that China is not included in the TPP. Recently China’s stratospheric growth rate has been slowing down (and so has foreign investment), and Chinese leadership – hoping to address rising debt levels and some issues within its finance system, and pivot from an investment- and export-based economy to one more aligned with domestic consumer spending (which might include even more-protectionist policies) – has recently announced that it will pursue policies that will sacrifice short-term growth in favor of more sustainable long-term stability. 

Also, while the TPP does not include China, it does include its regional trading partners, and raising environmental and labor standards for them could also force China to raise theirs as a price of doing business.

Could it be that President Obama and Big Business have anticipated this prospect, and that Obama is deftly tailoring a trade package that offers increased trade opportunities with pro-American developing nations (carrot), but with the caveat (stick) of a regulatory and enforcement regime that protects workers, human rights and the environment, in order to win the crucial support of Republicans and multi-national firms who realize that declining growth rates in the world’s second-largest economy might no longer serve as a cash cow? 

Could a trade deal that so far has seen more support from Republicans and corporations than labor unions and presumably pro-labor Democrats serve as a powerful international engine for worker empowerment, stronger environmental and human rights protections, and the reshoring of American jobs? Has Obama flipped the script and re-framed the narrative? Is this some of that fabled ten-dimensional chess he’s sometimes accused of, or credited with, playing?

Some fear that Obama is being “rolled” by cut-throat negotiators from Big Business and overseas interests, but in fairness Obama has proven to be a shrewd and tough negotiator himself. Consider that he: 

  • Engineered the rescue of General Motors and Chrysler;
  • Got automakers to voluntarily boost fuel standards for cars and trucks; 
  • Got hospitals, healthcare providers, and private insurers to agree to accept reduced levels of reimbursement and payment as part of healthcare reform;
  • Broke Republican opposition to extensions in unemployment insurance and payroll tax cuts, clean energy grants, and $313 billion in new spending, as well as START II, emergency assistance for 9-11 first responders, and the repeal of Don’t Ask, Don’t Tell, in exchange for a two-year extension of the Bush tax cuts for upper-bracket income – in effect, 
  • an $858 billion stimulus package; 
  • Secured a multi-billion dollar damage pool from British Petroleum after the disastrous Gulf oil spill, avoiding the decades-long delay and corrupt low-ball award outcome that followed the Exxon Valdez oil spill;  
  • Disarmed Syria of chemical weapons without firing a shot;
  • Convinced an energy-dependent Europe to join in imposing economic sanctions on Russia in the aftermath of its incursion into the Ukraine;
  • Reached a historic climate change agreement with China to reduce its greenhouse gas emissions – a first for China – and provide 20 percent of its energy from renewable sources by 2030;
  • Got an understanding with India on greenhouse gas emissions; 
  • Assembled a 60-nation coalition of allies – and adversaries – to combat ISIS; 
  • Eased travel restrictions with Cuba and started talks on normalizing relations – marking the end of the Cold War – which promise to relieve isolation for Cuban citizens and undercut attempts by Russia and Venezuela to forge wider hemispheric links, and 
  • Initiated negotiations with the P5+1 world powers and Iran on a framework for a landmark deal to limit Iran's nuclear program to peaceful uses.

NAFTA was flawed in not adequately addressing concerns about labor rights or environmental protection. However, the Europe and Asia deals present new opportunities and challenges, and we should not judge them based on the history of NAFTA and its perhaps unintended consequences. 

And we should not second-guess the motivations of the most pro-worker President in generations based on a 20-year old agreement crafted during the Bush and Reagan administrations and only finalized under President Clinton.

In addition, China is hoping to craft a rival Common Market-style trade deal within Asia, and if we do not forge greater trade and economic ties with Europe and Asia, China will step in and do so, and they most likely would not support the kinds of environmental or labor protections that we (sometimes) do, which would likely accelerate a “race to the bottom” with regard to worker interests everywhere. 

Another priority for liberals and Democrats is a massive funding project that would create millions of jobs repairing or modernizing infrastructure. But with a Republican Congressional majority, Democrats and liberals who have focused their hopes on a conventional Congressional appropriation for funding feel the opportunity already has been lost, given Republican reluctance to broach the subject.

But, again, there may be an opportunity in out-of-box thinking.

Both Obama and Senate Majority Leader Mitch McConnell have expressed interest in reforming the tax code. Obama has suggested such revenue be used to fund an infrastructure bank.  However, some on the Left fear Obama's proposal to consider a tax break to corporations or to expatriated capital -- some trillions of dollars in overseas accounts – amounts to a "cave" to moneyed interests seeking a break on taxes.

Would the Left support a deal that allows expatriated money from Google, Apple, Caterpillar, or General Electric to return to the U.S. and be taxed at a lower rate than normal, or that lowers nominal rates but closes corporate loopholes and frees up monies to be used to fund infrastructure projects? Would the Left be outraged and call it a "cave" and decry Obama as a “corporatist”?

Some Democrats and liberals might reject outright a proposal that lowers nominal tax rates, but President Obama appears be working on a number of proposals intended to promote massive infrastructure development, an economic and industrial revival, job creation and free community college in the US – coupled with opportunities for expanded overseas trade that wean multi-national firms from reliance on cheap labor and China’s now-shrinking expansionist window and “globalize” worker and human rights and environmental protections – by, in the words of the Godfather, making Republicans and the One Percent “an offer they can’t refuse.” 

Will Obama be able to count on the Left, or will they remain stuck in ideology? 

And can he get Republicans to carry the ball for some of his greatest economic achievements in his Fourth Quarter?

Truly, politics can sometimes make for strange bedfellows.

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