What Can Sanders Do as Budget Chair?

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Rob Johnson:

This is Rob Johnson, president of the Institute for New Economic Thinking. yesterday I made a podcast with Paul Jay, on TheAnalysis.News. Paul and I talked about Bernie Sanders becoming the new chair of the Senate Budget Committee, and all kinds of possibilities and policies, both domestic and foreign, as the Biden administration takes power. I hope you enjoy the conversation, here on Inauguration Day.

Paul Jay:

Hi, I’m Paul Jay. Welcome to theAnalysis.news podcast. Please don’t forget there’s a donate button at the top of the webpage.

(Video from Sanders’ site)

(various Republicans speak) “If we lose Georgia, Bernie Sanders is the budget chairman. If we lose a Senate do you know, who becomes the chairman of the Senate Budget Committee. In 2016, Paul Ryan said Republicans should be scared of Democrats controlling the Senate because Bernie Sanders would be the budget chair. A guy named Bernie Sanders. You ever heard of him? Bernie’s budget, Bernie Sanders speaking out on spending priorities, the Senate Budget Committee is really one of the most powerful in Congress because it controls the money.” (from the Rising show) “Sanders has been creating a new stimulus package that could include an emergency universal health care program so that anyone can get medical treatment during a pandemic, whether they currently have insurance or not.”

Paul Jay

Bernie Sanders, who will become the chairman of the Senate Budget Committee on January 12th, tweeted this:

“In the past, Republicans used budget reconciliation to pass massive tax breaks for the rich and large corporations with a simple majority vote.

As the incoming chairman of the Budget Committee. I will fight to use the same process to boldly address the needs of working families.”

So just what can Sanders do as chairman of the Budget Committee? And how will Sanders deal with conservatives in his own party who want to slow down the pace of economic reform? And what would a progressive economic program for the Biden administration look like? Now joining us is Rob Johnson. He’s the president of the Institute for New Economic Thinking – INET – and host of a new podcast, Economics and Beyond.

Previously, Johnson was a managing director at Soros Fund Management, where he managed a global currency bond and equity portfolio, specializing in emerging markets, particularly in Asia. He was a senior economist on the Republican staff of the Senate Budget Committee from 1984 to 1987. That’s the same committee that Sanders is about to become the chair of. He was also chief economist of the U.S. Senate Banking Committee from 1987 to 1989. Thanks for joining us again, Rob.

Rob Johnson

It’s my pleasure.

Paul Jay

So let’s start with just what is this budget committee and how powerful is this job Sanders has as chair of it?

Rob Johnson

Well, there are a lot of dimensions to it. First of all, you have the different components of spending related to the defense budget, housing, education, et cetera, energy, all these things come from different places and our aggregated after appropriations into a budget. But it’s kind of a chicken and egg thing because you formulate a budget, which you might say is the top-down targets for deficit or lack thereof, and then you adapt the spending to that.

You allocate spending across areas. Then you’ve got to come up with what your tax profile is going to look like as well. Is it powerful? Very definitely, because very often what happens is those specialized bills all get caught in conflict, and when you get to the end of the season, what they call the Christmas tree bill, where the budget is embedded and everybody gets to put their ornaments on all their little special things for their home state or home district, and that usually gets pushed through. So the budget chairman in the last act in the creation of the budget has a great deal of leverage. He also holds hearings throughout the year, he or she, depending on who’s the chair.

And those hearings set a tone for what is right and wrong in the eyes of that budget committee and that chairman there on C-SPAN. They’re all quoted in the news. I think that President-elect Biden, in putting Bernie Sanders on as the chair does something which you might call gives a voice to a broader part of the spectrum than has traditionally been the case.

Paul Jay

But that wasn’t up to Biden, was it? He’s just a senior. I guess he’s a Democrat. He was the senior Democrat on the committee. Yes. I mean, Biden doesn’t get to decide the job, right?

Rob Johnson

It’s not decided, but it was encouraged and congratulated. So he affirmed that role. And so he’s giving voice to Bernie Sander’s contribution, not running away from it, or not remaining silent. Sanders, who obviously was quite a vigorous and outspoken opponent of Biden in the primaries, is now sitting at the table in a leadership position being affirmed by the president-elect.

And I think that’s the beginning of a potential what I call a healing gesture, which should encourage people in the progressive wing of the party relative to other types of response. I think that Biden understands that there’s a lot of healing to do right now, both within the party and vis a vis the public more broadly.

Paul Jay

Now, in the progressive wing, there’s a lot of voices, including some of those progressive House members I just interviewed Rashida Tlaib, and they’re talking about, you know, now that Biden’s been elected the fight continues in terms of the progressive-wing versus the more centrist center right-wing of the party. And a lot of focus will be on Sanders. So, for example, let’s take this issue of Medicare for All. There’s some suggestion in this video that we played at the top that Sanders might even try to push through using his committee a kind of Medicare for all during the pandemic, something specific as a pandemic measure. Now, how much can he do as chair without, I mean clearly, he can’t force it through. There’s a lot of conservative Democrats that are not for Medicare for All.

Rob Johnson

You know, I think that he has a difficult challenge in that regard. On the other hand, there is a sense among progressives in the context of the pandemic and other dysfunctions in society that we would be better off, not what you might call acquiescing to practicality, but to forcing votes and bringing out to the surface the people who are opposed because public opinion polls show more than 70 percent of the population is in favor of Medicare for All. It’s not the population that doesn’t want it, and they’re the ultimate voters. It’s vested interests and the struggle that has to do with the relationship between money-raising campaign war chests and the probability of re-election and what you might call the refractory influence of the mainstream media, where pharmaceutical companies in particular and insurance companies as well are very big advertisers. So there’s a sort of shining a light on the controversy that the progressives, I think, both in House and Senate, aspire to.

What’s another dimension, though, is that Sanders is really about bread and butter economic issues. And some of the other progressives are addressing another agenda, which is also important, which is what you might call the breadth and quality of representation across gender and race, and sexual preference. And so they may have different ways of being progressives where Sanders is saying, let’s elevate the material distress and fear of health and so forth to show that we represent people in this democracy, whereas the others are focused on what you might call broadening inclusiveness in the process.

Paul Jay

Let’s go back to the Medicare thing. So as chair of the committee, let’s say he wants to propose some form of Medicare for All as a pandemic, a measure. Now, of course, he’ll be accused of using this as a way to push it further than the pandemic. But I’m sure he’s not going to be shy about hoping for that. But as chair, he can do what he can force to have hearings on this. He can force. It’s not enough just to force a vote.

Rob Johnson

You can raise the attention, put the stage lights on. What would this imply for the American people and invite witnesses. There’ll be some yin and yang. Some people will talk about the ramifications of costs and oppose him. But by raising the issue and putting it on the table he gives it voice. And as I mentioned. It may be the case that if he can generate the popularity when the Christmas tree bill comes along, it could be an amendment that people at that time would fear to oppose. Provided, I would say, if the pandemic’s consequences are quite prolonged and severe.

Paul Jay

Yeah, there’s been a lot of conversation on the left about this force the vote in the House. There were some people suggesting that the progressives in the House should withhold their vote for Nancy Pelosi when she had to be voted in as the speaker of the House and so on. I personally have never been for or against that tactic in the sense I don’t know enough about how the House works. I didn’t like some of the name-calling that was going on, which is what I objected to.

But it seems to me this is in some ways more significant what Sanders can do here because he’s chair of the Budget Committee so he can really steer a conversation on this issue of Medicare, but he can do it on other issues, too. Now, Sanders has talked a lot about cutting the military budget so he could do the same thing. Could he not, like, you know, have hearings, force a vote on some significant cuts to the military budget?

Well, I know your friend and my recent acquaintance, Daniel Ellsberg, has some very interesting ways to achieve savings in the military budget. I watched a presentation the other day in a conversation between former Treasury Secretary Robert Rubin and Joseph Stiglitz. And Rubin said, look at American health care. It costs about 40 to 50 percent more than the other countries and yet its performance is very much at the bottom of the advanced countries, the so-called OECD countries. So there may be opportunity to improve the performance of health care. At the same time as reducing the costs and creating budget savings that could be used for something like a Green New Deal or Medicare for All.

Paul Jay

Now, Bernie doesn’t actually have that great a record when it comes to cutting the military budget. He’s advocated it. But, you know, when he was in Vermont, he kind of supported the idea. I think it was the F-35 was it, would have a certain amount of production in Vermont. It’s a touchy subject for all of these people in Congress, but seems to me to be a critical one. There will be a lot of pressure on him from the progressive wing of the party to really force a real conversation about the Pentagon budget.

Rob Johnson

Yes, I think what you might say after 40 years since the time that Ronald Reagan was elected, there are a lot of fault lines and a lot of stresses that are emerging. Some of the tax cuts for the wealthy, particularly the tax cuts that Donald Trump initiated in 2017, could be rescinded. Changes in the composition of the military budget, reflecting the fact that since the time Reagan came into power, the Cold War has ended. Questions related to the cost of pharmaceuticals in America relative to other places in the world. So there are many places in which to try to readjust things, but you do face the fact that this is not just something that’s up to the voters. The role of money in American politics is very, very enormous with lobbying, campaign contributions, appointments, provision, what laws are proposed, what regulations are enforced. All of these things are influenced very heavily by money and with the very increasing concentration of wealth and income, those who are represented are fewer and fewer. Unless you believe in something that the conservatives used to call trickle-down, which is if you give all the money and all the freedom to the people at the top, they’ll create through investment a structure that raises productivity and makes everybody better off. But after 40 years, people are questioning the validity of that hypothesis because it’s a promise that’s not been fulfilled.

Paul Jay

Yeah, I think the trickle-down turned out to be more like excuse the language pissing down because it wasn’t wealth, something trickled down, but it wasn’t wealth.

Rob Johnson

That’s right. Let me add one other thing. It used to be that taking your money and keeping it offshore was called tax evasion, and it was a crime. But we’ve now lobbied successfully on the part of the wealthy and powerful, so that is now called tax avoidance, not tax evasion, and all of that keeping money offshore, whether it’s companies like Apple and Amazon or whoever, or whether it’s wealthy individuals makes it look as though the tax base is always smaller.

Now, there may be a promise that it will be deferred until such time things come home, but we do not see what you might call the uniform international floor on taxes. And people can thrust their money to the lowest rate area and act as though that’s where their activity takes place. And that starves the American government for budget. We’ve been talking about the spending side, but on the revenue side, those things add up to be what we might call the deficit or the balance of the budget. If we brought more revenue home and taxed more – some talk about a global wealth tax – this could redistribute things and allow us to achieve many of the social structures like health care, like education, like repaired infrastructure, like making a public good, a broad-based Internet structure so that everybody doing remote learning has access to broadband. All of those things would improve the quality of life in the hope for the future for many, many people. So there are a lot of variables in play, all of which, in a practical sense, have a lot of resistance to reform given the structure of money politics.

My understanding is even today, the Supreme Court is about to take on a new case to reaffirm that these so-called super PACs do not have to disclose their donors. They are, quote, money is freedom.

Paul Jay

If Bernie were to propose, for example, a wealth tax or frankly, any of the other reforms that he’s talking about that are serious, including significantly higher taxes on the wealthy, which he’s also talked about. In spite of these warm and fuzzy words that president-elect, almost president, and maybe by the time we run this interview will be. I don’t know. Biden has for Sanders, he’s appointed some people around him that represent some of the most powerful interests of Wall Street.

Two of his top advisers on economics used to work for BlackRock, which is the largest asset manager in the world. He’s got some other people that are former Goldman people. And it seems now listening to the way some of these advisors talk that BlackRock and others on Wall Street are for a big stimulus package.

And I guess partly because the past stimulus packages, a lot of the money is gone to protect assets on the stock market, which has greatly benefit BlackRock and others. I don’t know if you have a handle on what this new Biden plan is going to be. Is it going to be another big chunk of money to prop up the stock market or is significantly more going to be actually direct subsidy into people’s pockets? Because I saw I think his name is Brian Deese. I think he’s the head of the Economic Advisers.

Rob Johnson

National Economic Council.

Paul Jay

Right. And he was on a Sunday morning TV and he was talking very positively about an almost two trillion dollar plan. But again, is the plan really going to go into working families, or is another chunk going to go to prop up stock markets which help BlackRock?

Rob Johnson

Well, that’s to be determined. I don’t know the details yet, but I do think people have recognized, as you alluded to, that the first round protected assets, not people. And so I think we’re now at the juncture, where a different distributional plan is essential to the credibility of this new administration. So what would that look like? It would be much more direct support to individuals. Who have been laid off when you look at the different sectors in the economy, the sectors like hospitality and leisure, hotels, restaurants and so forth, have had to lay off a lot of workers, particularly in the second phase, lockdown that we’re in right now.

And so giving support to those people, meaning, to the extent that their spending would be constrained in the absence of a wage, but in the long run, these people will be coming back on stream. They’re professionally capable, they’re not laid off because they’re incapable, they’re laid off because those sectors have to be locked down. It’s a collective responsibility. Paying those people directly allows them to continue to be consumers, provide for their children. Eat well and things of that nature.

The appointments like Deese and some of the others who have, you know, either just came from Wall Street or have been going back and forth between Wall Street and government, but, you know, clearly represent Blackrocks and others. Did that concern you, that Biden, you know, could have gone a less Wall Street direction than he did.

Rob Johnson

Yeah, I guess I would say yes, everyone should be concerned. There’s kind of a yin and yang in this, in my view. On the one hand, some of the people who operate in finance and so forth have a lot of knowledge and sophistication about how you would create a healthy impact. On the other side they may have that knowledge, but they may be so, what you might call, woven into their crony club of their sector that what they do is reward people with the proceeds for that. I guess you have to say that in embarking on as powerful an episode as we have right now after the turmoil of January six, after the recognition that Trump came to power because of some of the neglect and failings of the previous Democratic administration, the administration, where Joe Biden was the vice president. We’ve got to do something different. You know, FDR was viewed as a kind of silver spoon rich kid and he rose to the occasion of the New Deal after the Depression and then on to World War Two, so I guess one is perhaps purifying your identity by remaining cynical and caustic.

I think being critical is important. But being supportive of finding a direction in which to take leadership that will address the problems and perhaps working with the you might call ability to persuade people who have knowledge about the structure and the plumbing of finance and economy may contain within it some potential. We got to see if these people rose to the occasion. I don’t think they can go back to what you might call playing lobby and games and fill in their own pockets. The public is too attentive, and too outraged.

Paul Jay

I hope you’re right. The thing is, a lot of that outrage was, quote unquote, against government, which is the old Reagan thing. The government’s not the solution. Government’s the problem. The outrage certainly amongst Trump supporters really wasn’t against the actual one percent that are the ownership class or less than one percent who are really, you know, the power here. It’s all against government or it’s against ethnic minorities. You know, a lot of that outrage is not very conscious of where the real problem is.

Rob Johnson

Somebody once said to me, I was doing a conference for INET in Detroit, said, he was talking about racial animosity. He said, why don’t the black and white working-class people go fight with each other so us plutocrats can take off with all the loot and go to the Caribbean? Have a nice vacation. He was being facetious, but the idea of where we need to focus and by the way, I’m somewhat averse to making it about personality.

You know, you see on the right AOC is this you see on the left, Mitch McConnell, is that. All of these people live in a system which is refracted by the power of money and the relationship of money to survival. Someone as smart as Kamala Harris, who I’ve met on a couple of occasions, and she’s very smart. She knows the difference between right and wrong. And she also knows the difference between what would get her put out of office and what allows her to continue to struggle from a position of power and hopefully with people like her in the administration and this higher intensity on the part of the public.

She and people like her can bend the ear of the president to move in a constructive direction, because I think the danger is if we don’t do that, if we allow the despair to continue to be fomented and elevate there will be a degree of fear where many people will acquiesce to another authoritarian leader. And I think that is a bigger danger for democracy and for the health of our republic and for that matter. If you’ve got a good business and you go into what I’ll call wild authoritarianism. Your business may get choked. If you think you know what you’re doing in the private sector. You ought to be in the game of giving up a little right now to stabilize our social sustainability and to correct our environmental problems so that 20 years from now you’re still making money.

Paul Jay

Well, these family-led authoritarian governments are usually family-led kleptocracies. They usually go hand in hand or almost always do.

Rob Johnson

Well, I was going to say in the beginning there were a number of people who supported Adolf Hitler, but at the end it was the wreckage. That game didn’t play out well for a lot of those families that started off getting richer. When something is not sustainable you can’t foresee how it will emerge. It’s known that it’s coming apart, but it’s not known how it will be reassembled. And to pretend those who made money this year or last year can continue in that new environment is pretending to know something that you don’t know.

You’re right that being wealthy gives you what you might call leverage in the design and architecture, but it’s not sufficient in a period of outreach.

Paul Jay

Yeah, I mean, I think what happened here with Trump is he was a very useful megalomaniac for most of the four years, but institutionally, when he didn’t want to transition power peacefully, then it starts becoming a one-man kleptocracy, one-man show, and the elites decided it was really time to get rid of them.

Rob Johnson

Yes

And you know, McConnell, as I’ve said on air before, I think McConnell played a role working with Dick Cheney and some others to dump Trump by actually allowing chaos in Congress and using that to sink Trump’s boat. But I think it’s important that the substance of what Trump stood for, not the craziness, not the megalomania, but the real core values of Trump. I don’t think are all that different than Reagan and, you know, government is the problem. The dog whistle stuff appealing to racism and so on, that this is part of how the right-wing and the right-wing of the elites mobilize their power.

And so, yeah, what you’re saying is if the Biden administration doesn’t do something really seriously to make people’s lives better in 2024 or whenever we’re going to find a less maniac Trump, a more controllable Trump perhaps, because I think in the end the elites didn’t like that they couldn’t control Trump. And they showed where the real power was to, because as much as Trump tried to use the power of the presidency when push came to shove, the elites had a lot more power than he did.

Rob Johnson

Yes.

Paul Jay

Now, given the chaos and civil war in the Republican Party, do you think this makes the possibility for some really progressive reform out of this administration, more or less likely?

Rob Johnson

Well, I do think how would I put it one of those Dr. Seuss things had a thing called the Push Me Pull You. It was one of the little cartoon characters in a child’s fantasy episode. The Push Me Pull You kind of went in both directions at once. There’s a temptation to try to bring the center-right back. From the time when I worked with Pete Domenici. Who once said to me, he was a Republican, he was my boss. Years later, he said to me, I think I was a little further left than Barack Obama or John Kerry.

But by the time I had left, Newt Gingrich, Trent Lott, and everybody were in power and the party was going to the right. But that centrist, what I’ll call stewardship type Republican, has been absent for quite a long time. And so you could say the schism in the Republican Party might bring some people back to the center and make it easier to govern, on the other hand, the progressive flank appears to me – we’ll call it the Bernie Sanders flank – to appeal to an awful lot of those Trump voters and doing policies that are much broad based in terms of equity of distribution, and repairing things that are in disrepair.

Would very likely bring some of those people, what they call Trump’s Democrats, Jon Shields, and a woman whose name I don’t recall right now, wrote a wonderful book about field research all around the country of who were the long-term Democrats who voted for Trump. We should diagnose who those people are, what their concerns are, and try to heal those concerns, to bring things, say, both from the right and the left back to a more cohesive and sustainable society.

And I don’t know. If you’re going to see the courts taking a more moderate role, I’m quite skeptical in that regard given recent appointments and I’m also very concerned that the legislature itself would have a very hard time rescinding the tax cuts because powerful donors don’t want to pay more in taxes. But there will be some fear among the very elites that the system is coming unbottled, unless they give up a little bit or contribute to things, that it won’t be just through their charitable donations, you’d have to be structural in order to be of the scale in the hundreds of billions of dollars to repair the kind of psychological damage that’s been done in the last four years.

Paul Jay

There seems to be some appetite for that on Wall Street. There were lots of articles in the business press that the finance sector and other elites are willing to accept some higher taxes because Trump’s gone nuts. And if that’s what it takes to get some kind of stability, I guess for now, because they know later they can probably get it cut again. I guess as progressives, I know that word gets thrown around so much it can mean almost anything, but I think we need to be realistic about what’s possible in the United States.

This is the most powerful empire in the history of the world. It is the wealthiest and certainly the most powerful military in the history of the world. And I think if it’s possible to mitigate American foreign policy so it’s less aggressive and if it’s possible to have some reforms so the society is more equitable. At the same time, I think we need to talk about what a larger goal looks like, for me personally, I don’t think any real solutions take place without significant public ownership.

I just think private ownership as such has its limits and it’s so hard to even regulate these days because of the lobbying power, and as you were talking about the money in politics.

Rob Johnson

And with globalization, you can evade the control of a nation-state by redeploying capital and technology.

Paul Jay

Yeah, very much, which is really, I think, what led to the power of the forces that led to Reagan and then Trump. And same with Clinton as well. I mean, it is globalization that’s driven all of this to my mind.

But there’s something I think. There is importance in the nuance. And I think this gets lost sometimes on the left. The nuance for the Biden foreign policy, that gives me some encouragement, and it’s two things. One is on Iran. Jake Sullivan was on Zakaria’s show and said that Biden is going to go back into the Iran nuclear deal if Iran complies with the original deal, which they say they will. So it sounds like that deal will get going again. And that’s at least some glimmer of rationality in U.S. foreign policy, which I think is important.

And then another one, Avril Haines, in her hearing, which is just we’re recording this on Tuesday. It was Tuesday morning. While there’s a lot of the same rhetoric about China that we’ve heard, you know, she was asked a pointed question and I thought her answer was interesting and a good answer in the context of a lot of normal, aggressive intelligence agency rhetoric.

She was asked, is China an adversary or a competitor? And she said President-elect Biden is globally positioning this question, he’s framing it as China is a global competitor. Instead of the word adversary, which I thought is also a glimmer of light, if that’s really the inclination, because during the election campaign there was a lot of inflammatory rhetoric from Biden trying to practically outflank Trump from the right.

I couldn’t agree more with the priority that you’re attaching to China and the need, I think, for the intelligence community to focus on this issue. I think in the context of China. China is adversarial and an adversary on some issues and in other issues. We try to cooperate with them, whether in the context of climate change or other things. And ultimately, the frame that the president-elect has identified for thinking about this is as a global competitor.

Paul Jay

That’s a glimmer of light. So talk about how some of that let’s talk foreign policy, I guess, for a bit. You know, some of the small things matter. What are your expectations?

Rob Johnson

Well, first of all, I want to refer to what you said a few moments ago about the use of the American military, where one day after Martin Luther King holiday. Martin Luther King’s speech one year before he died at the Riverside Church in New York, beyond Vietnam, a time to break the silence, spoke about the coherence and the moral, how we see magnetism or lack thereof of American foreign policy, was something that had to be brought. As he said, militarism, racism, and extreme materialism are a triad, they’re not separable.

And so the question of what moral and ethical framework, is the American military being devoted to achieving? It’s very important to consider. The powers, the pressures in the trenches of the military-industrial complex, lobbying, and so forth, as again, Daniel Ellsberg in Doomsday Machine talks about it with great lucidity, will always be there. But given the priorities you, we don’t have a war against Mars, we have a war against climate, which is not a well-defined adversary in the tangible, historic sense, but we have to embrace that with China not as a competitor, but as an ally, with India as an ally, which will probably require some global support.

So a moral and ethical deep dive into what American foreign policy is meant to achieve. Progressives should be very attentive to that dimension of the challenge. And I know that there are some very experienced people like Lawrence Wilkerson who’s been on your program and others who are capable of discriminating between dangerous to us or to our allies on the one hand, and what you might call other forces that are propelling defense activity. In other words, not so much defense as offense or intimidation, that we need to disaggregate, we need to change course.

And I believe the military industries are comfortable staying on this course because they know how to build all the machines and so forth, but when you shift gears, they’ll still be good at adapting to whatever the challenges. But we got to make real challenges because, in essence, they’re getting paid with the money of the American people. So it’s not so much acquiescing to them, it’s defining where we have to go as that you say the most powerful military empire in history and how we characterize people like you described like the Chinese.

And interesting, how will China as a competitor in fostering the development of Africa relate to the very intense and brutal military presence of the United States in Africa? It may be that China is a competitor, and is going to have to induce us to change strategy, in order to have a win-win collaboration in Africa.

Paul Jay

I’ll remind you China has been quite OK with collaborating with very brutal governments.

Rob Johnson

That is true of China. I’m not putting them on a pedestal. There’s plenty of critique for the Chinese. I mean of the Chinese that we should also be very clear about.

Paul Jay

What is driving this China-phobia in both parties, this idea that, if China is just a global competitor, well, so’s Europe and they’re not talking about Europe the way they’re talking about China, even though there’s some real competition with Europe.

I remember in Eastern Europe, after the fall of the Soviet Union and the Berlin Wall, there was serious competition between Germany and the United States about who would have the upper hand in Eastern Europe. But this rivalry with China goes beyond that because just because China is now a global competitor not at the level the United States yet but not far away from being, you know, pretty much an equal. Which amongst other things says to countries like anywhere from Pakistan even to Brazil to you name it, when they’re negotiating with American mining company or investment banks or whatever. Now, these countries can say what they used to say about the Soviet Union. They can say, well, actually, we got another door we can knock out. We don’t just have to play with you Americans. I mean, is that what’s really bothering the U.S. here?

Rob Johnson

I would refer to the economist Dean Baker a little bit here. He’s been on my podcast recently and he also has written about this a great deal. In the beginning when China started its development program, it’s a country that’s population is about four times the size of the United States. It’s per capita income at the beginning of the 1980s was one- fortieth of America, integrating them into the United States through foreign direct investment where they had lower labor standards and lower environmental standards did compress the wages and reduce the number of jobs in the United States. So the adjustment process took place and it was very painful for a very significant proportion of the American population. Now, what’s happened more recently is that the anger against China has been coming from Silicon Valley, the entertainment industry, and pharma industry over intellectual property rights; Wall Street, about not getting enough market access and not having the currency, the renminbi be convertible.

So all kinds of the powerful interests got upset and the original interest, whether the Walmart’s or Nike’s, whoever, who had such fantastic profitable run from doing foreign direct investment, started seeing China improve its environmental standards and push for better labor conditions and higher wages, compressing their profits. So almost every powerful vested interests in America saw the rate of change as negative and maybe even the absolute level as negative. Many American knowledge-intensive industries would open a plant as a joint venture in China and shortly thereafter see a Chinese plant copying it, being favored by the government so that their market share didn’t blossom.

All they did was transfer the knowledge of the production process and then be pushed aside. That was the basis for resentment. The Chinese do use the state more heavily than the other places. State-owned enterprise, the subsidies it gives them, which you might call resilience advantage in competing with companies in the West, and it makes them afraid. People had hoped when they joined the WTO and joined this world system that they would converge what you might call with the American model, but that hasn’t happened as of this point.

And in the China 2025 plan, which came out a few years ago, made it look like they were going to turn inward, they could see the scale of their own economy. The next big boost in demand would be Chinese internal demand from the development moving from the middle-income trap up to a higher knowledge-intensive economy. But they weren’t talking about doing that by allowing the others in. So there was real basis, Democrat or Republican. People like Larry Summers went to the China Development Forum and were very critical, they sound quite a bit like Donald Trump.

So there is some, what you might call adjustment or accommodation to being a member and a competitor in the world system that China has to make.

Paul Jay

Or is it going to go the other way? Your colleague Tom Ferguson sent me an article a day or two ago about how Deutsche Bank is actually suggesting that the German state government get far more involved in a planned economy. Yes. Even ownership positions in companies to take some of the risk, a kind of Chinese model. And I’m wondering if you might not see that in the US to where to compete with China. They want to have more state intervention in that way. Obviously, state intervention on behalf of the monopolies.

Rob Johnson

Yes. Well, we do not acknowledge in America the degree to which we do support, subsidize and benefit large powerful companies. The American military in the sea lanes, and policing the Middle East is subsidizing oil companies, their profits, as well as perhaps the price of gasoline for the consumer in the United States. But these are not unsubsidized industries. They’re just organized in a slightly different manner. But I do think that the Chinese model poses a fundamental threat and the German response. It’s not surprising.

Paul Jay

Yeah, Tom, I wrote back to Tom, I said, so the Germans want the Chinese model and he wrote back and he said, yeah, but without the party. And I wrote back saying, well, that may come true because they already had the party once.

Rob Johnson

Well, I would say that was a party we all had a hangover from in Europe. Anyway, my sense is that vis a vis the foreign policy the animosity towards China now, this is how I want to synthesize the two pieces we’ve been talking about. The pain was felt by the working class. They remained resentful. Trump, on behalf of these industries. Demonize the Chinese. And the people who had been injured in the pass round, as Dean Baker points out, were on board. They wanted to give voice to that pain that they had suffered and in the old days when Wall Street still thought it was going to get in, when Facebook and Google and Apple all thought they were going to get in, when they thought they were going to open the markets. Everybody suppressed concern, the so-called are they a currency manipulator – keeping the renminbi undervalued – was thwarted at the Treasury through most of the Bush and the Obama years. When most indicators suggested their currency in terms of a trade purchasing power parity measure that economists use was undervalued and they had a competitive advantage and the currency, given their surplus, should have appreciated more.

But we didn’t punish them because American lobbyists from the upper end of the spectrum of wealth and power supported that Chinese American-interaction. But now they’re fighting for themselves.

Paul Jay

Just to leave just a little hopeful note, again, it seems to me now it doesn’t matter what topic you’re talking about, if we don’t frame it within, what does it mean in terms of climate change? We’re kind of missing the boat because it ain’t going to matter if we don’t deal with the climate issue and carbon and such, then kind of doesn’t matter.

You can have Medicare for all tomorrow, but if we don’t have effective climate policy, you know, in a few decades, we’re going to be on a planet that’s more or less unlivable. Not to say we don’t need Medicare for All, of course, but climate is clearly the critical issue here. In this hearing again, with Avril Haines, when she’s asked about is China an adversary or competitor, she kind of said, well, both when it comes to on the intelligence side, they’re an adversary.

But she said on an issue like climate in fact, there should be cooperation. And, you know, looking at the history of how the Soviet Union and the United States communicated with each other, these hearings, and these sort of things by these kinds of officials, it seems like they actually count for something. It is a way to communicate.

And it sounds like Biden is trying to throw a few lines or whatever you would call it, to the Chinese to say there actually is room to talk here as collaborators and especially on climate. And if they’re serious about that. That’s a good thing. And as much as I think there are genuine concerns, certainly about repression inside China and such, that, again, the climate issue certainly is the thing that’s the most significant we’re facing as humans. And if there’s really going to be cooperation. Now, on the other hand, Biden better get some climate policy that makes sense himself, because if he thinks it’s all going to be about carbon capture, then that ain’t going anywhere either.

Rob Johnson

Well, I think there are a lot of people like Adair Turner, who was a senior fellow for many years with INET, believe that the technological possibility. In other words. What has already been developed, if implemented on a scale, is feasible to meet that challenge, and it’s now very much about the politics of priorities and how what you might call restrict the political power of the fossil fuel industry from arresting the transformation that has to be done on large scale and rapidly.

So I think that it’s not so much. Can we do it? It’s will we do it? That’s at issue here, and if I were a Biden inner circle person in the White House, I would say you want to go down in history as a great president? The way you’re going to do it is being the guy that shifted gears and made the climate challenge and by the way, comes with just the macroeconomic stimulus and jobs associated with the transformation process in digging out of this rut that we’ve been in since the pandemic started. Would be a tremendous, what you might call a double hit, two for the price of one if you will. And so I think he. I sense that the Biden people, they talk as though they understand the greatness of the challenge that we’re in vis a vis social sustainability and climate/resource sustainability at the same time. And I think that those smoke signals, those flares they’re sending to China about collaboration are encouraging.

That tells me it’s at the top of their consciousness because in the aftermath of Donald Trump, it may be a little bit risky to talk friendly and cooperative to China. He fomented very successfully a demonic image that needs to be greatly diminished.

Paul Jay

There are certainly voices in the Democratic Party who are just as vociferous as he was.

Rob Johnson

Yes. It’s not R vs D kind of thing it’s much broader-based, as you say.

Paul Jay

All right. Thanks very much for joining us, Rob. We’ve got to do this more often.

Rob Johnson

My pleasure. Thank you. And enjoy the process of thinking about how to help. Because we’ve got to get beyond the despair so that we are committing to our children’s future. Don’t give up to criticism. But despondency has no role.

Paul Jay

Right. Thanks and thank you for joining us on theAnalysis.news podcast. And please don’t forget the donate button. And here’s the music.