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Casualties of Clintonism

Bill Clinton’s record of failure and defeat
A collage of featuring a portrait of Bill Clinton with former U.S. secretary of the treasury Robert Rubin in the background. Behind them both are two panels of red and blue-tinted images depicting workers and government officials.

This piece is published as web-exclusive material for issue no. 73, “Consolation Prizes.”

In his 2002 book State of the Union: A Century of American Labor, historian Nelson Lichtenstein traced the rise and fall of “the labor question” from the Progressive era, when union members began to push for a living wage and for industrial democracy, through the 1930s, at which time the labor movement got significant boosts from the New Deal, to the precipitous decline of union power in the 1970s and 1980s. The atrophy continued in the 1990s: “During the first two years of the Clinton administration,” Lichtenstein wrote, “a remarkably ambitious set of reforms were put in play, but almost every initiative collapsed in the face of internal division and paralyzing opposition.” One of the casualties of Clintonism, he noted, was that “the labor question seemed to vanish from the social agenda.”

Today, organized labor is back in view—President Joe Biden even became the first president to join a picket line when he marched with United Auto Workers on strike last year—but it continues to face long odds due to the neoliberal politics that took root in the Clinton years, when the Democratic Party devoted itself to the agenda of Wall Street. In May of 2017, Lichtenstein was beginning work on the history of the American corporation when an admired colleague, Judith Stein, died. He was told that Stein had begun work on a book too, and hers was meant to probe the political failures of the Clinton years. Stein’s literary agent wrote to ask: Would he be willing to pick up where Stein left off? He agreed to do it. Last September, the book was published as A Fabulous Failure: The Clinton Presidency and the Transformation of American Capitalism (Princeton University Press).

Lichtenstein, again, was struck by the “remarkably ambitious set of reforms” Clinton originally pushed upon taking office. He appointed liberal proponents of “industrial policy,” such as Robert Reich, who became secretary of labor, and Ira Magaziner, who led the effort to remake the health insurance system. Magaziner counted on support from both labor and big business—and for a moment in 1993, it seemed he would get it. The health plan, Lichtenstein writes, was “a far more radical and market-regulating proposal than anything advanced by Barack Obama fifteen years later.” And yet it triggered a well-organized backlash from the Republicans in Congress and big business gradually withdrew support while the famous “Harry and Louise” TV ads pushed the idea “There’s got to be a better way.” By the summer of 1994, the health care reform was dead. By 1996, Clinton declared, “the era of big government is over.”

Early this year, I spoke with Lichtenstein by Zoom. He is the author or editor of eighteen books and is a research professor at the University of California Santa Barbara, where he directs the Center for the Study of Work, Labor, and Democracy. He told me that when he first circulated the proposal to finish Stein’s history of the Clinton years, some publishers expressed worries about “Clinton fatigue.” Hillary Clinton had just lost the election to Donald Trump, and it seemed the public wanted a break from the Clintons. Lichtenstein pressed on and the result makes clear why: The thread running through A Fabulous Failure is that Clinton, for all his mastery of policy detail, was steered by powerful interests to take short-term victories that led to long-term setbacks for American workers—and split the Democratic Party’s coalition. The work by Stein and Lichtenstein is an essential study of how to win the presidency and then lose Congress to a militant band of conservatives, how to serve Wall Street but not Main Street, how to proclaim yourself above the “old” politics while believing the country had become something new and shiny and modern. In other words, how to ultimately fail the country. What follows is a transcript of our conversation, edited for length and clarity.


Dave Denison: I think many may not remember it now, but Bill Clinton took office in 1992 with a lot of people around him who had high hopes for progressive policy. He campaigned as “the man from Hope.”

Nelson Lichtenstein: Yeah, that’s right. It’s funny the way history plays tricks on us. He’s now been identified—in the latter part of his presidency, for sure—as a neoliberal president. And historians, journalists, and ordinary people have seen that, so they’ve projected that back to the very beginning, and made him a creature of the Democratic Leadership Council. But when he began, his campaign was not for a balanced budget or austerity, or even free trade for that matter, or for NAFTA. In his campaign, the phrase was “the economy, stupid”; that famous phrase that James Carville put on the wall of the War Room in Little Rock. It meant, one, stay away from culture war memes and themes that George H.W. Bush was being pushed to do. And also, stay away from the culture war ideas that his so-called allies in the Democratic Leadership Council also wanted—they wanted welfare reform to be the key issue in the campaign. But that’s not what Clinton did in 1992.

The second thing that “the economy, stupid” meant was boosting the livelihood, the wages, the well-being of ordinary working-class Americans. Clinton had ideas for health insurance reform, and for what we call industrial policy; that is, targeted investments. He used the phrase “we’ve got to reinvest in America,” which would help out the Midwest. Already by 1992, there was a sense of income stagnation and inequality. That was made very manifest right after the election, in December, at an economic summit meeting held in Little Rock with three hundred people. And Clinton had many, many business executives there, but they weren’t there to argue for traditional conservative economic views; they were there to assert that, yes, American industry is having trouble competing with Japan or Germany, and we need to have a very vigorous, active government to help them out. The head of Ford Motor Company, for example, said, “Hey, we’re spending more money on health insurance than on steel.” Clinton came in with many progressive ideas. Also in his world were those who are more Wall Street-oriented. But he was not a so-called neoliberal when he walked into the White House.

DD: One of the points you make is that it wasn’t out of his ideology that Clinton set out to become, as some have called him, “the Democratic Eisenhower.” It was a matter of, as you present it, being defeated—from within and without. The flop of the health care plan, for example, shows a little bit of both.

NL: There were two things going on in that first year of his presidency. One was health care, which was actually run by liberals. The conservatives stayed away from it; that was not their thing. So Ira Magaziner was the head of that, and at first there was quite an optimistic sense that it would get done.

But Clinton was not a so-called neoliberal when he walked into the White House.

Because, like the Ford executive who was worried about health care being expensive, many, many business executives, including the National Association of Manufacturers—usually thought to be a conservative group—or the Chamber of Commerce, said, “Yeah, we’re in favor of a health care reform, and we’re willing to work with the Clintons.” And there was a constructive dialogue going on between the business executives and the White House—and the insurance companies—to create this health care plan. In some of the same ways that today, for example, the automakers in the green transition are sort of having this cooperative relationship with the Biden administration. Anyway, that was one thing.

The second thing going on in the first year was the budget. Would the budget be more austere? Or would there be room for various kinds of stimulus plans that people like Robert Reich wanted? And here, the influence of people like Robert Rubin came to the fore. Rubin was a very charming and popular figure, even among liberals. He was a Wall Street guy who spent twenty-five years at Goldman Sachs. But the reason that Rubin was viewed as a liberal in this period is that he came out of a Democratic liberal family. His mother voted for Henry Wallace in 1948. She was a civil rights activist in Florida. Rubin voted, and raised money, for George McGovern in 1972. Rubin was a liberal, a racial liberal, and even a welfare state liberal; he wanted a modest welfare state. But he thought that the mobility of capital was absolutely essential, that free trade was absolutely essential, that if you wanted to have investment in America, which Clinton did, then the most important thing was to convince Wall Street, the stock market, and the bond traders that stable, austere economic policies would be put into effect. Then, bond interest rates would decline; they’d been quite high earlier. That would open up a plethora of investment.

This debate as to how austere the first budget would be went on for months inside the Clinton administration. They were going to raise taxes on the rich, and Rubin was all in favor of that. Wall Street did not care about taxes on individual income; that was not their problem. What they cared about was low bond interest rates and the possibility of great capital gains. So anyway, that debate went on, and the Rubin side won. All of the stimulus programs were stripped away from the first budget. So this was a defeat for the progressive Clinton of 1992. He would later side with Rubin on other questions, but nevertheless, that was what we think of as a defeat.

DD: To put a finer point on that, the part about Rubin’s role, he and much of Wall Street at the beginning of the Clinton administration believed that reducing the federal budget deficit was the highest priority. He’s on record saying that. And they got what they wanted. Out of the eight years of Clinton, they got what they wanted.

NL: That’s right. And you can make the argument, as others have, that you ended up with a series of speculative bubbles. Yes, there was reinvestment, but it wasn’t channeled. And the asset bubbles of the late 1990s and the dot-com bust, and later on the bust of 2008, in part can be laid at the feet of Rubin and the Federal Reserve chair Alan Greenspan and others who thought that the absolutely most important thing was getting interest rates down so that reinvestment would take place.

DD: That question about the deficit ultimately, the way you look at it, is one of defeat. You write about the defeat of the Clinton policies as being a result of what you call “seductive illusions.” What were some of those illusions?

NL: Well, one illusion, of course, was that free trade was in and of itself a benefit for everyone; that it would ultimately be a big plus both for investors and the working class. All economists, including liberal economists, said, “Oh, yes, free trade is a good thing.” Yes, free trade will reduce the price of what you’re buying, a small percentage for everybody. If you go to Walmart, which is importing tons of stuff from Mexico and China, yeah, the stuff is cheaper. But the problem with free trade is that the cost of free trade is very targeted: this factory in this town will go bankrupt. And that has a huge impact for a certain limited number of people, which is very visible. Whereas the fact that you can buy a T-shirt for ten cents less, you know, you don’t notice it. So that’s one thing.

Initially, Clinton’s view toward China was: the United States has to have human rights connected to any free trade. And Nancy Pelosi was a leader in that, she was pushing Clinton on that. But by the latter half of the 1990s, Clinton abandoned that perspective. Gene Sperling, who was one of his key trade aides and economic aides, said free trade in China will produce capitalism, civil society, and human rights, and it will democratize China. This was said over and over again when the debates about China becoming a member of the World Trade Organization were taking place. It was an illusion—they were convinced of it, but it was enormously wrong. Clinton, at one point, says, “Well, if you have computers, and consumer choice, you know, democracy is not far behind.” I mean, it was incredible.

The second big illusion was the so-called “New Economy.” First: What does this phrase mean? It sort of meant Silicon Valley, or, Silicon Valley plus Walmart. And it became extraordinarily popular in the news in the mid-1990s. When you do these little studies of how many times something is mentioned in the papers, there’s a huge spike for the New Economy. And everyone said, “OK, all the old rules don’t apply, you know,” whether it’s labor-management relations, the nature of the budget, or the character of the stock market: “we have a new economy!” Everything is open. They thought, “well, welfare reform will work because we have a new economy. People can get a job at McDonald’s or at Walmart, and we don’t need to provide government assistance as much anymore.” That was part of the argument for welfare reform. It was seductive, because it seemed to solve political problems which the Democrats thought had been intractable, and which Clinton no longer had the votes to solve. I mean, Clinton lost control of Congress in 1994.

I can give one more example, which people don’t remember today: there was a big deregulation of the telecommunications industry, which allowed for an enormous number of mergers. This was pushed especially by Al Gore and Clinton: “Oh, this is the new economy, everything’s gonna be connected, this is a whole new world. We don’t have to worry about whether these companies are merging, or what they’re doing in terms of the labor involved.” It turned out to create a series of monopolies, some of which went bust in the early twenty-first century. And it led to the destruction of trade unionism in the telecommunications economy. Yes, we did get wireless. And we all use cell phones. But the companies who were pushing deregulation were intransigent in their opposition to high wages and good benefits for those people involved in the wireless economy. They just didn’t want to pay good wages, or have permanent jobs, or things like that. And the Clintonites, thought, “Oh, well, this new technology, everyone will be making a lot of money and have great jobs.”

DD: I want to jump back to the Robert Rubin question, because you say at one point that it was really the Treasury Department that was the driving force behind most of what Clinton’s economic policies turned out to be. You write about Rubin at some length in the book: him coming out of Goldman Sachs, having made his career there. I was thinking, reading this, you kind of get the feeling that this guy had never met a union member in his life. He had a background in a certain type of American liberalism, favoring the welfare state. He either thought that the labor movement would be an obstacle to strong economic policies, or the labor movement was entirely irrelevant.

NL: Well, the latter, I think. On Wall Street, of course, unions aren’t there, really. The labor movement was irrelevant for Clinton too. And this is true of Robert Reich, who was the secretary of labor. Reich today is a staunch labor liberal and a Bernie Sanders kind of guy. But back then, he very much wasn’t. And you have to say, the nadir of the American labor movement was in the 1980s and 1990s. Not in terms of numbers, because a higher portion of the workforce was unionized then in contrast to today.

One illusion, of course, was that free trade was in and of itself a benefit for everyone.

But the movement was at its nadir in terms of the way it projected itself, and in public sentiment about it. It was stolid and unexciting, it seemed retrograde on some questions. Liberals did not look at it as one of the building blocks of a better future. Again, you can contrast that with today, when there’s enormous excitement about organizing Starbucks or the UAW. I mean, there’s a sense of dynamism and a sense of militancy now. And that was not true in the 1990s. So that’s one reason that many people, and not just Rubin and Reich, thought of the labor movement as moving toward irrelevance. Especially in this new economy, where there’ll be cooperative labor-management relations.

I make this point in the book, but the other thing about Rubin: What did he do at Goldman Sachs to make his money? He was on the arbitrage desk, which meant he’d figured out when a company was going to merge, what was the difference in stock prices between the two companies, and he’d put a big bet on that and make a lot of money if he got it right. Now, to make arbitrage work, you have to have absolute mobility of capital, and you can’t have any restraints on that, either in the United States or abroad. And so that’s one of the fundamental elements of Rubin’s worldview: the mobility of capital is absolutely essential. That meant he was not only a free trader, but when it came to Wall Street derivatives—all sorts of new economic products, which were in theory designed to create the so-called efficiency of capitalism, meaning mobility and liquidity—Rubin was all on board. He was a neoliberal in that respect.

DD: You know, most of us have either forgotten or never knew about the so-called Dunlop Commission. Your account of that effort tells us a lot about the Clinton’s team’s inability to do anything useful for the labor movement.

NL: And also American liberalism’s posture at that moment. John Dunlop had been a major figure, an industrial relations academic who’d been secretary of labor under Carter.

DD: Was it under Carter or under Ford?

NL: You’re right, under Ford, excuse me.

DD: And he was a Harvard guy.

NL: Oh, yes. He was at Harvard for decades. And he was a founder of the modern discipline of industrial relations, going back to World War II. He was also a Washington player for decades, right, under Ford.

So the Clinton administration set up a commission in the early 1990s, which was part of this argument that we’ve got a big problem with American productivity. Competing with Japan, Germany, they asked: “How do we get American firms to be more productive, to be more innovative?” The whole premise of the Dunlop Commission was to figure out new forms of labor-management cooperation, on the shop floor and in the companies. Certain things would be allowed: joint committees of companies and workers, which had been somewhat illegal under the Wagner Act, because they were viewed as company unions. But they’d make that legal, and cooperation will take place. Robert Reich was all into this; he would go to visit a firm here or there, Levi Strauss or some steel company, and find workers and managers working together. The idea of the Dunlop Commission was that, in return, companies would allow for easier unionization in return for this cooperation. Now, it didn’t work because, basically, the management side said “no, we don’t want easier unionization.” “No, not at all, we refuse.” And so that failed. But the idea of it—think about that idea. That was thirty years ago. What’s the idea of the UAW in its strike this last year? It wasn’t “we want to cooperate with the Big Three.” It is, “we represent the working class, and we’re in a class warfare with these guys, and they’ve been ripping us off.” I mean, the ethos of today is so much different from that of the Dunlop Commission. Maybe for some academic in a business school, the idea of the Commission might seem attractive. But for the vast majority of American workers, it was, “what is this technical thing about cooperation—no, I’m getting screwed, my wages are less.” People were pissed off, and the Newt Gingriches, and later on the Trumps, would take advantage of that frustration, which was there. But that was not seen in 1993 and 1994.

DD: That was a time of not just defeat, but defeatism. When I was thinking about how the unions came out of the 1970s and 1980s, it seemed like there was such a vicious cycle for labor, in that they had lost so much power and then, because of that, they had no political muscle to push for the things that would help regain power.

NL: There was something called the Striker Replacement bill, which the older industrial unions wanted, which would prevent companies from firing workers who were on strike and replacing them. This went to Congress, and in July of 1994, it failed. And it failed because the two Arkansas Democratic senators voted against it. And labor, of course, blamed Bill Clinton for this, because they thought, “hey, don’t you have any control over the Democrats in Arkansas?” Actually, it turns out he didn’t.

One more thing that I spent some time on in the book is the Caterpillar strike, which was a vicious, long, brutal, miserable strike of workers at Caterpillar in the Midwest. It went on and on and on. It was a defeat for labor. The union did survive, but basically it was a defeat. So here was a company, Caterpillar, which had, by the way, said earlier on, “oh, yes, we’re gonna have labor-management cooperation.” They were competing with Komatsu, the big industrial machinery operator in Japan. And basically, they said, “Look, free trade? We’ve got to reduce the wages of American workers if we’re going to compete with the Japanese.” So all these things came together at Caterpillar, and the Clinton administration could do nothing to help out the unions, and really chose not to do anything. It was a symbol of the defeat of unionism in the 1990s, ideologically and on the ground, and the picket line.

DD: And as you note, if you look back carefully at Clinton’s political rise in Arkansas in the 1980s, it was never a priority for him to work with the unions. He was very aware of the business sector in northern Arkansas, between Walmart and Tyson. And he did not have a strong labor record, even as a governor.

NL: That’s right. Arkansas was actually not the worst of the southern states, but Clinton was not the best of the southern politicians when it came to labor. He was not the absolute worst, but he was certainly not one of the better ones. What’s interesting is that there was this famous education reform there, which Hillary was very much involved with. The idea was—and this gets to another of these illusions—if funding was increased for education and skills, the Arkansas workforce would be upgraded, and then industry would come, and standards of living would go up. Clinton was effective in getting more money, actual tax dollars, to go to education. And there are some indications that grades went up in Arkansas, too. But to do it, he demonized the Arkansas Educational Association, the teacher union there. That was undercutting one of the key liberal alliances, especially in the South, where the teachers unions were one of the key building blocks of any liberalism that remained there. You can see the ideology: “We don’t need unions, we don’t need these political formations, if we have more skilled workers in this new economy.” Just increasing the skills of American workers, or any workers anywhere in the world, is not going to necessarily lead to the higher standard of living. Clinton bought into this thinking; that skills are good, education is a good thing, but alone they will not necessarily solve the problem.

DD: Isn’t that one of the keys to understanding Clinton, though, when you see that type of, you know, swinging in the other direction? It seems essential to who he was, and where he thought the country was going, that he had to show himself not to be a certain type of Democrat, and to try to win back Reagan Democrats—by showing that we’re not going to take that old-fashioned, New Deal liberal approach anymore. We’re responding to what Reagan created in the 1980s.

NL: Yeah, to a degree that’s true. Now, he didn’t entirely accommodate to Reaganism. That’s why I think the 1992 campaign was actually tilted in a more liberal direction. He wasn’t entirely a Reaganite.

I don’t know if Ross Perot has been forgotten; he ran as a third-party candidate in 1992, against free trade. NAFTA will be “a giant sucking sound”; that was his phrase. He runs against NAFTA, and in favor of “we need to get back to the fundamentals of the economy.” Perot himself did think balancing the budget and getting rid of the deficit was important, but ultimately, he emphasized the economy. Perot was not a culture warrior. He didn’t go on about abortion or gay people or anything like that. He got 19 percent of the vote in 1992—he may well have been the reason Clinton won, that’s subject to debate. And then he ran again in 1996 and got about 10 percent of the vote.

Now, one of the failures of Clinton was: here is this group of voters who are up for grabs. Who’s going to get them, the Republicans or the Democrats? And I think Clinton’s decision to push for a NAFTA bill, which he does in 1993, lost much of that Perot constituency for the Democrats. I call NAFTA a blunder. There were debates inside the administration: Should we push for this? NAFTA was a George H.W. Bush idea.

The labor movement was irrelevant for Clinton too.

It was not a Democratic idea. It was put on the table by the previous administration, and by the Mexican government. I think the reason Clinton decided to go for NAFTA was, “Well, yes, we like free trade.” But probably more important at that particular moment was his need to pass something that was bipartisan. The budget, which did raise taxes, was passed entirely with Democratic votes in August of 1993. “I’m gonna get hammered for that,” he thought, “I need something bipartisan.” And sure, NAFTA did have lots of Republican votes for it, but it split the Democratic Party.

Then, in 1994, in the Congressional election, studies have shown that a huge proportion of the reason Clinton loses so badly is NAFTA. Northern Democrats didn’t like it, but they survived. They survived in power. The people who were really hurt by NAFTA were the Southern, somewhat conservative Democrats, many of whom had voted for NAFTA. But that didn’t matter. They were wiped out. The moment when the South became predominantly Republican, and then at least in the House of Representatives, is 1994. And I think it’s largely a result of NAFTA.

DD: That’s another thing we can easily see now, but they did not see in the 1990s: what the Republican Party was turning into, even in 1992. Pat Buchanan, and then in 1994, Newt Gingrich—they were signs of where that party was going. And here were Bill Clinton and his people thinking, “Oh, we’re going to show bipartisanship.”

NL: Bill Kristol today is a big Never Trumper, but in 1993, during the health care debate, he offered a series of memos in which he said, “We have to be against this health care reform, under all circumstances.” He was really attacking Senate Minority Leader Robert Dole. Dole was willing to cut a deal with Clinton; he was an old-fashioned give-and-take kind of politician. And Kristol said no, because he didn’t want to do anything that would legitimize the welfare state, which would then benefit the Democrats. So just vote against it. And this won the debate.

Interestingly, in 1993 and 1994, you have a situation where the right wing of the Republican Party, the Gingrich wing of the Republican Party, was lobbying the business associations, the NAM, and the Chamber of Commerce. The politicians were lobbying the businessmen to stop cooperating with Clinton on health care, rather than the other way around, because they saw its potential success as a kind of Democratic victory. In a way, they were they were right. When Obama did pass health care fifteen years later, at first it was politically toxic. But today, it’s become embedded in the way the economy works.

DD: Another thing that’s easy to see in hindsight is that Clinton’s people came in talking about industrial policy. As far as I can tell, at that point in the 1990s—even when they had a congressional Democratic majority—the Democrats put no priority on addressing climate change. And then we lost twenty years.

NL: Part of the first budget in 1993 was a tax on BTUs—a carbon tax—which would have netted a few billion dollars. It would have been a start toward a kind of climate change policy, and the liberals and Clinton were in favor of it. But within the Democratic Party, the more conservative elements, those from Oklahoma and Texas, said, “No, no, no, you can’t do that.” So in the horse trading within that budget, and in a victory for the more conservative elements within the Democratic Party, the BTU tax was cut out. Al Gore would be taking the lead on climate, and there would be other initiatives that would come down, but they were pretty minor during the 1990s. Nothing compared to what Biden is doing today.

DD: Of course, Clinton’s defenders would say that’s the problem: he couldn’t be blamed if he didn’t have solid, unified Democratic support in Congress backing him up. How was he going to get something through Congress?

NL: Well, right, although I think Clinton was a terrible party leader. And mainly on trade. There were a number of trade bills of various sorts that went through Congress, not just NAFTA. There was a “fast-track” bill, which is a bill that gives the president more authority on trade. There was of course, China entering the WTO. And increasingly through the 1990s, the Democratic Party was split. By the end of the 1990s, a majority of Democrats were against the trade bills that Clinton puts forward, and he was relying on Republican votes. This was not a good way to build up political capital. He knew this was a problem. At one point he realizes he’s stiffed labor enough.

DD: Do you think, realistically, there’s one thing that he could have done in the 1990s, that he could have gotten through Congress, that would have made some sort of important difference for organizing unions?

NL: The labor movement said he didn’t put enough energy behind his effort to get some labor law reform passed. Maybe so. But he was defeated. Getting labor law reform directly enacted would have been difficult. It’s been difficult for every president: for Obama, Biden, Carter. I mean, labor law reform has failed, failed, failed, over the last fifty years. When you directly approach this question, for a variety of reasons, the votes aren’t there.

On the other hand . . . Clinton ends up with a budget surplus in 1997, 1998, 1999. Big victory for Clinton, right? Tremendous. And he, of course, bragged about it. Clinton and Rubin and others had been going on for so long about balancing the budget, pushing for more austerity when it came to federal spending, etc. By the time they got the budget surplus, the main thing that the Clinton people were afraid of is that the Republican-dominated Congress would take that surplus and enact a series of tax refunds. The Clinton people didn’t know what to do. They couldn’t advocate for some big infrastructure program, as they’d already argued against that. Well, we’ll say all that money would go to Social Security—to “save Social Security first,” that was the phrase. Which was really a way of saying, they weren’t going to do anything with it. And when Al Gore ran for president in the year 2000, was he advocating a big program that’s going to benefit his constituency? No. He said we’d have a “lockbox” for Social Security. The budget surplus was kind of an albatross. It was there, but Clinton doesn’t get any credit for it, and it wasn’t useful. I think that was a kind of a failure of imagination. I can say by that point, Robert Reich was out of the cabinet, and he was excoriating Clinton in the late ’90s for the failure to use the surplus to benefit his own constituency.

DD: I keep coming back to the labor question because you’ve made a connection in your earlier book, State of the Union, between a weak U.S. labor movement and deteriorating democracy in the United States. And that seems especially important now.

NL: What are the institutions of the working class? Well, there are mega-churches, there are right-wing associations, increasingly, gun clubs. The National Rifle Association and megachurches: these are the institutions of the working class. Well, trade unions used to be a kind of core institution of the working class, in places like Western Pennsylvania and Ohio, crucial states like that. They don’t exist anymore. How do people’s consciousness shift? Not by just looking at a TV commercial or even having someone knock on the door. It’s when on a day-to-day basis, you are acting collectively with your workmates, this interaction generates a certain way of thinking about the world. That’s one reason that union members tend to vote more Democratic, at a much higher percentage than nonunion members. Well, that doesn’t exist anymore. Some of the working class—some of it—shifts to the right as a way of reorienting their view of the world, and maybe even some presumptive solution to their problems.

I think the Democrats have been very slow to understand that. Part of the reason is because the Democratic Party has lots of people like Rubin in it, and lots of businessmen in it. The unions are divisive. You can look at these coffee shops around the country, not just Starbucks, and these wonderfully liberal people running bakeries and coffee shops in San Francisco and places like that. Well, when the workers want to form a union, all of a sudden these liberals who are running the show say, “wait, no, no.” Because a union is right in your face, and right in the face of the employer. It’s not something theoretical. There is such a thing as a class struggle, and it divides the Democratic Party often on some of these questions.

DD: I have to say that even after reading your book, I wasn’t entirely sure whether your use of the word fabulous in the title should be described as ambiguous, tongue-in-cheek, ironic, or outright sarcastic.

NL All of those, I think. That word, fabulous, comes from a small book by Janet Yellen, who’s now secretary of treasury, and Alan Blinder, who was a member of the Clinton Council of Economic Advisers. They wrote this in the year 2001, and the book was entitled A Fabulous Decade. It’s true that unemployment was low by the end of the 1990s; real wages for low-income people were going up because inflation was low. The stock market, of course, was booming. And even people who’d been on welfare were, in fact, getting jobs; they weren’t being hurt all that much. In the year 2000, if you look back, you’d say, “Wow, this was a fabulous success, Clinton was a success, because look at all the indicators.” And one of the phrases used was, “the Goldilocks economy”; not too hot, so not much inflation, and not too cold.

But I think much of that was built on sand. It was built on what left-wing economic analysts today call “asset bubbles.” That is, with low interest rates, you got the stock market boom, and land and housing and things like that inflated in value. Workers thought, “Oh, my 401(k) is doing fine, so I’ll go out and spend some more money.” But these bubbles tend to pop—even Alan Greenspan knew that—and one did in the year 2001. Along came a lot of bankruptcies of telecom companies and things of that sort, partly because of the deregulation. Another huge pop occurred in 2008, not just because there was a kind of super-inflation of housing prices, but because the Clinton people had deregulated derivatives, which are kind of insurance products that have a huge speculative and leveraged character to them, back in the late 1990s. There was another debate within the Clinton administration about this; a woman named Brooksley Born was head of the Commodity Futures Trading Corporation, advocated for regulation. Larry Summers, who was secretary of the treasury then, and Alan Greenspan, and others refused, citing the New Economy. “We’ve got to let this stuff run.” Anyway, those things would explode. So yes, the word fabulous is ironic and sarcastic, and all the other things you mentioned.