TO: The president-elect
RE: The economy
FROM: Michael R. Bloomberg, Mayor of New York City
The stock market has plummeted. The credit markets are frozen. Unemployment is rising. Housing foreclosures are skyrocketing. Consumer spending is weakening. Manufacturers are cutting production. A global recession is in the offing. Welcome to the White House, 44. You're sure you wanted the job, right? (Article continued below...)
The global financial crisis has prompted countless comparisons to the Great Depression, and no doubt members of the media will soon be asking you to detail your agenda for your first 100 days, expecting you to pursue a legislative sprint as fast as Franklin D. Roosevelt's in 1933. My advice: ignore them. Your first 100 days in Washington will be better spent preparing for the 1,360 days that will follow.
FDR's first 100 days achieved what the Bush administration and Congress have been trying to do for the past 60 days: restoring confidence in our financial institutions. By the time you take the oath of office, the worst of the bank panics should be behind us. And while the economy may well be in a full-fledged recession, leading the country out of it, and laying the foundation for a new century of growth and prosperity, can't be done in a few short months—and it can't be done with regulatory reform alone.
Reforming the structures that govern financial institutions will likely be the hot topic of the next Congress, and that's long overdue. But it is critical that you not allow Congress to confuse regulatory reform with an economic agenda. The long-term health and strength of the nation's economy depends less on the shape of federal regulations than on the country's capacity for growth and innovation.
Over the past decade, as you well know, our status as the world's economic superpower has been challenged as never before. Thanks largely to America, capitalism has triumphed around the globe, and now everyone wants to beat us at our own game.
This is a competition we should relish, because we continue to enjoy all sorts of advantages: the best universities, the most advanced factories and health care, the most entrepreneurial workers and the best quality of life. But like a champion who has gotten complacent and sloughed off on workouts, the federal government—paralyzed by partisan gridlock and special-interest pandering—has let America slip out of top fighting form. Getting back into shape will not be easy or pain-free, but the alternative—losing ground to China, India, Korea, Japan, the European Union and others—is simply not an option.
The crisis in the financial markets elevated our economic problems to the lead issue in the campaign, and your victory is largely attributable to the trust voters have placed in you to take action—and get results. You campaigned on the need to bring change and reform to nearly every aspect of federal policy, including health care and Social Security. These are critically important issues, along with many others. But you cannot take them on all at once. You will have to prioritize, and in a time of economic crisis, the economy must come first.
As worrisome as the economic news has been, and as painful as the months ahead might be, especially for a middle class already squeezed by rising prices and stagnant wages, there is nothing like a crisis to mobilize political support for long-overdue reforms. You have a once-in-a-generation opportunity to create a package of bipartisan economic initiatives that are far more ambitious than anything we have seen in decades.
You will receive advice from many wise people on what shape your economic agenda should take. That's healthy. Listen to them all and then pursue the best ideas. As mayor of America's largest city, as a businessman who started a company 25 years ago with three men and a coffeepot, as a father of two girls who is deeply concerned about the future of their country, I thought I would offer a few ideas of my own—take 'em or leave 'em.
Hurricane Katrina tragically highlighted our under-investment in infrastructure, but mayors across the country see it every day: in mass transit that needs building, in bridges that need repairing, in airports that need expanding, in water and sewage systems that need upgrading. Americans recognize the need for greater infrastructure investment, and from my experience in New York, they are willing to pay for it, if—and this is a big if—they can be sure their money will be spent improving their and communities, not improving some legislator's re-election chances.
You have rightly criticized the process of funding infrastructure through earmarks, and I cannot think of a better way to start your administration than by working with Congress to reform it. What a signal it would send to voters: you are watching after their tax dollars more closely and putting them to better use.
How to win congressional support? In exchange for legislation creating an infrastructure bank that funds projects based strictly on merit, agree to invest more money on the infrastructure our country needs most. And you should also demand more from the states and cities that get federal money: hold them accountable for building on time and on budget. Call it a "New New Deal": investing more, more wisely, and getting bigger returns.
A bold infrastructure plan will help put Americans back to work—plenty of good projects are ready to go, they just require funding—and it will build the infrastructure our country needs to compete in the 21st century. Remember: the construction projects of the New Deal didn't just help Americans survive the Great Depression. They built the foundation for a broader and more prosperous middle class that led America to new heights.
The infrastructure that may be most critical to our nation's future was also a hot topic on the campaign trail: energy production. And I was encouraged to see something of a consensus emerge regarding which types of production we should pursue: all of them. That includes more nuclear power and offshore drilling, but we both know that the real long-term solution lies in green power.
Oil-rich Middle Eastern governments are investing in green energy, because they understand that it will be the fuel of the future. America can either be the pioneers of green energy or the purchasers. If we are the pioneers, we'll create tens of thousands of good-paying jobs. If we are the purchasers, we will continue transferring billions of dollars of our wealth overseas—and the high-tech jobs that go with them.
To move from arguing about energy to acting on it, offer both sides of the aisle a victory: more environmentally sound offshore drilling and more nuclear power, satisfying those on the right, in exchange for more investment in green power and higher energy-efficiency standards, satisfying those on the left. It's a good deal that the vast majority of Americans would strongly support—and in the long run, it will save us all money.
Pioneering green energy—and countless other new technologies—requires the best and brightest minds. Unfortunately, our broken immigration system has been shutting too many of them out. In many cases, brilliant young students come to America to receive an education, but after they receive their degrees, the federal government boots them out—and so they take everything they have learned and go put it to work for another country. That's insanity! And it is badly damaging our capacity for innovation.
Traditionally, economic downturns have heightened xenophobia and resulted in tighter immigration restrictions—making a bad economic situation worse. We cannot allow that to happen again. Too many companies are already setting up shop elsewhere because of the difficulty they have getting visas for their foreign workers. That means fewer jobs for middle-class Americans, and less tax revenue to pay for education, health care and other essential services.
Immigration reform is central to getting our economy back on track. The elements of the most practical and effective plan combine ideas from both the left and the right: imposing tighter border security; creating a 21st-century worker identification card that will allow employers to verify the legality of a job applicant and allow the federal government to enforce the law; increasing lawful opportunity for those seeking the American Dream; and—following in the footsteps of President Reagan—allowing those who are here illegally the chance to earn the right to stay.
You will never convince the demagogues, but most members of Congress will be willing to support this kind of common-sense approach if they believe it will not threaten their re-election campaigns. Tell them—including members of the opposite party—that they will have your support in their re-election campaigns. That simple act may do more to shake up the Washington establishment than anything that has occurred there in decades.
America became an economic superpower because we have always welcomed the best and the brightest, and because our top-quality public schools have produced the best and brightest. But our education system has been stuck in neutral for several decades, while other countries have had their foot on the accelerator. As a result, not only are we losing low-skilled jobs to nations with lower wages, but more and more of them are competing with us for high-skilled jobs.
In traveling the country and the world, you know how important it is for our students to learn more math, more science, more engineering and more technology. The problem is not that we don't spend enough money on education—we spend enormous amounts, and far more than any other nation. But we are pouring it into an outdated and inefficient production model that, like the American auto industry in the 1970s, is largely driven by the power of unions, rather than the needs of consumers (students).
The first President Bush aimed to become the "education president," and all of his successors have pursued the same mantle. But all have tinkered around the edges of a broken system, and all have fallen short. You can be different, but only if you pursue top-to-bottom change. And as with energy policy, we need an "all of the above" approach, whether the ideas come from the right or the left. That means higher standards, higher salaries, merit pay, tenure reform, school report cards, a longer school day and more. These reforms have been essential to our success in New York, and if they can be achieved here, where labor unions and special interests have held sway for decades, they can be achieved across the nation.
Getting It Done
Of course, an economic agenda this ambitious will not come free. It is the responsibility of leaders to set priorities and make tough choices. Programs that don't pass a cost-benefit analysis, that have been driven by politics rather than economics, should be cut. For example: subsidies for corn ethanol and agribusiness, massive outlays for defense projects that our armed forces do not want—and the list goes on.
Making tough choices also means deciding between a stimulus package that is focused on job creation and long-term infrastructure, or a politically popular quick shot in the arm that sends checks to Americans. We cannot afford both.
Tough choices will also require us to look at the revenue side of the ledger. The handful of old Laffer Curve fans still standing may continue to allege that cutting taxes can raise revenue in a bull market, but certainly not in a downturn. The reality is that the time when governments most require money is when people are least able to afford paying it. The reason to run surpluses during the good times is not to spend them, but to mitigate the deficits in tough times. Unfortunately, Washington squandered that opportunity by spending with reckless abandon for years. Now we have little choice but to find new revenue streams.
If we have any hope of balancing the budget, the alternative minimum tax cannot be entirely eliminated. In addition, demand for revenue will necessitate bringing back the estate tax—because it makes too much sense. It will both raise revenue and encourage more wealthy Americans to donate to charity. Government should incentivize the maxim I plan to follow: "The ultimate in financial planning is to bounce the check to the undertaker."
We can also generate new revenue by promoting new industries. For instance, we should design our environmental agenda to be a stimulus plan for the clean-energy industry. A carbon tax or a cap-and-auction system, along with eliminating tax cuts for oil companies, could raise revenue for investments in green power or to retrain workers in older industries. To pay for long-term infrastructure, options will have to include tolls, taxes, fees or privatization. Raising revenue, as with reducing spending, will take real political courage. But remember: the public is smarter than most elected officials give them credit for being. They know that the days of something-for-nothing are over. Be honest with them about the costs and benefits, and you will be pleasantly surprised at how they respond.
A word of warning: no matter what the ideologues in your party say, history shows that you will not be able to ram your domestic agenda through Congress, even if your own party wins control of both houses. Ask Jimmy Carter. Or Bill Clinton. Or George W. Bush. Getting big things done will require building close relationships with both parties.
As someone with a strong independent streak, you have an unusual opportunity to pull the two parties together. This work must begin immediately, because once one party retreats into partisan warfare, it is very difficult for the other not to follow suit. And then your entire agenda—and the country's future—will be caught in the crossfire.
Based on my experience, bridging the partisan divide begins with three steps:
First, show respect. When you are asked by the media whether you have earned a mandate, do not take the bait. Be gracious in victory. Nothing energizes the opposition party more than the opportunity to defeat a president who claims a personal mandate.
Second, build trust. Demonstrate that your talk of bipartisanship is not just talk. Appoint a bipartisan cabinet. Invite the best and brightest from all parties to apply for agency positions. Will professional partisans scream? Yes. Let them. Voters are tired of the constant partisan warfare, and they rightly blame it for blocking progress. If they see you holding out your hand, it will be all the more difficult for the opposing party to walk away.
Finally, in legislative negotiations, let everyone taste victory. Don't aim for compromises in which two sides battle over the narrowest sliver of the pie—and then cut it in half. That leaves each side with a few crumbs and a public still hungry for change. Instead, think more creatively about how to enlarge the pie.
I believe these steps, coupled with a bold, independent agenda, can lead to the kind of legislative breakthroughs that have been missing in Washington for too long—and that we can no longer do without.
As you prepare to assume the awesome responsibility of leading our country during a difficult period in our history, I want to leave you with one story. On September 11, 2001, I was a first-time candidate running for mayor of New York. After the attacks on the World Trade Center, one of my advisers said to me: "You sure you want this job?" Without blinking, I replied: "More than ever." At the time, I had no experience in politics, so I hadn't learned what I couldn't do. Looking back now, I realize that was my greatest asset.
Over the next four years, there is nothing that you cannot achieve—if, from the start, you refuse to be bound by Washington's rules and conventions, if you pursue a bold and independent agenda that brings the two parties together and if you are honest with the American people about costs and benefits.
Good luck. And if I can be of any help, just call.