Senator Hillary Rodham Clinton carried coffee and hot chocolate to the crowd outside the Abyssinian Baptist Church in Harlem after attending services there on Sunday.
Senator Hillary Rodham Clinton said that if she became president, the federal government would take a more active role in the economy to address what she called the excesses of the market and of the Bush administration.
In one of her most extensive interviews about how she would approach the economy, Mrs. Clinton laid out a view of economic policy that differed in some ways from that of her husband, Bill Clinton. Mr. Clinton campaigned on his centrist views, and as president, he championed deficit reduction and trade agreements.
Reflecting what her aides said were very different conditions today, Mrs. Clinton put her emphasis on issues like inequality and the role of institutions like government, rather than market forces, in addressing them.
She said that economic excesses — including executive-pay packages she characterized as often “offensive” and “wrong” and a tax code that had become “so far out of whack” in favoring the wealthy — were holding down middle-class living standards.
Interviewed between campaign appearances in Los Angeles on Thursday, she said those problems were also keeping the United States economy from growing as quickly as it could.
“If you go back and look at our history, we were most successful when we had that balance between an effective, vigorous government and a dynamic, appropriately regulated market,” Mrs. Clinton said. “And we have systematically diminished the role and the responsibility of our government, and we have watched our market become imbalanced.”
She added: “I want to get back to the appropriate balance of power between government and the market.”
In the last two weeks, Mrs. Clinton has devoted most of her public remarks to the economy, and she won the New Hampshire primary and the Nevada caucus largely because of support from households making less than $50,000 a year, according to polls conducted by Edison/Mitofsky.
Mrs. Clinton’s approach to the economy would have three main components. She would roll back the Bush tax cuts for households with incomes over $250,000 while creating more tax breaks below that threshold; impose closer scrutiny on financial markets, including the investments being made by foreign governments in the United States; and raise spending on job-creating projects like the development of alternative energy.
“We’ve done it in previous generations,” she said, alluding to large-scale public projects like the interstate highway system and the space program. “But we’ve got to have a plan.”
Using blunt and at times populist language in the interview, Mrs. Clinton, Democrat of New York, tried to steer a course between the often business-friendly themes embraced by her husband and the straight populism that John Edwards, the former senator from North Carolina, has used in his presidential campaign this year. Senator Barack Obama, Mrs. Clinton’s main rival for the Democratic nomination, has also begun using more of her kitchen-table language in recent days.
Although the two Clintons share similar views on a wide range of economic issues, she has long been more skeptical about the benefits of freer trade and other aspects of a free-market economy. While he peppered his 1992 campaign speeches with both populism and calls for personal responsibility, including welfare reform, she talks less about irresponsibility among individuals and more about irresponsibility in corporate America and the government.
Perhaps the bigger difference, though, is that Mr. Clinton was running for president when the federal budget deficit was much larger than it is now and the United States seemed to be falling behind Western Europe and Japan in economic competitiveness. Mrs. Clinton is running when the economy has grown at a healthy clip for six years but incomes for most Americans have barely outpaced inflation.
Republicans say that her tax increases on the affluent and her spending proposals would increase the deficit, but Mrs. Clinton’s advisers respond that she, like her husband, is a fiscal conservative. They add that reducing the deficit is no longer sufficient, because today’s problems have less to do with the size of the economic pie than the way it is divided.
“Inequality is growing,” Mrs. Clinton said. “The middle class is stalled. The American dream is premised on a growing economy where people are in a meritocracy and, if they’re willing to work hard, they will realize the fruits of their labor.”
Mrs. Clinton’s approach involves programs narrowly focused to deal with specific problems, a strategy that economists say has pluses and minuses. Her proposal for short-term economic stimulus, centered more on home-heating and mortgage subsidies than a broad tax rebate, has generally received lower marks from economists than Mr. Obama’s plan, which emphasizes immediate tax rebates to most workers.
The Clinton plan “has moving parts” and is “more complicated,” said Robert D. Reischauer, president of the Urban Institute and former director of the Congressional Budget Office. “It’s not as clear the stimulus would get into the system rapidly Mrs. Clinton, whose campaign initiated the interview, can speak in both fine detail and sweeping historical terms about the economy — almost as would a policy adviser, which she essentially was for a long time. When talking about the middle class, she divides the decades since World War II into two periods, using the same cutoff point that many economists do.
Skip to next paragraphIn the first period, from 1946 to 1973, the pay of most workers rose steadily. The income of the median family — the one earning less than half of all other families and more than half of all others — more than doubled during those years, to almost $50,000, in inflation-adjusted terms, according to Census Bureau data analyzed by the Economic Policy Institute, a liberal group in Washington.
Since 1973, the income of the median family has grown only about 25 percent.
During the earlier period, Mrs. Clinton said, the share of workers in labor unions grew, allowing workers to win raises and benefits that they can rarely win on their own. Marginal tax rates on the affluent were “confiscatory” by today’s standards, she said. (In the early 1970s, the top rate, which applied to income above $1 million in today’s terms, was 70 percent; the top rate now is 35 percent.)
Jobs once paid enough that only one parent in many families needed to work, saving them from expenses like day care. And not only did the federal government invest in public goods like the highway system, but companies also invested more in communities than they do today. In Rochester, for example, Kodak helped build hospitals and schools.
“You had a corporate ethos, that, because of the more self-contained American economy, was really focused on community,” Mrs. Clinton said. “There was a sense of multiple obligations. It wasn’t just to one’s shareholders. It was also to one’s employees, to one’s community.”
Mrs. Clinton mentioned technological change, which has eliminated the need for many blue-collar jobs, as well as global trade, which studies suggest may be holding down the wages of some Americans.
But when discussing the causes of the middle-class wage slowdown, she tends to focus not on market-based changes, like technology and trade, but on institutions, like unions and the government.
Her first priority, she said, would be changing the tax code. She has proposed tax credits for college tuition, retirement savings, health care and alternative energy use, most of which would go to lower- and middle-income families. She would also raise the top marginal rate to 39.6 percent, its level for much of her husband’s administration. Increasing high-end tax rates would bring in $52 billion a year, her campaign says, and help pay for some of her other proposals.
“It’s shocking that there is such a continuing political pressure to lower tax rates on the wealthy, when so much of what we look back on now with nostalgia and pride,” she said, referring to the decades immediately after World War II, “was at a time when those who were well off were paying a significantly higher percentage of their income.”
She said she would also use the White House bully pulpit to inveigh against the current level of executive pay. Though it is difficult to reduce such pay with new laws, she said, she wants to consider proposals that law school and business school professors have made along these lines.
“We have this class now of professional corporate managers who are not the creators of the corporation — they very rarely had anything to do with starting the business or building it up,” she said. “And then they come in and they believe their No. 1 obligation is to secure the biggest possible pay package at the expense at everybody else.”
On this subject, she sounds very much like Mr. Edwards, yet, unlike him, she has still received considerable support from top executives. She has been endorsed by John J. Mack, the chief executive of Morgan Stanley; Peter Chernin, president of the News Corporation; and Lloyd C. Blankfein, the chief executive of Goldman Sachs, who received a $67.9 million bonus last year.
David Bonior, Mr. Edwards’s campaign manager, said her support from Wall Street suggested that she would be as friendly to corporate America as her husband was.
Still, if Mrs. Clinton is elected, she might bring the toughest regulatory scrutiny of any president in a generation. Mr. Clinton nudged the Democratic Party toward a more laissez-faire economic policy, and President Bush has gone considerably further in this direction.
“I just believe strongly that we are in great need of a total overhaul,” she said, arguing that the Bush administration has outsourced too many functions and damaged the federal government’s competence.
Last March, when many officials in the administration and at the Federal Reserve were saying that the housing slump would not be too severe, she warned in a speech about “trouble signs below the horizon” with subprime mortgages. She has suggested that she would have been more willing to crack down on some lending practices than the current administration has.
But perhaps the most telling example of her approach is how she would try to clean up the mortgage problems. She has called for a 90-day halt to foreclosures on homes with subprime mortgages and a five-year freeze in the interest rates on all subprime mortgages, many of which are scheduled to jump.
The proposal would most likely reduce the number of coming foreclosures. But it would also potentially reward real estate speculators and others who took out mortgages they could not afford. In the process, it could raise interest rates for everyone else, economists say, by forcing banks to rewrite the terms of loans retroactively and to lose money on some.
Her plan goes significantly further than Mr. Obama’s. She decided, in effect, that the downsides of rewarding irresponsible borrowing was outweighed by the benefits of reducing foreclosures.
She said she could “understand totally” the frustration of people who did not take out such loans and now wonder why the government would help those who did. “What I’m trying to do,” she said, “is practically stabilize the patient so we can begin to try to cure this mess that everybody got us into.”
If she were to win the Democratic nomination and the general election, she would most likely take office at a similar economic moment as her husband, with the economy struggling to emerge from a downturn. In 1993 — with Mrs. Clinton playing a role that Bob Woodward later described as “de facto chief of staff” — Mr. Clinton pushed through an economic plan without a single Republican vote.
Many analysts say that plan played a role in the Democrats’ loss of Congress the next year, but it is also widely credited with helping lay the groundwork for the 1990s boom. Mrs. Clinton suggested that she would be willing to take a similar approach in 2009.
“You try to find common ground, insofar as possible. But if you really believe you have to manage the economy,” she said, “you have to stake a lot of your presidency on it. Because at the beginning is when you’re strongest.”
President-elect Barack Obama with two new members of his economic team: Peter Orszag, left, who was named director of the Office of Management and Budget, and Rob Nabors, the new deputy director
