Last month, I asked Sen. Elizabeth Warren (D-Mass.) some big policy questions and then offered my reactions. Readers seemed to embrace a calm, polite exchange of policy ideas. I decided to try it again, asking Los Angeles Mayor Eric Garcetti (D) five questions, some identical to those I asked Warren and some new ones. Here are the questions and his answers. Below are my reactions.
Question 1: Should we open markets internationally, increasing free trade and creating new opportunities rather than slapping tariffs on foreign products?
A debate over being “pro-trade” or “anti-trade” is out of touch with today’s economy. The fact is, there are far more customers for American products outside of the U.S. than there are here at home. With open markets and a level playing field, American workers can out-compete workers anywhere in the world.
My perspective on trade is firsthand. As mayor, I oversee the Port of Los Angeles — the nation’s busiest port, which together with its twin Port of Long Beach account for nearly 40 percent of the nation’s cargo and 1 in 9 jobs in Southern California, and are tied in some way to about 1 in 50 jobs nationally. As mayor, I’ve traveled to China, Japan, South Korea, Vietnam and Mexico to meet with heads of state and business leaders to promote trade with L.A. companies and through L.A.’s seaports and airports — because that generates L.A. jobs.
Other countries cheat and use all sorts of tactics to make it difficult and more costly for American products to enter their markets. They dump artificially cheap products into our market, often with the help of subsidies from their home government, to drive down prices and push American competitors out of business. And this has been the case for too long, on the watch of administrations of both parties.
Yet, this administration’s trade temper tantrum has only made things worse. It’s effectively a tax on American consumers and producers — higher aluminum costs for manufacturers, higher beer and soda prices for consumers, fewer buyers for agricultural exports. And there’s no sign China is changing its behavior. In fact, it is digging in.
We need a pro-worker trade approach that puts American jobs — not corporate profits — front and center. That means we need the necessary trade-enforcement tools to respond with speed and force — and the right tariffs at the right time will be part of this.
Our anti-dumping and countervailing duties rules are antiquated and ponderous. The career professionals who administer these statutes are overwhelmed and under-resourced. We need domestic tools that are more nimble, sanctions with sharper teeth, and a World Trade Organization that is reformed and more responsive to worker and environmental concerns.
Better trade policy and opening new markets, however, are simply not enough to fix our nation’s economic ills — and they can’t be seen in isolation from a new approach to jump-starting wage growth for American workers. We must do the hard work of developing a national competitiveness strategy for economic development that works from the ground up and starts in every community in every part of America.
Question 2: What is the right balance of taxes, expenditures and debt?
The right balance of taxes, expenditures and debt cannot be determined through an abstract calculation. It will be found by looking at the real-world impact of those decisions. The truth is that taxes, expenditures and debt are all tools of government action. Some in politics approach this from the perspective of an ideological crusader. They see “low taxes” or “more government spending” or “eliminating our national debt” as the answer no matter what the question and what the circumstances — in good times or bad.
Aggressive government spending during the Great Recession was absolutely necessary. Spending that invests in people, innovation and infrastructure delivers an ROI, as does debt that does the same. Politically driven spending and debt, of course, simply rack up deficits. When deployed appropriately, tax cuts can help spur economic innovation and growth and put more money in the pockets of American workers. But the tax cuts we’ve seen under this Congress and this administration have amounted to a giveaway to the wealthiest corporations and individuals. Make no mistake — this is not an unnatural or unexpected outcome. It’s what the tax legislation was designed to do, making it an example of the shamelessness in Washington policymaking today.
One example of the right approach: Instead of academic debates about taxes, spending, and debt, Washington should act on the bipartisan consensus and invest in a real infrastructure package to jump-start the American economy. On the same day that Trump was elected president, local jurisdictions approved $230 billion in local infrastructure measures. Our Measure M in L.A., the largest in history times two, will generate $120 billion and create 745,000 high-paying jobs for decades to come — with those benefits being complemented by congestion relief, cleaner air, quality-of-life improvements and more.
Question 3: People want to live in cities, especially L.A., which puts upward pressure on housing costs. Is this an instance in which government regulation (i.e., zoning) has hurt rather than helped average Americans?
Zoning is a tool that, when properly used, makes cities work better for our residents and businesses. There is no doubt that in many cities, our land use plans and zoning rules must be reformed to reflect changes in the marketplace, changes in how people live and work, and the economic and demographic pressures of today. In L.A., my administration is working through the first comprehensive overhaul of our zoning code since 1946, and the bureaucratic inertia and parochial politics that delayed us to this point have absolutely hurt people and their quality of life.
Our overhaul effort is not top down; rather, it does what government at every level should be doing — listening to the voices of everyday people and learning from their ideas. With thousands of hours of community meetings, the result is one that reflects the needs of the people who live and work in Los Angeles.
Back in the 1940s, L.A. was filled with wide-open spaces and was home to a robust streetcar system. Our population was less than half of what it is today. As I write this, our metro area has overtaken New York City’s as the most densely populated region in the nation.
The laws of supply and demand apply to cities as well as businesses. The cost of housing in L.A. has increased dramatically because more people want to live here. They come to Los Angeles every day, not just from around the United States but from around the world. Their hard work and hustle is creating jobs and driving our economy. It’s government’s job to bring that same ingenuity to our response. We’re doing that by using every tool at our disposal to create more affordable housing, including common-sense zoning. It also means America’s most ambitious reimagining of a modern transit system, that includes 15 new transit lines underway, all at the same time — something never before seen in history — with zoning changes tied to that transit.
Question 4: Apple is now valued at more than $1 trillion. How do you create an economy in which there are lots of Apple success stories, but prosperity is more widely shared?
Apple was famously started by two guys in a garage. It’s the quintessential start-up story. But what too often goes untold is that Apple’s founders benefited from a public school system that was the envy of the world, and that their fledgling company benefited from government small business loans that invested in the success of a new enterprise.
Those and other systems that provided the foundation for Apple’s rise — and for millions of Americans to enter the middle class — have sharply declined. Investing in education that prepares Americans for the economy of today and to adapt to rapid economic change is essential to ensuring our economy is sustainable and is essential to making sure we continue to be the leading source of Apples, Googles and the like. STEM education, increasing access and affordability to higher education, government investment in basic research, encouraging private sector investment in the places and people too often left behind, tougher enforcement of anti-trust laws — these are necessary elements to our future success. What certainly does not work is a tax bill that gives Apple more money when it was already sitting on billions in cash — money it already wasn’t able to spend efficiently.
Question 5: What do mayors and governors know about immigration that the federal government doesn’t?
Mayors deal with the practical realities of immigration while Washington plays politics. The reality in my city, and in many others, is that immigrants start up most of our businesses — they are a boost to our economy. And when local police departments aren’t burdened with the federal government’s enforcement role, crime goes down. It’s easy to spend your time throwing out soundbites on cable TV. But in L.A., we’ve lowered crime to 1950s levels because our immigrants will work with our police department against gangs and crime. Break that trust and you will see law and order suffer, and people get hurt.
My response to Garcetti: I’ll start by thanking Garcetti for taking the time to give thoughtful answers — not one of which involved the president. It’s a helpful reminder that the brain-dead policy debates of Washington do not need to set the tone for our politics. We get dumber by the day as citizens if we don’t make an effort to consider critical issues outside the context of partisan politics.
I was surprised how much of what he said resonated with me — and I think would find favor among center-right Americans. Garcetti’s answer on trade is about the best — from the perspective of a free trader — that I’ve heard from a Democrat. The mayor embraces the idea that trade benefits U.S. markets and that trade warriors who obsess about the trade deficit are going down a dangerous road. Unlike many elected officials, Garcetti plainly understands that tariffs are a tax. I would also agree that trade is not the end-all-and-be-all of economic policy. Trade is a means to an end — a more prosperous America and a more prosperous and less conflict-ridden world. Likewise, I was heartened to see that Garcetti will acknowledge that some government regulation is bad insofar as it creates inequities (existing homeowners over newer, less affluent Los Angelenos.) It’s also refreshing to hear full-throated praise for capitalism without the usual accusations of corporate greed. He’s right that the problem, if there is one, is that the pipeline to the next generation of start-up billionaires is too narrow. And finally, he came up with the best rationale for not making local law enforcement the lackeys of federal immigration enforcement: If police concentrate on local policing, they can reduce crime.
My primary difference with the mayor concerns spending, debt and taxes. It is not enough to say one favors spending that “invests” in people and opposes “politically driven” spending and debt. One man’s “politically driven” spending is another man’s “investment.” While I fully agree the Republican tax cut was ill-designed and did not focus as it should on the main economic issue — raising productivity and wages — we are still left with the question as to what to spend money on and who should spend it. Bold Democrats could address entitlements for the simple reason that the cost crowds out useful discretionary spending that would in fact benefit non-rich Americans’ wages and economic security. It would behoove Democrats (and Republicans, if they ever step away from supply-side economics) to set a reasonable goal for government spending and debt as percentages of GDP, set several priorities (e.g. infrastructure, alternatives to four-year college, national security), and then be willing to reach a compromise on entitlements that includes both revenue and a slow-down in the rate at which benefits grow.
In other cases, I would hope Garcetti would go bigger and bolder. Garcetti knows all too well about Los Angeles’s enormous homeless problem and the lack of affordable housing options, especially for younger workers. What would be of benefit is a comprehensive approach that affects not only zoning but also other regulatory issues, broadly described as the “captured economy.” These are policies, especially zoning, occupational licensing, financial regulation and intellectual property laws, that while well-meaning favor the haves over the have-nots.
For example, “Today, around 25 percent of American workers need a state license to do their job—up from 10 percent in 1970. Over 1,000 different occupations are now regulated in one state or another. Although these regulations are justified in the name of protecting consumers’ health and safety, the evidence that licensing improves consumer welfare is weak. By contrast, there is extensive evidence that licensing is a great deal for incumbent service providers, boosting their incomes by making it harder for potential competitors to enter the market. This barrier to entry discourages innovation, exacerbates income inequality at the high and low ends, and undermines geographic mobility.” It’s up to mayors, governors and state legislatures to root out these status-quo preferences — be they zoning or too-big-to-fail bank protections — as a way to unleash innovation, shift power away from the already powerful and create more opportunities for Americans who need the most help.
In closing, I will say that in 2020, Democratic primary voters should seriously consider nominating a mayor. (Several are considering a run.) They have actually done things, solved problems and dealt with the messy compromises one needs to make to govern well. Outside of the Washington maelstrom, they’ve had to eschew soundbites and partisan dogma. After a president who knows nothing and has never been accountable for results, it might be refreshing to hire someone who knows the results of policies firsthand and gets immediate blame or praise for his choices.