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Atlantic Unbound | February 5, 2004
 
Interviews
 
Let's Make a Deal

Matthew Miller, the author of The Two Percent Solution, talks about the promise of the political center and the life we might find there

.....

The Two Percent Solution

The Two Percent Solution
[Click the title
to buy this book]

by Matthew Miller
PublicAffairs
320 pages, $26

o matter who emerges victorious from the Democratic primaries this spring and the general election in the fall, the President who takes office next January will face a daunting roster of challenges: costly military commitments abroad, record budget deficits at home, and the stewardship of a country in which millions of working families remain in poverty and millions more lack health insurance. Looking ahead, the pressure will only increase as the Baby Boomers begin to retire, stretching Social Security and Medicare to the limit as trillions of dollars in as-yet-unfunded liabilities come due. Cynicism and anti-Washington sentiment runs high.

Offering a prescription for these ills is the journalist Matthew Miller, whose thought-provoking book The Two Percent Solution: Fixing America's Problems in Ways Liberals and Conservatives Can Love was published late last year. A veteran of the consulting firm McKinsey & Company and the Clinton White House, Miller believes that these troubles can be traced to a vicious cycle of popular disgust and official timidity that breeds a self-fulfilling lack of civic imagination on a national scale. Eager to reverse these trends, Miller sounded out a host of social scientists, business executives, labor leaders, and current and former government officials as he formulated a grand new policy vision that seeks to enrich public life and solve seemingly intractable policy dilemmas while re-animating the dormant center of American politics.

The key, in Miller's view, is a series of "grand bargains" in which politicians of the left and right would agree to search out the greater good, looking beyond the partisan trench warfare that often frustrates voters and produces meager results. To find common ground, Miller writes, liberals should be more open to market-friendly approaches to longstanding problems, while conservatives should acknowledge that serious problems require serious funding in order to be solved.

Miller envisions a not-too-distant future in which health-care coverage would be universal, a wage subsidy would lift working families out of poverty, public education would be a well-funded site of innovation and popular esteem, and political campaigns would be financed in as rigorously democratic a way as possible. All of this can be achieved, he argues, with a spending package equal to roughly two percent of the gross national product, some $220 billion annually. Although large on its face, such an expenditure would raise government spending as a proportion of GDP to only 22 percent—the average level maintained by Ronald Reagan's and George H.W. Bush's Administrations.

To pay for his plan, Miller proposes a series of cost-saving measures, including cuts in "corporate welfare" and redundant health-care subsidies, along with the rolling back of a portion of President Bush's tax cuts and the gradual phasing in of a gasoline tax aimed at reducing U.S. dependence on foreign oil.

Although Miller believes that there is a moral imperative to extend American prosperity to as many people as possible, persistent social inequalities and the coming Social Security crunch also demand attention on purely pragmatic grounds. He writes:
The sheer size of this challenge will make it hard to take up new causes unless we've built them into our vision of American society in advance. In this context, getting serious about the uninsured, the working poor, inner-city schools, and rigged elections isn't a job for altruists and do-gooders; it's about self-interest. To get the economic growth we'll need to pay for all those gray boomers, we can't afford to leave a huge swath of the country ill-schooled, ill-paid, or just ill—not to mention closed out of the democratic process altogether. Instead, if we're to sustain America's greatness, this new decade will have to be one of those rare moments in which real answers trump ideology and political jockeying.
Matthew Miller is a syndicated columnist, a senior fellow at the Center for American Progress, and the cohost of the public-radio political-affairs program "Left, Right, and Center." He is also a frequent contributor to The Atlantic, where portions of The Two Percent Solution dealing with health care, school vouchers, and teacher compensation have previously appeared. He lives in Los Angeles with his wife and daughter.

We spoke recently by telephone.

—Benjamin Healy



Matthew Miller
Matthew Miller   
The Bush Administration has just unveiled its latest budget, which projects a record deficit of $521 billion. Since a lot of the ideas in your book were presumably developed in a time of surpluses, how does the current budget situation change the political calculus underlying your proposals?

Well, I think we need to both cut the deficit and think bigger, so the deficit makes it harder politically, but remember that the whole idea of the two-percent framework is to show people and persuade people that it doesn't take some utopian, wild-eyed liberal revolution to get serious about the uninsured and the working poor and urban schools—it takes moving two cents on the national dollar. That fact remains true. But I do think that deficits matter—you may know that I was a big deficit hawk from the Clinton Administration days. We do have to deal with it, and the way I dealt with it in the book was to suggest repealing a third of the Bush tax cuts, mostly for the well-off, to fund this package. I also include a lot of other stuff that is generally considered tough medicine budget-wise. I actually don't think the outlook is much different from before, even though this year's number has spiked. That's partly because of Iraq and Afghanistan, which I don't view as ongoing, annual expenditures. But I do think that once the dust clears from the one-time Iraq costs and once growth is on a more stable path, you're still going to have deficits in the $200 to $300 billion range.

The bulk of the shortfall comes from Bush's tax cuts, which don't have a chance to last beyond the onset of the Baby Boomers' retirement anyway, because of the extraordinary expense. So all of those cuts will have to be on the table to both fix the deficit and to do the domestic initiatives that we ought to do. Even if they were repealed it would still leave government smaller than when Reagan was President. Bush is trying to create this myth of overspending now, which is ludicrous—first of all because he's trying to blame some generically evil Congress for overspending when it's his own party that follows the White House's tune very closely. But, secondly, Bush is only going to spend 20 percent of GDP this year, whereas Reagan and Bush the First spent 22 percent of GDP. It's the revenue side that's the problem. Whereas the average revenue has been around 18.5 percent of GDP, Bush this year will have it at 15.8 percent of GDP. That is the lowest revenue level we've had in fifty years. Back in 1950 Social Security still hadn't been phased in for most seniors, and Medicare and Medicaid hadn't even been invented. It's a revenue shortfall that's the major driver of the current deficits we see, and that's an incontestable fact.

You've spent time working in business as a consultant, and in the 1990s you were an aide in Clinton's budget office, so you've had government experience as well. How did these different environments shape the ideas you discuss in the book?

In the journalism I've done I've tried to find what seemed to me pragmatic but also hopefully ambitious ways to get both sides together to address some important problems—the uninsured, the working poor, schools for poor kids, and campaign finance, especially to the extent that it might enable discussion about these other issues. At the same time, If you're someone who has been a manager for McKinsey and then on staff at OMB, you can't help but be aware that it only takes very small changes to come up with very big numbers that could let you really get serious about a lot of this stuff. I wrote a column when I was at The New Republic, around eight years ago, about what I called the "10-percent solution." You see, I was more ambitious then, but now I've scaled back a bit. But it just kept gestating, and eventually it came together in a bolt of lightning—a package that could blend the best liberal ideas and conservative ideas in a pragmatic way.

For a long time a popular political style associated with reform has been that of the anti-Washington outsider, whether it's Jimmy Carter, George W. Bush, or Howard Dean sounding the alarm. The plan you put forward here constitutes very much—and I don't mean this in a pejorative sense—an insider's solution. Do you think the popularity of the anti-Washington line contributes to the gridlock that persists in government?

Well, you're right, there is definitely truth to that, and yet I try to work both sides of the street in some sense. I obviously want my approach to be credible and serious in the most credible and serious policy circles. Yet at the same time, to me this is not at all the typical Beltway discussion of this, because you'd never see on offer plans that move 2 percent of GDP this way. So I'm hoping to begin a discussion that can create a constituency for these ideas, first among people who read the book and are aware of it, and then trickling throughout the system.

I'm not a politician-basher. I empathize with politicians, and I actually think good politicians are essential and incredibly valuable. At the same time, we hear so much about the crisis of leadership we face, and some of that's true. But if we're honest, we also suffer from a crisis of followership and citizenship, and in a democracy we largely get the government we deserve. If we want our politicians to be talking differently about some of these things, we have to start a constituency that makes the world safe for them to do that. So I guess, to that extent, I'm trying to encourage the people to form an army of two-percenters outside of government that will change the way our leaders feel they can talk. Because they reflect us, basically.

At one point in your book you sit down for an extended meeting with two congressmen (Rep. Jim McCrery, R-La. and Rep. Jim McDermott, D-Wash.) as they hammer out a hypothetical agreement on a bipartisan health-care plan. I have to say I was surprised to see how conversant they were with the matters of policy, and also how genuinely concerned they seemed with working something out that would be consistent with their principles while also actually helping people—they're not just fast-talking empty suits, to be sure. Do you think lawmakers like these are in the minority? Is the popular image of politicians equipped to reflect the more substantive dimensions of their jobs?

From Atlantic Unbound:

"Health Care: A Conversation With Jim McDermott and Jim McCrery" (October 2000)
The transcript of Matthew Miller's conversation with Representatives Jim McDermott and Jim McCrery on March 29, 2000. The conversation was the basis of his article "Health Care: A Bolt of Civic Hope."
It's a good point. McCrery and McDermott are certainly on the extreme end of knowledge and substantive engagement, because they've devoted so much of their careers to the health-care debate. But if you go member by member, there are areas where all of them have expertise and passion, and in the reasons that drove them into public life, there is originally substance. Between the whole media culture and the 50-50 division of power, we have been given this one-dimensional view of our political culture as just a jockeying for influence. That's not my view of what most politicians are like behind closed doors at all. That's why I think we have to have some empathy with their situation in order to change the system.

As far as constituencies go, after September 11 conventional wisdom held that we might see a redrawing of the social contract as a result of everyone's having been through trauma together, and that you might find people being a little more inclined to mutual sacrifice and fellow-feeling. Do you think this has happened at all?

I think Bush squandered an enormous opportunity to lead the country in this direction, and his leadership should be faulted. He obviously had to deal with a military response to the attacks, but I maintain that America can walk and chew gum at the same time. The idea that Bush has used this time to continue to cut taxes, mostly for the best-off, while running record deficits and putting the full tab for the aftermath of Iraq on our children I think is immoral.

You're a Democrat, as you mention in the book. How do you square your own partisanship with your efforts to bring both sides together?

Well, the book's themes and ideas are totally consistent with Bush's compassionate conservative rhetoric, but we know now several years into his Administration that that rhetoric is totally phony. Bush's basic domestic policy is to cut taxes and to have a bunch of cosmetic things that look like he cares about the other stuff, to persuade independent voters that he's a decent guy. So what I say to people is, You have to view the agenda in the book as the magnanimous terms of surrender to be imposed by a victorious Democrat after we beat Bush in the fall.

People to the left of me will say, "Well then, why can't we just take the two percent? Why do we have to do it with these eclectic means that you're talking about?" My answer is that for reasons of sound, economically rational policy, and for reasons of political sustainability, we have to use the kind of approaches I'm talking about. The best example is that of a living wage, where the left thinks that if you just mandate that employers must pay $10 to $12 an hour that solves the wage problem, when for the reasons I explained in the book, you can't solve the problems that way. It's economically irrational, and you'll end up hurting the unskilled workers you're trying to help. I think to get durable changes in the social commitments we make as a nation you have to have ideas that can pass by votes of 70-30 not by 51-49, if you see what I mean. And for that reason you need to have what I'm calling "ideologically androgynous" policies that marry liberal goals with somewhat more conservative or market-friendly means. I've spoken to a number of conservative groups on my book tour and they've been very receptive. I tend to be a liberal who conservatives are open to engaging with, because my attitude on how to address some of these problems is perhaps a bit more eclectic than the others'.

To turn to policy for a second, Social Security emerges as a sort of 800-pound gorilla in your book, representing the non-negotiable cash crunch that government will have to plan around once the Baby Boomers start to retire. How did this come to pass?

I guess the short answer as to why it's the 800-pound gorilla is in part that it's been an enormous success. Social Security has done so much to alleviate poverty among the elderly, and for that reason it has grown to be enormous program, with a huge constituency that will start doubling in size as the Boomers retire. That makes it very politically difficult to suggest changes that slow its growth. But if we want to have a government that a decade from now does anything beyond just health care and pensions for seniors, then we're going to have to be open to sensible changes that will slow the growth of these programs somewhat, to make room for other needs that non-elderly Americans might have.

As you point out in the book, the health-care proposal you advance is similar to the one Bill Bradley proposed during the 2000 campaign, which was in turn similar to but slightly less ambitious than what George H. W. Bush had come up with in 1992. Bush's plan was less ambitious still than what Richard Nixon of all people had put forward in the 1970s. How do these windows of opportunity shift and shrink so significantly?

From the archives:

"A Triumph of Misinformation" (January 1995)
Most of what everyone "knows" about the demise of health-care reform is probably wrong—and, more important, so are the vague impressions people have of what was really in the Clinton plan. By James Fallows
Great question. The political center of gravity in the country has shifted dramatically to the conservative side in the last twenty-five years, and there have been people who have written whole books trying to assess and deconstruct what happened: loss of faith in government, Watergate, and Vietnam, the excesses or failures of the welfare state. (I think these last failings weren't as dramatic as some people make out, but there were flaws that needed to be addressed, and that fact was harnessed successfully by conservative politicians and think tanks, who have done a good job discrediting these sorts of public goals.) When Clinton's big effort on health care failed, that sort of put Democratic ambition into a deep freeze. If we had been able to pass a big health-care plan in the Clinton Administration to do something serious about the uninsured, I think American politics would be totally different, and I think that's one of the reasons that Republicans fought to the death and made a decision to demagogue it. The Clinton Administration plan may not have been done in the best way, but it was also clearly demagogued for political reasons. Bill Kristol and others at the time realized that if something passed, or even if it took a big bite out of the problem and insured 20 million of the uninsured, it would be seen as an enormous victory for Democrats and for the idea that the government could do something good and affirmative. That was politically intolerable to the Republicans, so they had to brand it as socialism. There were a lot of fair critiques that you could make about the Clinton health-care plan, but it wasn't socialism. Margaret Thatcher would have been thrown from office if she had proposed something as radically conservative as the Clinton plan, which still had private providers and still left a bunch of people uncovered.

What people don't realize is that we continue to grow more and more wealthy, and it's demonstrable that the conservative mantra that growth is the answer isn't enough, because we've grown 40 percent in the last decade and the problems I'm talking about in the book have worsened. The economy has doubled in size since Ronald Reagan, and these problems are only deepening. In the book I argue that we should try to do things in ways that are market friendly, while at the same time realizing that in order to address the problems of those who are left behind, it is going to take some kind of government action. One of the things I'm hoping to accomplish with the book is to try and put these problems back up front and center in an effort to help nudge the debate in that direction.

Are third parties a viable way to expand the debate?

The historian Richard Hofstadter had a great line about third parties. Their role is to "sting like a bee and then die." And I guess I think that's right. Third parties end up representing something that's not getting attention but that there's a kind of inherent constituency for. They prove there's a constituency, and once they do that their ideas and agendas get co-opted by the major parties. For example, I think what Ross Perot did on the deficit in 1992, his pre-lunatic phase, was incredibly important. It proved there was a constituency for fiscal sanity. We could use that again now. Look at what the Clinton Administration did when they first came into office. I don't think the focus on the deficit would have been as intense if Ross Perot hadn't gotten 19 percent or whatever he got of the vote. I think in the long run, we'll have the two major parties representing a kind of "liberal impulse" and "conservative impulse," with varying degrees of consistency and fidelity to those ideas at different times.

As a Californian, what do you think of the centrist territory that Arnold Schwarzenegger has staked out so far as governor?

I was against the recall because I thought it was a crazy process, and Schwarzenegger ran a very bromide-laden and totally vacuous campaign in terms of actual political choices—which I guess is more power to him because he got elected with maximum flexibility. But I'm trying to be hopeful right now. If he governs as what used to be called a "Rockefeller Republican"—which is the way he cast himself—it could be enormously constructive for California and for the country, because that's been the missing strain in the Republican Party for the last twenty years. All the Rockefeller Republicans have died off, or been marginalized. If you had Arnold presenting an alternative to the bogus, phony compassionate conservatism that Bush is offering nationally, I think it could change the Republican Party, and that would be great for the country. One thing that's really encouraging is that Dick Riordan, the state education secretary, is working on a plan that would better target state monies to needier kids, and make it so that more money goes to kids who are at risk, so that schools with more at-risk kids get more money in aggregate. That's a really interesting development, and if he's able to pull it off it shows what a more-progressive Republican Administration might look like. I'm trying to remain hopeful that all those Kennedys around Schwarzenegger the night he won weren't there for nothing.

To turn to the ongoing presidential campaign, something you bring up repeatedly in your book is the unwillingness of political campaigns take bold leadership steps and test the cautious boundaries they set for themselves. How would you evaluate the Democratic campaign so far in terms of substance and leadership?

Well, I'm encouraged on health care, because the Democrats have all been aiming high in ways they didn't when Al Gore was the nominee in 2000. He was only talking about insuring children, which is everyone's sort of cheap response, because it costs less and it sounds good. But now the Democrats—even the ones who are more conservative like Joe Lieberman—have offered more ambitious health-care plans that talk about 30 million of the uninsured, so that's good. And I think John Edwards's rhetoric has been very good. He keeps stressing in his stump speech that we have a moral obligation to the working poor. It's just a shame that the Democrats didn't aim higher when we had these big surpluses around. But I think on the domestic side, the campaign is going to pit discussion of a lot of these domestic needs versus Bush's tax cuts mostly for the best off, and I think that's a debate Democrats can win.

I don't think they're necessarily talking substantively, though, because that's were the math starts to get hard. It's hard to critique them for that since that's not what a primary campaign is about. It's about distinguishing themselves from one another to win the nomination. But I remain hopeful that in the general election some of these ideas can get real traction.

For the past few decades there's been what I guess you could call an "incubation gap" between left and right, with a number of conservative think tanks and institutes that are very well funded and very well organized, and fewer of those types of institutions on the left. I see that you're involved with the Center for American Progress, the new liberal think tank that John Podesta, Bill Clinton's former chief of staff, has founded. How might the emergence of such groups affect the political landscape?

You need to have institutions on the liberal side that are committed to shaping the climate of debate and pursuing the marketing of ideas the way that the Heritage Foundation and American Enterprise Institute have on the right. That's the only way for things to get traction in public life: to pursue them with the same spirit, intensity, strategic sense, and focus that the other side has. They have fundamentally changed where the center of gravity is in American politics, and it's time they were pushed back against by an aggressive organization.


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Benjamin Healy is a staff editor at The Atlantic.

Copyright © 2003 by The Atlantic Monthly Group. All rights reserved.