‘Human Capital’ Touted In Clinton Economic Agenda

Max Zwicky, an economist at the Economic Policy Institute in Washington, criticizes the Administration for reaching a deficit-reduction deal that left minimal federal funds to support its human capital agenda. President Clinton and his team of advisors have spent the first 18 months of his presidency developing a domestic agenda that focuses on the human element of the Administration’s economic plan. Referred to interchangeably as the "human capital" or "lifelong learning" agenda, this blueprint forms the third part of an economic strategy that also aims to reduce the federal deficit and increase access to global markets for American-made products.

The human capital agenda covers a wide range of proposals and programs, including various initiatives related to education and an expanded Head Start program. It also includes a newly unveiled plan to overhaul the welfare system. The Administration’s emphasis on human capital reflects its belief that the federal government must assist in preparing workers to adapt to the economic forces at play in the rapidly changing global economy. Secretary of Labor Robert B. Reich, in his book "The Work of Nations," explains the connection between the investments made by the public sector and a nation’s ability to attract international capital. According to Reich, a nation’s workforce skills and infrastructure quality are what make it unique and appealing in the world economy. Michael Edwards, manager of Congressional relations for the National Education Association, confirms that President Clinton sees education as a crucial foundation for economic growth and productivity.

However, not everyone agrees with the Administration’s perspective on global markets and worldwide competitiveness. Critics argue that while the economy is increasingly global, a nation’s productivity is still determined by the goods and services it provides to its own citizens. Others claim that the Administration’s agenda lacks substance and sufficient funding. Nevertheless, Administration officials assert that they are making strides in changing education approaches and domestic policy administration. Their goal is to ensure that American workers are the most equipped in the world to capitalize on domestic and international markets. William A. Galston, the President’s deputy assistant for domestic policy, believes that if successful, the President will have completely transformed the lifelong learning agenda.

Mr. Galston likens the 103rd Congress to a two-stroke engine, with 1993 being the year in which macroeconomic issues were addressed, such as reducing the federal deficit and expanding global markets through trade agreements. In 1994, the Administration shifted its focus to reform in four areas that are seen as vital components of its human capital strategy: education and training, health care, welfare, and crime. Education became a key focus in 1993 with reforms to the postsecondary student loan system. Momentum grew this spring with the passing of several education-related bills like Goals 2000: Educate America Act, the School-to-Work Opportunities Act, and the Head Start reauthorization bill. The human-capital agenda will receive further support later this year with the reauthorization of the Elementary and Secondary Education Act. Mr. Galston emphasizes that in the ever-changing economy, lifelong learning is not just a luxury but an essential necessity.

Although the Administration’s strategy is not entirely new, it is not driven by partisanship either. Mr. Galston states that it builds upon the national conversation that took place during the 1980s and early 1990s regarding the nation’s economy and the employability of its workers.

At the national level, Mr. Clinton played a prominent role in the National Governors’ Association (N.G.A.) in the mid-1980s. During his time as chairman in 1986-87, the N.G.A. produced a report focused on the role of improved education in economic competitiveness. Prior to that, Mr. Clinton co-chaired the production of "Time for Results", an N.G.A. document that outlined an education agenda for governors. He also led the task force on school leadership and management for that report, while Secretary of Education Richard W. Riley led the task force on school readiness. In 1989, Mr. Clinton spearheaded the development of the six original national education goals.

By the time he became President, Mr. Clinton had already formulated a comprehensive human-capital agenda. According to Mr. Galston, there was no doubt or hesitation in Mr. Clinton’s commitment to this agenda. The challenge now was to convince Congress of its importance and implement it. Fulfilling a campaign promise, Mr. Clinton established the National Economic Council as a domestic counterpart to the National Security Council, with the aim of coordinating economic policy from the White House. Robert E. Rubin, a Wall Street investor, was appointed as the head of the council, and he selected Gene Sperling and W. Bowman Cutter as his deputies. Sperling had previously played a key role in economic issues during the campaign, while Cutter was a former consultant with Coopers & Lybrand.

While Sperling focused on the deficit-reduction package, Cutter convened meetings with high-ranking officials from various agencies to discuss the state of the nation’s workforce. Some of the participants included Undersecretary of Education Marshall S. Smith, acting assistant labor secretary for policy Leslie Loble, assistant labor secretary for employment and training Douglas Ross, Labor Department’s chief economist Larry Katz, Commerce Department’s Mr. Barram, Defense Department’s principal deputy assistant secretary for manpower Louis C. Finch, and counselor to Ms. Shalala Peter Edelman. These meetings resulted in a commitment to a human-capital strategy that was coordinated from the White House but permeated throughout the agencies. "I happen to believe, as a matter of logic and analytics, that human capital is really best thought of as an economic issue," stated Cutter. "In business, the only enduring resource is people."

After seven months of discussions, the task force produced a document that President Clinton utilized as the "country paper" at the G-7 jobs summit in Detroit. While this document has not been publicly released, Mr. Cutter shared that the group came to three critical conclusions: the changing economy requires a workforce with greater technical skills, technology must be applied to education and training, and government programs need to be reevaluated and focused on assisting the lowest end of the workforce. "If we don’t incorporate this sector into job networks, training networks, and education networks, it won’t be a rising tide that benefits everyone," Cutter warned. "The tide will rise, but that boat won’t be lifted." The task force is currently engaged in a second round of discussions that are examining the future of education, training, human-capital, and economic-policy issues.

While these efforts were seen as crucial by Mr. Clinton and his administration, some critics considered the idea of a human-capital strategy to be overly simplistic.

In addition, she mentioned that investing in a human-capital strategy does not guarantee job opportunities. Companies facing financial difficulties might resort to laying off highly skilled employees to keep their businesses afloat. "It’s a way of positioning individuals to compete in the job market," Ms. Berryman explained. "That’s the most we can do for them."

However, government officials claim that they aim to establish a system that enables workers to freely transition between jobs, especially in situations where they are compelled to do so. "Our true objective is to educate individuals to become job creators," stated Mr. Barram from the Commerce Department. Despite this, some critics argue that adequate funding for these projects is still uncertain. Max Zwicky, an economist at the Economic Policy Institute, blames the Administration for reaching a deficit-reduction agreement that leaves little federal funding to support its human-capital agenda.

"Human-capital development is a frequently discussed topic in their rhetoric, and it plays a pivotal role in their concept of economic development," Mr. Zwicky explained. "However, they have backed themselves into a corner." In his book, "The Agenda," investigative reporter Bob Woodward reveals an internal conflict within the Administration between officials advocating for deficit reduction and those advocating for investment in education and training. Unfortunately, the spenders lost.

Although Administration officials acknowledge the difficulty in securing funding for these initiatives, they affirm their commitment to continue fighting for funds. Mr. Cutter emphasized that, apart from money, the Clinton Administration recognizes its responsibility to follow through on its agenda. "There is a general skepticism that government is incapable of achieving anything," he acknowledged. "This places a particular burden on Democrats to be ruthless in ensuring the success of their programs. We absolutely have to hold government programs accountable for delivering."


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