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Franken defends Democratic policies on economy and says Minnesota’s ‘doing a lot better’ than Wisconsin

Responding to criticism from his GOP opponent that Democrats over-regulate, Sen. Al Franken notes in a MinnPost interview that one of the key causes of the Great Recession was Wall Street deregulation.

President Obama sharing a laugh with Sen. Al Franken during a 2012 visit to Minneapolis.
REUTERS/Jason Reed

This is one in an occasional series of articles about the policy positions of U.S. Senate candidates Mike McFadden and Al Franken.

No big surprise here, but — for those who care about such things — the 2014 U.S. Senate race in Minnesota will present plenty of clear policy choices between the leading candidates.

After long, ridiculously substantive, mind-numbingly issue-oriented interviews with Sen. Al Franken and his likely Republican opponent Mike McFadden, I can begin to lay out those differences for you (and may continue until you beg me to stop).

My interview with McFadden ran last week in two parts here and here. I am working to schedule a continuation of issue questions and answers with the Republican endorsee.

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With the Senate finishing a session, Franken was tied up in Washington but we spoke by phone late last week.

McFadden criticizes Democratic policies, which he tends to describe as Obama-Franken policies, for creating a slow, sputtering economic recovery. Democrats put too much regulatory restraint on business making businesses reluctant to hire. McFadden, a businessman, pictures a roaring recovery that would ensue if government interfered less and let business do what business knows how to do. I asked Franken to respond to that theme.

Interestingly, Franken didn’t mention, at least not specifically, that the recession started with a market crash before he or President Obama had taken office. But he did respond to McFadden’s characterization of the current economy this way:

“After 52 months of positive job creation, anyone who looked at the situation, taking into account what was happening when Obama took office, would agree that we’re headed in the right direction.”

The recession that began in 2008 was the worst economic meltdown since the Great Depression, Franken noted, adding that recoveries from recessions that start with a collapse of the financial sector are historically slower than other recessions.

On the argument that Democrats have slowed down the recovery by imposing too many regulations, Franken noted that one of the key causes of the Great Recession was the deregulation of Wall Street that led to risky mortgage-backed securities being sold to unsuspecting investors with AAA ratings. Franken mentioned his own idea: to end the practice of allowing Wall Street banks to choose the credit rating agencies that rate their own products. Franken has sponsored a bill that would change that practice. and it is the subject of his campaign’s most recent TV ad.

Polymet mining project

One of McFadden’s key examples of government regulation that was interfering with job-creating enterprises was the Polymet copper-and-nickel mining project up on the Iron Range. McFadden said that project has the potential to do for job creation in Minnesota what the Bakken oil field has done for North Dakota, but Polymet has been held up for years awaiting EPA clearance to start building the mine.

Franken said he “talk[s] to the Polymet people all the time, and they tell me that this has been a good process and has helped the project tremendously.” Minnesotans want the jobs and economic development that Polymet can bring, Franken said, but they also want clean water. (“That’s what Minnesota means,” Franken said in an aside. “Land of clear waters.”)

The initial environmental impact statement had serious flaws. If the project had been approved based on that proposal, it would have been an environmental “disaster,” Franken said.

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“And so, to me, we have to make sure that regulation isn’t overburdensome, but that there’s a purpose to it… To say this could have been approved in six months or something like that is irresponsible.”

Maybe so, but, as Franken acknowledged when I pressed him on that “six months” statement, the Polymet project has been in the permitting process for more than 10 years. But, he added, “the Polymet people will tell you that if we had approved the project [based on the original design] then, this would have been the last copper-nickel mining in the range, ever. It would have been a disaster.”

Responding more generally to the idea that regulation is bad for prosperity, Franken said that all of the world’s most successful economies rely on regulation. And, he suggested, if you want to see a side-by-side comparison of a state being run along the lines that Democrats favor and one being run by Republicans, look at Minnesota and Wisconsin. “We’re doing a lot better,” he said.

The recovery of recent years has lifted the stock market to record highs, Franken noted, which has helped the already wealthy. But, he added:

“Part of the reason for the slow recovery is that we see all this wealth flowing to the top 1 percent — and to the top one-tenth of 1 percent. But the middle class is under assault. When you have an economy that is 70 percent consumer driven, what you need is people with money to spend.”

Unsurprisingly, Franken comes across as a strong believer that the federal government can play a constructive role in the economy, and especially on behalf of those who have been struggling to get into the middle class.

Franken said many policies that could have helped spread the benefits of the recovery more widely have been tied up in Congress or compromised in ways that made them less effective. I asked him for an example. He said immigration reform. Clearing up the status of immigrant workers would be good for the economy, Franken said, and if you don’t believe him, he added, U.S. the Chamber of Commerce thinks so, too.

Getting more of the U.S. workforce education and training that fits the jobs that are available would be great, Franken said. Our interview was sandwiched around trips to the Senate floor where the the Workforce Innovation and Opportunity Act was under final consideration. (In a rare show of bipartisanship, the bill passed the Senate 95-3 and awaits House action.) Franken  played a substantial role on some elements of the bill and was thanked for his leadership by the bill’s chief sponsor, Sen. Patty Murray, D-Washington.

“I’ve been talking a lot about bringing manufacturing back to the United States — and it is coming back,” he said. “We’ve had this skills gap….We’ve had 3.5 million jobs waiting out there to be filled. If we skill these people up, it’s going to address our global competitiveness.”

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Deficit, debt, taxes, spending

I asked both candidates how alarmed they are at the size of the federal deficit and debt and what they would like to do about it. McFadden said the large debt is his No. 1 worry, emphasizing the unfairness of leaving behind so much debt for our children to bear. The debt, plus the slow growth, plus the high unemployment rate among young people were, I assume, part of what McFadden had in mind when he hyperbolized that Franken is “waging a war on youth.”

On the other hand, McFadden did not put on the table any concrete proposals for reducing the deficit, such as new taxes (he’s against them) or spending cuts (he didn’t specify any).

Franken, by contrast, doesn’t dwell on deficit reduction much in his everyday rhetoric. But when I asked him about it, he said it was important.

“I do think the deficit and the debt need to be addressed,” Franken said. “They’re huge threats to our sustainability.” To bring down the deficit, he would raise taxes on the wealthy, cut spending on specific areas that he believes are not needed, but at the same time increase spending. (He adopts the usual Democratic turn for his spending preferences, calling such spending “investments.”) Said Franken:

“It’s really a question of priorities. There are cuts we should be making, that we can make because some of our priorities have been the wrong priorities. And there are investments we should be making because they help our economy, they help growth. Over time, it’s the combination that will make it sustainable.”

How, specifically, would he reduce spending? It’s a pretty liberal list.

Franken would authorize Medicare to use its bargaining leverage to negotiate lower prices on the prescription drugs it buys for seniors under Medicare Part D. The savings to the taxpayers has been estimated at $240 billion over 10 years, he said.

Franken is sponsoring a bill to save money on federal prisons by allowing non-violent inmates — if the prosecutor, judge and probation officer in the case agree — to go to what Franken called “mental health court” and be sent to treatment that, he said, has been shown to save a lot of money.

Franken opposes a plan that he said would spend hundreds of billions to update the U.S. nuclear arsenal. “We’re not going to use those weapons and I don’t think some other country is going to challenge us because they think maybe some of our weapons aren’t going to work.”

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‘Buffett Rule’

On the revenue side, Franken is a big fan of the so-called “Buffett Rule.” The existing code is full of provision that help the wealthy pay a lower tax rate than the middle class. For example, much of the income of hedge fund managers qualifies as something called “carried interest,” which is tax at the capital gains tax rate, much lower than it would be if it was treated as regular income.

“Forty of the top hedge fund managers make as much as 300,000 teachers,” Franken said. “Yet the tax they pay is a capital gains tax because carried interest is treated as a capital gain… People who make over a million dollars ought to be paying the same rate as the rest of us.” Under the version of the Buffett Rule that Franken favors, anyone’s income above $1 million a year would be taxed at a minimum rate of 30 percent.

The tax code includes $4 billion a year in what Franken calls “tax subsidies” for the oil and gas industries. He would do away with those provisions. Said Franken: “It’s a very mature industry that includes some of the biggest and most profitable companies in not only the world but in the history of the world.”

This post is getting too long, so I’ll just pass along the summary list of the categories of spending that Franken listed as “investments,” because he believes that they ultimately pay for themselves in contributions to the economy:

Federally subsidized research and development (he gave several examples of government R&D projects that contributed to prosperous breakthroughs); education in general (with special emphasis on early childhood education, job training and workforce development), and infrastructure. “From the Erie Canal to the Internet broadband, infrastructure has contributed to economic growth,” Franken said.

Thursday: Franken on Obamacare, Iraq and other issues.