NEW YORK (Reuters) ? Government has a critical role in powering the U.S. economy's turnaround and preparing it to compete in the 21st century, former President Bill Clinton argues in his new book, "Back To Work: Why We Need A Smart Government For A Strong Economy."
The slim volume - the 42nd president's contribution to a growing debate about government's role in American society ahead of next year's national elections - is as much an outline for rehabilitating the economy as it is an attack on the Tea Party and what Clinton calls the "anti-government" ethos he says now pervades the Republican Party.
Clinton views Republicans' current staunch opposition to tax increases and their general disdain for government as an extreme manifestation of President Ronald Reagan's pivotal dictum that "government is the problem."
That philosophy, Clinton says, has proved disastrous, inducing rising income inequality and stagnant wages while putting the United States at a competitive disadvantage with other nations.
"The inevitable consequence of their policies is to push the pedal to the metal of the most destructive trends of the past thirty years, to increase inequality and instability, and to forfeit the future," Clinton says of anti-government "ideologues."
To support his argument, Clinton surveys the role various other governments are playing in kick-starting their economies. Singapore, for example, has created a hub for the biotechnology industry, while Germany's burgeoning solar power industry has created 300,000 jobs, he writes.
"How?" Clinton asks. "With government subsidies and targets."
Clinton finds ways for government to nudge job-creating corporations in the right direction, starting with banks.
Sweden's central bank encourages lending by charging banks a fee for holding their deposits, for example. That could work in the United States, where many banks keep deposits with the Federal Reserve at no cost, Clinton says.
"If the Fed imposed even a modest fee of one-fourth of 1 percent on bank deposits it holds, the banks might be more willing to lend so they could make, not lose, money on the cash they have," Clinton writes. "It's worth a try."
DEMOCRATS A PUZZLE
Anti-tax Republicans aren't the only focus of Clinton's criticism. His own Democratic Party is another.
He is mystified that President Barack Obama and the Democratic-led Congress didn't raise the debt ceiling in late 2010, while they still held a majority, instead subjecting themselves to bruising negotiations this year with Republicans emboldened by their mid-term elections wins.
"To the outside world, the United States looked weak and confused, completely in the grip of the anti-government zealots in the House Republican caucus," Clinton said of last summer's stalemate between Obama and Republicans that sparked a historic downgrade of the United States credit rating by Standard and Poor's on August 5.
He also faulted the Democratic National Committee for not arranging a unified message to counter the Republicans in the run-up to the 2010 mid-terms, despite what he called his own efforts and those of Vice President Joe Biden.
The two asked the DNC to distribute a centralized set of talking points "so Democratic foot soldiers would at least have some good ammunition for their phone and door-to-door campaigns," Clinton said. "We couldn't persuade the decision makers to do so."
Still, "Back To Work" won't likely satisfy Republicans seeking juicy campaign ad fodder against Obama from Clinton.
Clinton generally sympathizes with the challenges facing Obama and heartily agrees with the goals of the stimulus bill, the measures taken to stabilize the banking and automobile industries, and the president's recent jobs proposal.
"President Obama has a tough hand to play," he says.
Clinton also defends himself against criticisms that his administration's approval in 1999 of repealing key sections of the Glass-Steagall Act set the stage for the mortgage crisis that exploded almost a decade later.
Those changes broke down the barriers between investment banking and commercial banking that critics have blamed in part for the meltdown of Wall Street firms in 2008.
Since the late 1980s, Clinton writes, Federal Reserve rulings had eliminated restraints on the ability of big banks to pursue commercial and investment banking activities.
"The real problem," Clinton says, was that the Securities and Exchange Commission "lacked the authority to require investment banks to set aside more cash to cover high-risk investments ... and the bank regulators didn't do enough to limit commercial banks' risky loans."
Clinton admits he could be "fairly criticized" for not reining in financial derivatives, though he says he couldn't have done anything anyway because of Republican opposition.
"I should have spoken out more," he says. "In not doing so, I ignored one of my own rules: even when you can't win, it's best to get caught trying."
(Editing by Peter Bohan)
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