The Economics of Hillary Clinton

The economics of Hillary Clinton.

But Is Hillary Ready for Us?

March 13, 2015

William Greider

Date of Source: 

Tuesday, March 10, 2015

The Nation

The “Ready for Hilary” campaign has launched a not-very-subtle courtship of discontented Democrats, those leftish liberal activists who yearn for anybody but another Clinton. The not-yet candidate herself spoke to their concerns indirectly when she recently addressed the Silicon Valley Conference for Women. Clinton sketched out progressive goals for family-centered labor-market reforms. They were like love bombs for bleeding-heart liberals.

Meanwhile, the Center for American Progress, the shadow think tank that speaks for Clinton-Obama politics, issued a more substantive agenda in a 161-page report from its self-appointed “Commission on Inclusive Prosperity.” The co-chair was Lawrence Summers, former Treasury secretary under Bill Clinton and senior adviser to Obama. He performed an intellectual conversion equivalent to a double somersault in gymnastics. The new ideas were actually old ideas that progressive advocates have championed for decades to no avail. They were ignored or rejected by Summers himself and the two Democratic presidents he served.

Never mind, the message is: Hillary gets it. She’s ready to confront the inequality thing. She will bring fresh ideas to the campaign on how to reverse the deterioration of middle-class American life. Her list includes everything from parental leave to care for newborn infants to equal pay for women and paid vacations for all working people. The CAP agenda, among many sound ideas, opts for stronger labor unions, worker ownership of corporations, faster growth and full employment, a reformed global trading system that for American working people will become a “race to the top” instead of the bottom. What’s not to like?

But the Clinton seduction encountered a rocky start. In some progressive quarters, the shape-changing rhetoric inspired anger and abiding skepticism instead of applause. Many liberal advocates were reminded why they didn’t want Hillary in first place. Some saw a leopard changing spots into tiger stripes. Still, many policy activists were pleased that their agitation for Elizabeth Warren or other potential candidates was causing serious heartburn in establishment circles. The dissidents intend to do more.

Summers was especially infuriating with his condescending remarks. He has a well-known talent for foot-in-mouth (recall his Harvard speech on why women don’t do well in science and engineering). On economic reform, he offered a warning: “It’s not enough to address upward mobility without addressing inequality. The challenge, though, is to address inequality without embracing the politics of envy.”

“Envy” of the wealthy is a popular trope among the “1 percent” (remember Mitt Romney’s defense of his). In Summers’s case, he may have been thinking of his own grand windfall. A few weeks before his CAP report was issued, Summers hit the jackpot with the initial public offering for Lending Club. As a member of its board of directors, the Harvard economist had accumulated more one million shares in stock and options, priced at 70 cents each according to SEC filings. After the IPO, the stock was trading at $28 a share.

Do the math. The professor reaped something like $28 million for his undoubtedly wise advice to Lending Club. Are you feeling a little envy? (I know I am.) It reminds one of what Elizabeth Warren often says: “There is nobody in this country who got rich on his own.”

The not-yet-announced candidate has a thing about money too. Hillary Clinton’s speech before the Silicon Valley women got a reported fee of $300,000 (the women each paid $245 to hear her). The Clinton family has been smart about raising money for their foundation—foreign interests contributed heavily while she was secretary of state. Her fundraisers are now in a nasty dogfight among themselves over who will get the credit and commissions for raising big bucks for her campaign. “Politics is a dirty business,” as my late friend Hunter S. Thompson used to say.

In normal times, all these maneuvers could be ignored as inside baseball, the usual arguments over messaging that policy wonks and campaign junkies chew over in the run-up to a presidential election year. The masses of voters are not listening at this early stage and not even the intended audience. The insiders are testing out themes and policy proposals, polling the unwashed public on what sells, what upsets.

The Clinton machine’s real target audience, I suspect, are the media pundits and political reporters who will cover the next campaign and inevitably shrink the terms of debate by reducing the substance to a handful of insipid, shorthand clichés. The expressions of what Hillary (maybe) thinks and says as a candidate are meant to assure big media that she truly is a progressive candidate and willing to get beyond the status quo.

This pre-conditioning strategy might very well succeed, at least with the press if not with voters. The makeover has already begun in the establishment press. An op-ed columnist at The New York Times extolled the Larry Summers conversion to liberal economics as significant news headlined “Establishment Populism Rising.” If Clinton is repackaged as a pragmatic “populist,” then the press can cast Elizabeth Warren (not to mention Bernie Sanders and others) as a reckless bomb-thrower. Adjectives like “angry” and “strident” are already being attached to her name.

But these are not normal times. The preliminary skirmishes are more meaningful this time because they reflect the profound crisis of identity that burdens the Democratic Party. What does the party really believe? Whose interests will the nominee truly fight for? Democrats lost their old soul long ago, as critics like myself repeatedly charged. The 2016 election could become the decisive moment that either transforms the party with an aggressively liberal economic agenda or clings to the past and the “corporate-friendly” straddle devised a generation ago by Bill Clinton’s New Democrats.

Trouble is, the New Dems are now the Old Guard. Their center-right program—financial deregulation and “free market” globalization—has not only run out of gas but is rightly blamed for laying the groundwork for financial catastrophe. Yet the New Dem wing still holds the high ground, with big money and loyal supporters as well as Clinton clones populating the key governing positions. The labor-liberal insurgency has a weak bench because for a generation its promising young people were excluded from governing ranks—systematically screened out by both Clinton and Obama administrations—if they showed telltale signs of leaning leftward or embracing non-conformist ideas that resonate with the party’s New Deal values.

By contrast, Republican regimes since Ronald Reagan have always made a point of appointing thousands of young right-wingers to second-level government posts as the training ground for long-term governance. Dems still invoke sentimental rhetoric from the New Deal era, but the practical reality is that the party’s economic policy makers went to school on Wall Street, either before or after their public service (sometimes both).

The gut question is: Can we believe the warm and fuzzy reassurances from the Clinton camp? In politics, after all, it is possible for leopards to change their spots into stripes, and they are often congratulated when they do. On the other hand, it is also true some leopards will change back again after they win the election. I suspect we voters will be arguing this question of credibility right up to the 2016 election.

I am impressed that some well-informed and much-admired economists on the left, like Larry Mishel of the Economic Policy Institute and Dean Baker of the Center for Economic and Policy Research, are congratulating Larry Summers for changing his views. I hope they are right. So why am I not convinced?

Reading the CAP report on “inclusive prosperity,” I began to realize I had heard many of these new ideas long before. Then it hit me. Bill Clinton ran for president on some of the very same stuff back in 1992. His campaign theme in that election year was “Putting People First.” He spelled out his program in great detail, and it helped elect him, though he got less than a majority vote.

Clinton explained he would devote major federal spending to rebuilding the nation’s infrastructure and broadening social guarantees. He promised to protect working people and organized labor who correctly saw their jobs and wages threatened by the new trade agreement called NAFTA. He would go after big-business subsidies and scandalous tax loopholes. Attacking the bloated compensation for corporate executives was the core example of what Clinton intended. What’s not to like?

Within the first months, President Clinton reversed course or abandoned the meat of his promises. He passed NAFTA with Republican votes over labor’s opposition and cut a deal with Federal Reserve chairman Alan Greenspan to let the Fed command a slow-growth economy.

Virtually all of the points made in the Summers report of 2015 could have been made twenty or twenty-five years ago when Bill Clinton was president. In fact, many of them were. Summers is careful to avoid the past, much less even hint at previous views that are now seen as blatantly wrong.

Reading Larry Summers’s report elaborating on how to curb executive pay, I was reminded that Clinton actually did act on that promise. And failed. His solution was a flimsy Treasury rule that didn’t really achieve anything but allowed the fabulous explosion of stock options that has become an even larger scandal. When Democrats lost the House in the 1994 off-year election, the Clinton administration claimed it was because of their valiant but failed efforts to reform healthcare. The truer explanation was his betrayal of working people and other promises.

The spirit and reform ideas Hillary Clinton and the Center for American Progress are now proposing would fit neatly with the old slogan of “Putting People First.” But maybe the new Clinton campaign banner should say: “This Time We Mean It.”

Another source of my skepticism is the practical problem of which political constituencies Democrats must be prepared to abandon this time—working people or financial contributors. EPI’s Larry Mishel pointed out that if Hillary Clinton embraces the Larry Summers agenda this “puts her in a bind, you might say.” She would be going against Robert Rubin, the Clintons’ most influential advisor. The Goldman Sachs and Citigroup banker opened the Wall Street money spigot in 1992 by assuring bankers Bill Clinton’s presidency would be good for the country and especially good for bankers.

Rubin kept his word. Backed up by Summers and Greenspan and of course Bill Clinton, Rubin sold the repeal of Glass-Steagall to Congress (only seven Democratic senators voted against it) then went to work at Citi for $40 million a year. Rubin, Summers and Greenspan brutally trashed Brooksley Born, the only federal regulator who was trying to rein in dangerous derivatives. Rubin arranged a bailout for Mexico’s default crisis that was really a bailout for the New York banks and brokerages that made all the bad loans.

Would Hillary Clinton have the courage to turn on her principal mentor? It seems inconceivable. If she did, wouldn’t that turn off the money spigot?

In a broader sense, the Democratic contest for 2016 is a dramatic collision between outsiders and insiders. The insurgents are rapidly gaining breadth and momentum, but the reigning New Dems are not going to surrender power gracefully. Political machines never do.

Oddly enough, the outlines of this intramural struggle were explained to Elizabeth Warren quite bluntly by none other than Larry Summers. In the first year of the Obama presidency, Warren chaired the Congressional Oversight Panel on the banking bailouts. Summers was in the White House. He took Warren out to dinner and explained with breathtaking clarity how Washington really works.

“Larry leaned back in his chair and he offered me some advice,” Warren wrote in her new memoir. ”I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People—powerful people—listen to what they have to say. But insiders also understand one unbreakable rule. They don’t criticize other insiders.”

Doesn’t that describe the Democrats’ dilemma in a nutshell? The policy elites gain access to the internal debate if only they don’t share things with outsiders, i.e., the people. Thus insulated and isolated, governing elites can’t understand why people are so distrusting and hostile to government. Insiders can’t even talk about real answers they know. Larry Summers’s cynicism is like a crippling disease that runs through the Washington apparatus.

“I had been warned,” Elizabeth Warren wrote. Her exquisite reply to Summers was to tell this story about him in her book. That broke the Summers insider rule, big time. It puts him and other insiders on notice. She intends to do more talking to and for outsiders. We outsiders should honor her courage.

That doesn’t necessarily change the long odds against challengers in 2016. Most players inside the Beltway are already assuming the Clinton nomination is a done deal. Many are either arranging to get on board or are sharpening their attack lines. The Republican Party has its own more visible identity crisis and internal rebellion (the subject for another occasion).

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But I wouldn’t bet against the outsiders. Not yet. Rapid change is swirling around politicians in both parties and it’s clear most of them don’t know what to make of it but they’re plenty nervous. These parallel discontents confirm for me that profound wounds and confusion are the shared condition across the nation, far more profound than the standard party differences.

A young friend of mine with working-class sensibilities told me recently that the driving subtext for 2016 will be “anger.” A labor Democrat, he has a keen ear for popular attitudes, and he’s afraid this election could leave the country with a harsh right-winger as president—someone who can skillfully exploit confused and angry citizens by scapegoating the usual target groups.

Democrats, at least most modern Dems, don’t do “anger” very well. It makes them uncomfortable. Most of them would rather talk “hope and change.” Democratic candidates tried to make “hope and change” their theme in 2014 but got shellacked. Their rhetoric was hopelessly at odds with the painful evidence in their own lives.

That is often the problem with the standard party spiel. It’s top-heavy with cerebral abstractions—words like “inequality” or opaque economic statistics—but it’s short on gut-level wisdom.

The rising of insurgents could swiftly create greater authenticity, because most of them are grounded in grassroots realities. They speak the language people can understand, they know well the local texture of anger. Their version of “hope and change” has believable punch to it.

All I know for sure is this: if the Democratic party rejects the watershed potential of 2016 and sticks with the old guard’s way of thinking, they are only adding to their formidable burden for the 2016 election. American society is going to be put through some rough big changes in the years ahead. People know this in their guts, but they are confused and anxious and angry. They need some help understanding things; they need strong new ideas about repairing the damage and restoring hope.

The question is whether the Democratic Party is up to this, whether it wants to be on board.

William Greider, a prominent political journalist and author, has been a reporter for more than 35 years for newspapers, magazines and television. Over the past two decades, he has persistently challenged mainstream thinking on economics. For 17 years Greider was the National Affairs Editor at Rolling Stone magazine, where his investigation of the defense establishment began. He is a former assistant managing editor at the Washington Post, where he worked for fifteen years as a national correspondent, editor and columnist. While at the Post, he broke the story of how David Stockman, Ronald Reagan's budget director, grew disillusioned with supply-side economics and the budget deficits that policy caused, which still burden the American economy. He is the author of the national bestsellers One World, Ready or Not, Secrets of the Temple and Who Will Tell The People. In the award-winning Secrets of the Temple, he offered a critique of the Federal Reserve system. Greider has also served as a correspondent for six Frontline documentaries on PBS, including "Return to Beirut," which won an Emmy in 1985. Greider's most recent book is The Soul of Capitalism: Opening Paths to A Moral Economy. In it, he untangles the systemic mysteries of American capitalism, details its destructive collisions with society and demonstrates how people can achieve decisive influence to reform the system's structure and operating values. Raised in Wyoming, Ohio, a suburb of Cincinnati, he graduated from Princeton University in 1958. He currently lives in Washington, DC.

Copyright c 2015 The Nation. Reprinted with permission.