Wall Street-Backed Organization Blasts Rising American Populism and Elizabeth Warren
An almost palpable air of desperation clings to the anti-“populist,” anti-Elizabeth Warren editorial by Jonathan Cowan and Jim Kessler of the corporate-funded Third Way organization. If they’re worried, they’re right to worry. The world is changing.
“Economic Populism Is a Dead-End for Democrats” appeared in The Wall Street Journal, appropriately enough, and argues that the election of staunch progressives like Bill De Blasio as mayor in New York City and Warren as Massachusetts senator have no broader political significance.
For a piece that purports to address something called “economic populism,” Cowan and Kessler make some striking omissions. Nothing is said about today’s record levels of unemployment, including long-term unemployment. Or about the retirement crisis confronting most Americans. Or the wage stagnation that is crushing the middle class.
How is it possible to address “economic populism” without mentioning the three economic trends that have had the greatest impact on the general public?
Cowan and Kessler open their policy prescriptions with a feint against higher taxes for the wealthy and corporations – their group’s primary benefactors – by dismissing the income-generating potential of these taxes. Here’s the truth: Real corporate taxes rates are at or near their lowest levels in 60 years, despite record profits. The top marginal tax rate for individuals is less than half of what it was during the Eisenhower years.
And just one loophole – the offshore tax haven – is allowing corporations to evade paying taxes on nearly $2 trillion in income. It’s clear that significant revenue can be raised with these tax increases.
These tax hikes are also smart politics. A recent poll by Americans for Tax Fairness showed that 70 percent of Americans want to offset the sequester spending cuts with tax increases for the wealthy and corporations.
Instead, the authors push Social Security and Medicare cuts, which were supported by only 12 percent of those polled. They write of Medicare: “Sen. Warren and her acolytes are irresponsibly pushing off budget decisions that will guarantee huge benefit cuts and further tax hikes…”
But to treat Medicare as a “budget decision” is to misunderstand the problem. The core problem isn’t the Medicare budget. The problem is the cost of health care in the United States. Third Way-style solutions would not address that problem. They would merely shift the cost burden from the government to individual seniors who are entirely unequipped to handle it.
Eventually we’ll need to change a system of perverse provider incentives that distorts medical treatment patterns, billing practices and rates. That means addressing the destructive impact of investment income in the health care provider economy – something Wall Street-friendly groups would rather not discuss.
Don’t Fear the Boomers
Cowen and Kessler also indulge in typically misleading Social Security fear-mongering, writing of “a growing cascade of Baby Boomers (who) will be retiring in the coming years.” That “cascade” is actually shrinking, not growing, as death overtakes that generation. And its size has been well-known by actuaries since the last Boomer was born in 1964.
What changed? First, the rich began capturing a far greater percentage of the national income than had been the case in modern history – beginning with the Reagan years, continuing through the Clinton era, and continuing today. As a result, a much greater percentage of our national income lies above the payroll tax cap that funds Social Security. (No less an “economic populist” than Ronald Reagan’s chief actuary has helped explain why the Third Way position is wrong.)
Next, the predations of Wall Street banking firms – many of whom provide funding for Third Way and sit on its board – crashed the economy in 2008, throwing millions of people out of work and leaving millions more underemployed. Jobless people don’t contribute to Social Security, and underemployed people contribute less than they normally would.
A good way to address Social Security’s long-term shortfall, therefore, would be by lifting the payroll tax cap and addressing our nation’s persistent employment problem.
Liz Was Right
Social Security affords Cowan and Kessler the chance for another cheap shot against Elizabeth Warren. They write that she “wants to increase benefits for all seniors … and to pay for them by increasing taxes on working people and their employers” (italics ours).
But the increase would only apply to income above the tax cap, which is approximately $113,000 today. That’s hardly a “working people’s” income level.
What’s more, Americans are entirely willing to pay more taxes for Social Security. Three out of four Republicans said they’d be willing to pay more to protect the program. So did 86 percent of independents and 91 percent of Democrats. A “landslide” 62 percent of Republicans thought we should consider increasing the program’s benefits, as did 71 percent of independents and 84 percent of Democrats.
Political Death Wish
Social Security and Medicare cuts would also be political suicide. The same poll showed that 85 percent of those polled opposed asking seniors to pay more for Medicare, 83 percent opposed cuts to Medicaid coverage, and 67 percent – more than two-thirds of those polled – opposed the “chained CPI” Social Security cut which Third Way has heavily promoted.
It’s not as if Republicans are likely to cooperate politically after Democrats take the lead in cutting these programs. Consider what happened when Democrats, especially President Obama, made the mistake of listening to organizations like Third Way in the first two years of the Obama presidency:
- The Democratic Party experienced a 20-point plunge in the polls on the question of which party is most “trusted” to handle Social Security;
- The same poll showed that Barack Obama was less trusted than George W. Bush when it came to Social Security – even though Bush had tried to gut and privatize the program;
- Republicans seized the advantage and ran to the left of Democrats on entitlements, heavily promoting a cynical “Seniors’ Bill of Rights” and promising to defend these programs from Democratic cuts;
- Democrats, who had won seniors by seven points in 1996, lost them by 21 percentage points in 2010;
- Democrats lost control of the House of Representatives.
If that sounds good to today’s Democrats, then by all means they should listen to Cowan and Kessler. Otherwise they’d do well to stay away.
Rocky Mountain High
Cowan and Kessler insist that the results of any New York City election are meaningless nationally. But just three years ago they were promoting Bill de Blasio’s predecessor, the “centrist” Michael Bloomberg, as an ideal presidential candidate for their slickly packaged but failed “No Labels” third-party initiative.
New Yorkers tried it Cowan and Kessler’s way for 12 years, primarily because Michael Bloomberg spent an extraordinary amount of his own fortune to win and retain office. They didn’t like it.
If New York’s irrelevant, which region does Cowan and Kessler think does matter?
(When was the last time Colorado elected a president of the United States, you ask? Actually, never.)
Cowan and Kessler note that “on the same day that de Blasio won in New York City, a referendum to raise taxes on high-income Coloradans … failed in a landslide.” But they failed to note that Californians overwhelmingly voted to increase their own taxes. Since California began the anti-tax trend in the 1970s with Proposition 13, you’d think this would be worthy of note.
Oregon voters raised their own taxes, too. New Jersey voters chose to increase the minimum wage by a landslide. And Elizabeth Warren’s election has much greater significance than Cowan and Kessler would have readers believe.
Cowan and Kessler attempt to dismiss Warren’s election by describing her state as “midnight blue,” by which they presumably mean it’s deeply Democratic. But the GOP’s 2012 presidential candidate was once governor of that state, and the election of Warren’s Republican predecessor was described as the start of a sea-change in American politics.
Are they blue? Hardly.
A Dream Deterred
We don’t know why the leaders of an organization that claims to embrace “civility” have stooped to such tactics. But they certainly have reasons to worry. Perhaps they saw a recent Washington Post article entitled, “More liberal, populist movement emerging in Democratic Party ahead of 2016 elections.” The party’s growing rejection of Third Way’s Social Security cuts was a central theme.
They might also have seen recent polling that shows an overwhelming majority of Americans – nearly 70 percent – support an “economically populist” increase in the minimum wage.
Theirs was the real “we can have it all” fantasy – one where politicians could receive fat campaign contributions from Wall Street firms, look forward to a post-political life of ease in the corporate world, and still enjoy the adoration of a grateful nation. The country can’t afford that fantasy anymore.
Times have changed. The Clinton era was a bubble-fueled illusion. Deregulation crashed the economy. And Third Way policies are political poison, which is why Barack Obama quickly shifted back to populist rhetoric in 2012 – a move that ensured his reelection.
True, it’s too early to count the Third Way crowd out. They have powerful connections and vast reservoirs of funding. But the world is different now, as the country begins to understand that the Third Way leads only to a “dead end.” They had their day, and their self-centered dream, but eventually the “centrists” will have to face reality:
The dream is over.