Don't Believe the Hype: Democratic Candidates Aren’t Likely to Implement Their Platforms
If you are like most of professional Washington, you spent most of today glued to around-the-clock coverage of Special Counsel Robert Mueller’s testimony before two House committees and are about to start packing for summer vacation. And good news! The Beltway’s summer lull will be longer than usual this year. Members of the U.S. House head out of town this week. Senators follow next Friday, but both chambers will be in recess until September 9, meaning that Congress’ traditional August recess actually is a full six weeks long for the House and five for the Senate.
Though the summer doldrums will soon descend on the U.S. Capitol, the political world will be far from quiet over the next several weeks. With the 2020 presidential election now in full swing, all of the more than 20 Democratic candidates will be hitting the campaign trail in earnest during the remainder of the summer. Get ready for the glut of Iowa and New Hampshire Labor Day parades.
Against that backdrop, we will explore what Democratic presidential candidates have planned for financial services and broader economic policy should they ever inhabit the White House.
But, first, a foundational question: should Democrats’ even make economic policy a leading point on the stump?
The nation’s unemployment rate currently stands at 3.7 percent, the lowest it has been in almost a half century. For the last several months, there have been about seven million jobs open in the United States, an historically high number. We are approaching that nirvana that economists refer to as “full employment.”
The White House should feel pretty good about the president’s chances for reelection based on these numbers, right? After all the apolitical statistical and data site FiveThirtyEight explained in 2012, “[H]istorical evidence is robust enough to say that economic performance almost certainly matters” in the outcome of presidential elections.
So if things are going so well for the U.S. economy, shouldn’t Democrats look for another way to distinguish themselves from the sitting president?
The problem is, as FiveThirtyEight explains, “we just do not have anywhere near enough to data to make confident claims about exactly which economic variables are important.”
Maybe it is not the headline jobs numbers that Americans care most about. To wit: consumer confidence hit a two-year low early this summer and the International Monetary Fund has downgraded its estimates of the U.S. economy’s growth as a result of existing and looming trade wars. This is why Democrats will seek to use economic messaging as a key political argument on the 2020 trail.
Case in point: Sen. Elizabeth Warren’s (D-Mass.) earlier this week declared that “warning lights are flashing,” and argued that, amidst historically-high consumer debt levels, the economy is on the precipice of another financial crisis. Not surprisingly, then, Sen. Warren’s financial services platform should she win the 2020 presidential race is one of the most comprehensive. Last month, Sen. Warren outlined her “economic patriotism agenda” and last week she offered a Wall Street reform plan. That plan would:
Alter the private equity industry by making firms responsible for the debt and pension obligations of the companies they purchase, raising taxes on firms and closing the carried interest loophole.
Bring back Glass-Steagall to rebuild the firewall between commercial banks and investment banks.
Limit executive compensation for bankers.
Reverse recent changes to the Dodd-Frank Wall Street reform bill.
Allow the U.S. Postal Service (USPS) to partner with community banks and credit unions to provide basic banking services.
Enact regulations that require U.S. companies “to focus on the long-term interests of all of their stakeholders.”
Sen. Warren’s “economic patriotism” platform also calls for stricter management of the value of U.S. currency. In a plan released in March, Sen. Warren also called for breaking up Facebook, Google and Amazon and other companies that have “too much power over our economy, our society, and our democracy.”
To be clear, many of these proposals, while red meat for the Democratic base, are fairly unlikely to become law even under an Elizabeth Warren administration. Let’s remember that presidential candidates in 2016 converged on the idea of reinstating Glass-Steagall – so much so that the proposal was included in the official Republican Party 2016 platform endorsed by then-candidate Donald Trump. Three years hence, the notion of reinstating Glass-Steagall has gone nowhere on Capitol Hill.
On carried interest, as Accounting Today reports, “Most Republicans, and even some Democrats, oppose killing a tax option that investment firms have successfully argued creates jobs.” Presuming Republicans maintain control of the Senate, it seems impossible to imagine an outcome under which carried interest is meaningfully amended.
Since Sen. Warren is compared most often to Sen. Bernie Sanders, the only Independent running for the Democratic presidential nomination, let’s take a look at his platform next.
The senator also is ultra-specific in his recommendations. Under the heading of banking, Sen. Sanders would:
Cap consumer interest rates for financial products at 15 percent.
Create new regulations governing the payday lending industry.
Like Sen. Warren, allow the (USPS) to offer basic banking services.
Allowing the USPS to offer banking services is not a new idea. As NerdWallet explains, “Until the 1960s, people could turn to the post office to deposit money or build a savings fund. Born out of the financial crisis known as the Panic of 1907 and taking off in popularity after the Great Depression, postal banking flourished for a time — at one point holding about 10% of all commercial banking assets in the U.S. — before the system was abolished in 1966, when community banks proliferated.”
Those community banks, who collectively constitute a powerful lobby in Washington – there’s a reason they were carved out of much of Dodd-Frank’s more onerous provisions – clearly will oppose this idea, but Sens. Warren and Sanders have one point, at least, in their favor: according to a Gallup survey this year, nearly 75 percent of Americans rate the service they get from the USPS as excellent or good.
Under the heading of Wall Street reform, Sen. Sanders calls for:
Breaking up banks that have gotten “too big to fail.”
Reinstating the Glass-Steagall Act (like Sen. Warren).
Capping credit card interest rates and ATM fees.
Auditing the Federal Reserve.
Implementing a financial transactions tax.
Reforming credit rating agencies.
Sen. Sanders’ tax plan also calls for closing corporate tax loopholes and bringing more offshore income back to the United States – both of which have been staples of Democratic campaign platforms over the last three decades.
Like Sen. Warren’s proposed financial services and economic agenda, Sen. Sanders’ platform is ripe with proposals that have been floated in Washington by both parties in the past. For example: The Republican Chairman of the House Ways and Means Committee proposed a financial transaction tax way back in 2013 (it went nowhere) and former GOP Rep. Ron Paul (R-Tex.), father of current Sen. Rand Paul (R-Ky.), was a decades-long proponent of requiring a public disclosure of the Federal Reserve’s monetary policy functions (the Fed’s actual books are, in fact, audited by accounting professionals). Rep. Paul retired from Congress following the 2012 election cycle and the Federal Reserve’s monetary policy functions, though more transparent now than they have been in the past, are still relatively opaque.
For the two of arguably the most liberal Democrats running for the White House in 2020, therefore, despite quite a bit of discussion – and press – about their economic policy platforms, the likelihood of enacting those plans, even if they ultimately set up shop in the Oval Office, appears pretty unlikely.