A tale of two think tanks

Hillary Clinton declared her long-known intention to run for president in April 2015.  In the months before and after her announcement, the think tanks in the orbit of Democratic policy jockeyed for position to influence the agendas of the party and its presumed nominee going into the 2016 election.

In January 2015, the Center for American Progress released a comprehensive white-paper authored chiefly by former Obama economic adviser Larry Summers.  The white-paper prescribed a broad series of policy proposals to promote “Inclusive Prosperity” in the United States.  Since its founding, CAP has served as the Democrats’ primary bank for policy ideas, and has strong ties to the Clinton campaign.  (CAP is run by Neera Tanden, a former Clinton aide.)  The white paper ticked off the gamut of mainstream center-left policy goals: paid family leave, infrastructure investment, universal pre-K, and the works.

Many rightly expected that the CAP report would be strongly indicative of Clinton’s eventual platform.  For instance, Matthew Yglesias at Vox wrote that it was “the best guide to what Hillarynomics is likely to look like.”  And indeed, when Clinton launched her campaign from Roosevelt Island in New York, the policy ideas she endorsed closely tracked CAP’s report, even mimicking its theme of inclusive prosperity by arguing for “fair growth,” as John Cassidy of the New Yorker noted at the time.

Meanwhile, a month after Clinton announced her candidacy, the left-leaning Roosevelt Institute released a comprehensive white-paper of its own.  Authored by one-time Bill Clinton economics adviser Joseph Stiglitz (a rival of Summers’s in the Clinton White House), the Roosevelt report aimed to “rewrite the rules” of the American economy, proposing to fundamentally restructure the laws, regulations, and institutions comprising economic life to even out the balance of power and rewards between employers and workers.

The Roosevelt paper was widely seen as trying to provide a modicum of leftward pressure as a counterweight to the more conventional center-left CAP agenda.  And as the New York Times Magazine reported this week, Roosevelt has been in frequent communication with Clinton officials, and has achieved a striking deal of success in pitching its policy ideas to the campaign and the national Democratic Party.

In a primary campaign that saw token left-wing opposition from Bernie Sanders bloom into a bona fide movement, it’s interesting to see how these two dueling think tank reports wielded their influence now that the dust has settled.  There’s a good deal of overlap between the CAP and Roosevelt reports—both want to strengthen collective bargaining; both want to better regulate the shadow banking system; both want to negotiate fair trade deals that protect labor and the environment, among other points of agreement.  But they diverge in interesting ways—and at times, both wound up getting outflanked by the historically progressive platforms that ultimately came to be embraced by both Clinton and the Democratic Party.

Take the issue of housing.  CAP wanted to promote homeownership and affordable housing by tinkering with existing institutions like the Fair Housing Act and the Federal Housing Finance Agency to make home loans affordable to more buyers.  Roosevelt, on the other hand, took a more interventionist approach: proposing a public option for the mortgage industry.  “Rather than trying to nudge the private mortgage system with federal backstops, subsidies, and implicit bailout guarantees,” Roosevelt wrote, “lawmakers should create an explicitly public mechanism in the housing market.”  (Neither Clinton nor the DNC have taken specific stances on housing policy.)

That’s fairly typical of a side-by-side reading of the two reports: CAP tends to prefer tweaking existing programs and institutions to create a fairer economy, while Roosevelt will often propose a more wholesale overhaul to create new institutions.  Indeed, the Roosevelt report is heavy on public options, endorsing new government-run offerings in healthcare (Medicare for All), banking (financial services offered at the post office), and retirement (a supplemental Social Security program for IRA-style investment).

On tax reform, CAP proposes to make the tax code more equitable by taking homeownership tax deductions—which disproportionately benefit the wealthy—and converting them into tax credits.  Roosevelt, however, would go even further, converting all tax reductions to credits, and capping the number of credits that can be claimed by the wealthy.  Again, neither Clinton or the national party have broached the idea of reforming popular tax deductions.

Similarly, on early childhood, both CAP and Roosevelt support popular programs like universal pre-K, subsidized daycare, and expanded nurse home visiting, all of which have been embraced by Clinton and the Democrats.  But Roosevelt would also kick in a child benefit—“a monthly tax-free stipend paid to families with children under 18 to help offset part of the cost of raising kids.”  This would draw on the success of countries like Britain in slashing child poverty through direct financial investment in kids.  CAP didn’t endorse a similar program in its report—the closest it has come otherwise is proposing a new refundable young child tax credit.

But on some issues, both CAP and Roosevelt underestimated the ambition of Democrats in 2016.  On higher education, both think tanks proposed a relatively modest reform based on Australia’s system for financing college.  Students would have 25 years to repay their student loans, and would make payments based on their income level.  Interest rates would be lower, and under CAP’s plan, students would receive a voucher equal to the cost of public college tuition to cover some of the cost, to be repaid to the government.  But driven by the Sanders campaign, both Clinton and the Democratic Party have gone further.  Both now want to make public college completely tuition free for most low-income and middle-class families.

The Democrats also went beyond both think tanks’ recommendations for raising the minimum wage.  CAP proposed increasing the federal minimum wage to just $10.10.  Roosevelt didn’t endorse a specific federal increase, but did suggest that “States and cities should look at raising the minimum wage to reflect local conditions; many cities and metro areas can easily justify a minimum wage of $15 an hour.”  That the Democratic Party has embraced a national $15 minimum wage is a sign of just how far this debate has come in only a few years.

Both think tanks had other key wins too.  Both Clinton and the DNC have endorsed CAP’s plan to incentivize corporate profit sharing with employees.  And both think tanks’ push to raise the salary threshold for overtime pay was already enacted by the Obama administration.

Moreover, Roosevelt’s proposal to assess a capital surcharge to “too big to fail” financial institutions, while breaking up banks that are too massive to orderly unwind in a potential bankruptcy, has been adopted virtually wholesale by the Clinton campaign.  The Democratic platform picked up Roosevelt’s proposals to prohibit the appointment of any Federal Reserve members with conflicts of interest with regulated banks.  The platform endorsed Roosevelt’s plea to strengthen antitrust rules to promote market competition.  Roosevelt also wants to assess new taxes on carbon, short-term financial trading, and the ultra-wealthy—those are all in the Democrats’ platform, too.  The platform committed itself to a “full-employment economy,” echoing Roosevelt’s call to refocus Federal Reserve policy toward full employment rather than low inflation (a stimulative change that can be instituted without congressional action).  And the Democrats even adopted Roosevelt’s plans for postal banking options and to let more student debtors discharge their loans via bankruptcy.

This is all a testament to the bold ambition of liberals in the twilight of the Obama administration.  And much credit must go to the leftward push from the Bernie Sanders campaign.

But while their policy prescriptions may differ, both CAP and Roosevelt are speaking degrees of the same language.  In Why Nations Fail, economists Daron Acemoglu and James Robinson argue that the most successful economies are those whose political, social, and cultural institutions promote inclusive growth, which creates a virtuous cycle of widely-shared and robust economic activity.  When economies become extractive, benefiting only the elite, growth slows and the virtuous cycle turns vicious.

CAP and Roosevelt are in broad agreement on this basic understanding of economic success and failure.  Roosevelt takes on the notion that inequality is inevitable, arguing that it’s in fact a political choice brought about by deliberate institutional arrangements to shift the bargaining power in our economy.  We don’t need to sacrifice growth and efficiency in order to reduce inequality.  Similarly, CAP embraces middle-out economics that believes that our economy thrives when a thriving middle-class is its central engine.  The platforms espoused by the Democratic Party and the Clinton campaign merge the two dueling policy agendas in the best way possible: rewriting our economic rules to promote broadly shared inclusive prosperity.

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