By Bill Black, the author of The Best Way to Rob a Bank is to Own One, an associate professor of economics and law at the University of Missouri-Kansas City, and co-founder of Bank Whistleblowers United. Originally published at New Economic Perspectives
The Wall Street wing of the Democratic Party (Third Way) is relentless in trying to bring back the days in which the Democratic Party’s leaders buried the Party in Wall Street’s pocket under the label “New Democrats.” That period led President Clinton and Vice President Gore to implement disgraceful policies that made Wall Street executives fabulously wealthy at the expense of people. To deliver on their promises to Wall Street, Clinton and Gore had to betray much of what the Democratic Party stood for. Clinton and Gore’s destruction of effective financial regulation, which President Bush exacerbated, created the massively criminogenic environment that blew up the global economy.
I have written several times and documented that Third Way is a creature of, and devoted to, Wall Street’s CEOs. Third Way’s con is describing itself as “centrist.” Wall Street CEOs are not centrist. They include the world’s most powerful and destructive predators and parasites. The “left, right, center” metaphor does not apply to a group like Wall Street’s CEOs. The latest media sucker to fall for Third Way’s con is Politico. Politico fell whole hog, calling Third Way a “center-left think tank.” Fortunately, Google’s recent purge of New America Foundation scholars has proved that “think tanks” financed by elite corporate CEOs are oxymorons run by regular morons. The one thing you can never do as a scholar at a faux “think tank” like Third Way is actually think – and then make public the perfidy of the corporate CEOs that fund the non-think tank.
Third Way is Wall Street on the Potomac, so it is preposterous to call it “center-left.” It keeps its corporate funders secret to maximize their corrupting influence. It is one of many Pete Peterson front groups.
Politico compounded its error of falling for Pete Peterson’s false flag operation through its uncritical regurgitation of Third Way’s latest propaganda about jobs. The title of the article was “Third Way study warns Democrats: Avoid far-left populism.” A Third Way “focus group” prompted the article. Focus groups rightly became infamous when the Clintons’ based policy not on the merits or principles, but on political popularity as expressed by tiny groups of people discussing their impressions about a matter. One of the reasons Hillary Clinton was so unpopular with many people was that they believed that she based too many of her policies on their popularity in focus groups rather than any principled beliefs. Politico’s analytics-free article ignored that sad history and the political stupidity of basing a Party’s principles and policies on focus groups.
The Third Way memorandum that prompted the Politico story has one strength. It confirms what progressive Democrats have long argued – the key is jobs. That fact confirms that the anti-jobs Wall Street agenda that Third Way and the New Democrats have been pushing is not only terrible policy but also terrible politics. Politico is oblivious to these facts. It turns out that the actual statement by focus group participants strongly support Senators Sanders and Warren’s pro-jobs policies. Third Way, however, as a Wall Street front group, opposes their pro-jobs policies and supports Wall Street and the New Democrats’ anti-jobs policies.
The Third Way memorandum is even more dishonest in its treatment of President Trump’s policies. The memorandum also shows why focus groups are so unreliable in revealing anything other than the participants’ perceptions. Third Way shows how perceptions can be divorced from reality.
The fact is that the Democratic Party faces a grave perception problem: voters do not believe it is the party of jobs. Pre- and post-election polls confirmed that Democrats trailed on the issue of jobs in 2016. In the lead-up to Election Day, Republicans led by six points on jobs. Even worse, a post-election poll put Republicans’ edge at 16 points on “creating more good-paying jobs in the U.S.,” while another looking at working-class whites gave Republicans a 35-point advantage on which party will “improve the economy and create jobs.”
[T]his perception took shape during the 2010 midterm election—in which Republicans swept to power—and has existed in varying degrees since.
The focus group participants’ perceptions of Trump’s fake pro-jobs promises reveal that lying relentlessly to a subgroup of our population works. Trump’s agenda is hostile to jobs, but he said he was pro-jobs and would produce miracles. Trump is a notorious liar. Lying works with a significant portion of the electorate. It shapes their perceptions, which are often divorced from reality.
Third Way claimed that the focus group’s participants perceived Democrats as not putting enough emphasis on jobs for three reasons. Their actual results demonstrate that this is not true. First, the results show that the statement is imprecise. The more accurate statement is that white working class voters for Trump perceived Democrats as not focusing on providing jobs to the white working class. Second, the white working class Trump voters were frequently willing to display openly their intense hatred for the “other.”
Focus group participants were palpably angry about this perceived neglect. At times, this anger boiled over into vitriolic attacks on people they perceived as “others.”
In full disclosure, some participants’ comments were offensive to the core, and these people may be true Trump believers who are simply lost to the Democratic Party.
They’re angry because they believe the system rewards everyone but them, and this anger manifests itself in vicious attitudes toward outgroups. Some participants in our focus groups were not shy to convey overtly racist, xenophobic, and homophobic attitudes.
In plain English, Third Way found that bigotry explained why many white working class voters voted for Trump. Third Way describes the “overtly racist, xenophobic, and homophobic attitudes” as “vicious,” “palpably angry,” “vitriolic,” “shocking,” “appalling,” and “offensive to the core.”
Third Way falsely describes how it treated the “vitriolic” racism.
Throughout the memo, we determined it was important to convey participants’ words in an unfiltered format—even where we found their words shocking or appalling.
In fact, the racism was so ugly that Third Way does not quote a single example of it even though their report contains dozens of quotations from the forum participants. The fiction that Democrats, from 2010 on, sought to create jobs for blacks and Latinos but not the white working class provided these racist participants’ (false) excuse for voting for Trump and for proclaiming their hate for the “other.” The “homophobic” attacks demonstrate that tying Trump voters’ to supposed job favoritism by Democrats for blacks and Latinos is simply an excuse for bigotry.
It is relatively hard for participants in a three-day long focus group to express racist views in front of others. The racists know, and hate, the fact that other members of the group that they will have to interact with disdain their racism. Most moderate racists are unlikely to utter their true hate for the “other” in such a setting. Third Way did not report the number of focus group members that displayed intense racial animus or quote them because these facts did not accord with their agenda, but the number would have substantially understated the actual number of participants who held such views.
Third Way’s memo unintentionally demonstrates the absurdity of Trump voters’ perceptions. Third Way finds that Trump voters agree that the system is rigged – but on behalf of the people who lose under that system!
The root cause of voters’ anger is the political system they perceive as rewarding the poor and the rich.
Note that they list the poor first as the fictional greatest beneficiary of the rigged system. Anyone who knows the history of the United States will recognize the strategy used by white elites for centuries to ensure their political and economic domination by creating racial solidarity with poorer whites by casting poor blacks as villains. Trump’s white identity strategy reprises the same disgraceful demonization. It is no surprise that it worked for Trump; it has worked for over 150 years.
Third Way shows how spectacularly the strategy of demonizing blacks worked for Trump in attracting white working class votes.
Some participants also communicated resentment over special breaks for the rich, but there were fewer of these comments and they were less vitriolic in tone.
Third Way says it mentioned the poor first as the fictional greatest beneficiaries of the rigged system because the Trump voters rarely mentioned that the system was rigged to enrich further the wealthy. Even in the few cases they did so they were “less vitriolic in tone.” The Third Way’s memo about its focus group is so unscientific that it does not provide any numbers on how many participants expressed particular views. Third Way is also disingenuous in its “less vitriolic” description. The sole example Third Way provides of Trump voters’ perceptions of the system being rigged in favor of the wealthy is the phrase “many tax cuts/credits have been given to the upper class.” Using the word “vitriolic,” even with the modifier “less,” is absurd to describe that comment. The Trump supporters’ “vicious” racist language attacking poor blacks and Latinos” stands in complete contrast to the rare, milk toast lament about the wealthy.
Third Way provides a dishonest and crude explanation for how the system is rigged in favor of the victims that is understandable only if the reader realizes that Third Way shills relentlessly for Wall Street CEOs and regularly promotes many of Trump’s lies. Third Way’s highest priority is defeating the re-imposition of the rule of law on Wall Street CEOs and ending their massive frauds that have enriched them by devastating our Nation and much of the world.
I have spoken to and with thousands of the white working class. They know that Wall Street CEOs rig the system to benefit those CEOs. It enrages them. It enrages them even though President Obama failed to prosecute any of those CEOs. Those prosecutions could have transformed the political situation because they would have explained to the public how the frauds worked, how they drove the crisis, and how they enriched the CEOs. The working class is enraged at Wall Street CEOs even without this information, but consider how motivated they would be if they could read the revelations produced by over 1,000 convictions of elite bankers. Then consider how supportive they would be of the political party that had the courage to bring those prosecutions.
President Obama did not simply fail to prosecute the Wall Street CEOs who led the largest frauds. His Justice Department failed to prosecute even the not-so-elite mortgage banker CEOs and SVPs who led the making of millions of fraudulent mortgage loans. Even worse, to the extent Obama and his DOJ officials said anything about elite bank fraud they virtually always spoke to downplay it and to express their fear that prosecuting fraudulent bankers could harm the world. Obama’s unprincipled failure to restore the rule of law to Wall Street was terrible policy and terrible politics.
Third Way, of course, ignores Wall Street elites’ crimes as the ultimate form of rigging the system. Third Way, like Trump, presents a false dichotomy. The Democratic Party must choose to be “pro-business” and abandon being “anti-business.” As Third Way and Trump spin the issue, pro-business means pro-jobs and anti-business means anti-jobs. Third Way wants both major parties devoted to serving the interests of giant corporations’ CEOs. It advises the Democratic Party to further weaken the government and embrace deregulation again to complete the evisceration of the rule of law. Wall Street created, and runs, Third Way to ensure that it shills for Wall Street’s greatest wishes.
Democrats should be the party that supports honest businesses. Only by vigorously enforcing the rule of law can we avoid the “Gresham’s” dynamic that makes it impossible for honest business to compete with their criminal rivals. George Akerlof received the Nobel Prize in Economics in large part for his 1970 article on markets for “lemons” that introduced and named this perverse dynamic to economists.
[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.
Only government can break this perverse dynamic through regulation and prosecution – the enforcement measures essential to establishing an effective rule of law. The Gresham’s dynamic is terrible for jobs because it drives our most destructive financial crises and recessions. Effective regulation and prosecution is essential to expanding jobs – and preventing criminal employers from defrauding their employees. The Democrats should become the pro-honest business party by re-establishing the rule of law. It would be good for jobs, good for America, and good politics. If the Democrats return to shilling for Wall Street they will be destroyed. Even Third Way admits that voters would support such a principled, pro-jobs policy were the Democrats to adopt it.
It is true that voters want the government to crack down on business abuses….
There are other pro-job policies that the Democrats should make their own. First, the Democrats should be the party of full employment through a federal employer of last resort program. Everyone who wishes to work and is capable of working will have a job. Jobs, not simply a basic income, are essential to the sense of fulfillment of those who can work. Such a program would also put the lie to the claim that the poor do not want to work.
Second, the U.S. puts its firms at a competitive disadvantage relative to international competitors by placing the cost of health care on many firms. A significant number of the largest firms provide the so-called “Cadillac” health insurance plans that spur the severe inflation of Americans’ health care costs. Single-payer and national health system programs are much cheaper than our systems and provide equivalent or superior care. Both effects, removing the medical care costs from U.S. firms and reducing overall U.S. health care costs, would lead to more U.S. jobs.
Third, the other key to U.S. jobs is improved education and skills training, particularly for those who lose their jobs.
Fourth, better child care could allow more young parents to work outside the home.
Progressive Democrats favor each of these four pro-jobs programs while Third Way and Republicans oppose each of the policies. Third Way’s memo does not mention any of the four programs, presumably because Trump voters do not understand or support them. That suggests that Hillary Clinton and the DNC have done a poor job of supporting each program and explaining how valuable each is in creating jobs. The New Democrats controlled the DNC and they opposed jobs guarantee programs and single-payer health care. They opposed Senator Sanders’ bold educational program even though the white working class would have been the primary beneficiaries of a well-designed program providing public funding sufficient to allow anyone able to meet university standards to study for a degree. Buried deep inside the Third Way memo came an important admission and a deliberate misstatement about polls showing Democratic Party members’ dissatisfaction with Hillary Clinton because they perceived her policies as anti-jobs.
Comparing polls from 2012 and 2016, 90% of African Americans felt Obama’s economic policies would be good for them, compared to 62% who felt the same about Clinton’s. Among Millennials, 57% felt Obama’s economic policies would be good for them, compared to only 38% for Clinton’s.
It turns out that the Democrats’ choice of a New Democrat, Hillary Clinton, as their candidate led to the perception that she was not as committed to jobs as were other elected Democrats such as President Obama. As a New Democrat, Secretary Clinton was less committed to jobs than Senator Sanders. Third Way has, implicitly, admitted that the anti-jobs perception it claims to have identified with “Democrats” was actually a perception of the candidate that Third Way relentlessly pushed – Secretary Clinton. Secretary Clinton was far weaker on jobs than were progressive Democrats like Senator Sanders for the reasons that I have explained.
One of the most important pro-job education programs that progressive Democrats pushed was ceasing direct and indirect federal subsidies to for-profit schools that defrauded students and the public. Such frauds have dominated the for-profit sector. They result in substantial costs to the public and educational programs that are so poor quality that they leave the typical graduate unprepared to work at the promised jobs. The programs also lead to very high dropout rates and frequent(federally guaranteed) loan defaults. Trump, of course, ran one of these notorious educational frauds. His fraud was so crude that even the existence of the fictional “Trump University” was a fraud. Unfortunately, for-profit schools also made Bill Clilnton wealthy, so the New Democrats have been weak on stopping such frauds. Trump, unsurprisingly, is removing any rule of law restraining these frauds even though fraudulent for-profit schools are major job killers.
Third Way ignored two of the most destructive anti-job policies pushed by many New Democrats for an excellent reason – Third Way was wildly enthusiastic about those policies. Even when it quotes a focus group participant’s statement attacking trade deals as job killers, the Third Way memo ignores the point. The quotation stated the participant’s perception that Trump was pro-jobs because he was “ending trade agreements that are not in our favor.” The New Democrats and Third Way passionately pushed those trade agreements, which Third Way now implicitly admits Americans broadly perceive as anti-jobs.
The second, and far more destructive, job killer pushed by New Democrats and Third Way is the Grand Betrayal, which they called the “Grand Bargain.” In 2010, at a time when the economy desperately needed a far higher level of fiscal stimulus, the New Democrats and Third Way achieved domination of the Obama administration’s fiscal policy. President Obama recruited a senior Third Way leader, Bill Daley, as his Chief of Staff. Daley, a former Wall Street banker, promptly made the Obama administration’s top domestic policy in 2011 the attempt to shred the safety net in a deal with the Republicans. Pete Peterson’s fondest dream is the privatization of Social Security, which would increase Wall Street investment fees by tens of billions of dollars. The Grand Bargain would have also inflicted the economic malpractice of austerity at a time when we were just beginning to recover from the Great Recession.
Had President Obama and Daley succeeded in negotiating this Grand Betrayal of the American people and the Democratic Party’s principles, the economy likely would have been thrown back into recession and Obama would have been a one-term president. Fortunately, the Tea Party members of Congress made demands that were so extreme that the Grand Betrayal failed. Unfortunately, because the Obama administration endorsed austerity the job and wage recovery was slow and the public tended to blame the party in power. Third Way was the most fervent supporter of the Grand Betrayal, including austerity – the most lethal job killer.