Hillary Clinton gave an economic policy speech Monday at the New School in New York, calling for what she called a "growth and fairness economy" and outlining her domestic policy message for the campaign going forward. Here are nine observations on the talk:
She can sometimes sound like the Goldwater Girl she once was. In the "strong growth" section of her speech, Mrs. Clinton said she favored "tax relief and simplification" and said she wants to "empower entrepreneurs with less red tape." Later on, she talked about "empowerment zones," a favorite idea of Republican Jack Kemp. She talked about immigration and immigration reform contributing to economic growth, a point that Jeb Bush also makes on the campaign trail.
Yet she can also play the populist demagogue. When it comes to banks, hedge funds, and high-frequency traders, Mrs. Clinton wants not to eliminate red tape but to add more of it. She vowed to "go beyond Dodd-Frank" and "rein in excessive risks on Wall Street." Who would define what risk is "excessive" she did not say.
Health care, watch out. If you thought ObamaCare was the end of the story, you aren't ready for a Hillary Clinton presidency. She talked about families struggling with the "soaring price of prescription drugs" and the "out of pocket costs" of healthcare, and she promised to "make prescription drugs more affordable." She spoke of "continuing to constrain health care costs." She didn't quite vow to "go beyond ObamaCare" the way she explicitly vowed to "go beyond Dodd-Frank," but it was implicit that she thinks some additional government action, either subsidies or price controls, are needed.
She's got a plan to change the capital gains tax system. The third of Mrs. Clinton's three kinds of growth—strong growth, fair growth, and long-term growth—may be the most intriguing. Denouncing what she called "quarterly capitalism," Mrs. Clinton said she wants to change the rules to encourage companies and investors to think about the "next decade" rather than the "next day." She said she'd go into more detail soon about the capital gains plan, but a signal to where she is headed is available in two think tank reports.
- The first, a June 30, 2015 paper issued by Neera Tanden and Blair Effron of the Center for American Progress, recommends "a sliding-scale capital gains tax that determines the rate charged to investors in accordance with the holding period of the security." They write, "The existing capital gains tax is nominally targeted at rewarding long-term investment, but it falls short in practice. Hold an investment for 364 days, and it is a short-term gain; hold it for one more day, and it instantly becomes long term and qualifies for favorable tax treatment. There is no theory that suggests investments become magically more prudent on day 365, nor is there any reason to believe that one-year investments have the same effect on long-term growth as 10-year investments. Yet once an investor holds a share past the one-year mark, the tax code provides no incentives to maintain the position any longer."
- The second, a September 2009 paper from an Aspen Institute group that included Warren Buffett, Lester Crown, Peter Peterson, Martin Lipton, and Louis Gerstner, recommended, "Revise capital gains tax provisions or implement an excise tax in ways that are designed to discourage excessive share trading and encourage longer term share ownership. Capital gains tax rates might be set on a descending scale based on the number of years a security is held. An excise tax could be imposed that would also allow for the inclusion of tax-exempt and other investment entities."
She has no qualms about hypocrisy. Mrs. Clinton, who once served as a board member of Walmart, now is out there faulting companies for paying dividends and buying back stock but not raising the pay of workers. Mrs. Clinton, who made nearly $100,000 in ten months of 1978 and 1979 trading cattle futures on the advice of James Blair, now says she's against short-term trading and well connected traders. Mrs. Clinton, who earned a reported $400,000 total for two speeches to Goldman Sachs, now says she wants to "rein in excessive risks on Wall Street." She says she wants to encourage long-term thinking among capitalists, but her campaign seems predicated on a short-term mindset among voters, on whom she is counting not to remember her track record.
Her definition of "evidence" is highly suspect. Mrs. Clinton said she wants to rely on "evidence rather than ideology." Yet she claimed, "the evidence is in: inequality is a drag on our entire economy." Even Nobel laureate economist and noted anti-inequality crusader Paul Krugman thinks the evidence there is not in; he wrote the other day, "I've been using the case of research on inequality and growth as an example of an issue where liberals need to be careful not to let wishful thinking drive their conclusions… there just isn't a striking, simple relationship between inequality and growth; all the results depend on doing fairly elaborate data massaging, which might be right but might also be teasing out a relationship that isn't really there." He wrote that there is "not much evidence that failure to reduce inequality kills growth."
Entitlement reform? Not. All Mrs. Clinton had to say about the big federal budget issue of entitlement reform amounted to a vague phrase about "enhancing" Social Security. No one knows what that means, but it probably polls better than Jeb Bush's position, which is to raise the retirement age.
She sees the sharing economy as an opportunity. Advance press on the speech indicated she was going to criticize Uber, Airbnb, and other companies that rely on "on-demand" workers rather than stable unionized workforces. Jeb Bush promptly scheduled a campaign event with Uber as a contrast. But in her actual speech, Mrs. Clinton was more positive, allowing that these companies are "creating exciting opportunities and unleashing innovations."
Foreign policy president? Not. This was an economic speech, not a foreign policy speech, but even so you'd think a former secretary of state might have found a way to talk more about the opportunities of a global economy. Instead Mrs. Clinton focused on the downside. She didn't mention the North American Free Trade Agreement, a great achievement of her husband's presidency. She did say trade had "contributed to hollowing out our manufacturing base."
Clinton has to deal with Bernie Sanders in a Democratic primary, so as a political matter I can see why she might want to run against trade and against Wall Street. She didn't mention Senator Sanders in her speech, though she did mention Jeb Bush, Marco Rubio (whose tax plan she called "a sure budget-busting giveaway to the superwealthy") and Scott Walker (who she accused of "mean-spirited, misguided attacks" on unions). An alternative approach to the Sanders challenge, one that would be better for the country and might also put Mrs. Clinton in a stronger position for the general election, would be to defend free enterprise from his attack. Yet notwithstanding Clinton's rhetoric about growth and empowering entrepreneurs, and despite her own experience with Walmart, Goldman, and the cattle futures market, at this point in the campaign it looks like an unapologetic defense of capitalism will be the work of someone other than this particular candidate.