NEW YORK — Hillary Clinton gave a big economics speech here on Monday, and
the snap reaction among Wall Street investors, economists and ardent financial
reformers who thrill to the soak-the-rich rhetoric of Bernie Sanders was a
collective: “Meh. What’s next?”
Clinton laid out the soft contours of a “growth and fairness economy” in a
speech designed to appeal to struggling middle-class workers with promises of
higher pay and more generous federal policies.
But she left out many hard specifics on tougher tax policy toward the rich
and corporate America. And she offered limited pledges to crack down on big Wall
Street banks while hitting her strongest notes promising to toss rogue bankers
in prison while ripping recent worker-productivity comments from former Florida
Gov. Jeb Bush.
Despite those few moments, this was hardly Thomas Piketty invading the land
of Wall Street titans and flipping over tables piled high with gold. And there
were no radical new proposals aimed at reversing America’s long slide into wage
stagnation.
“She appears to have taken a page out of the Elizabeth Warren book on going
after bankers and brokers and fat cats and people who may have broken the law,”
said Jack Ablin, chief investment office at BMO Private bank. “I’m sure a lot of
polling went into that. But in terms of inequality and profit-sharing and
general economic redistribution, she was a lot longer on problems than she was
on solutions.”
And Clinton sounded some of her by now very familiar themes, invoking her
love of being a grandmother and arguing that middle-class wage stagnation since
the end of the Great Recession was exacerbating income inequality while pledging
that something must be done. But that something, according to Clinton, mainly
consists of boosting the minimum wage and increasing overtime pay, something
President Barack Obama has been pushing for some time.
Clinton also reiterated her long-held belief that the lower “carried
interest” tax that some private equity and hedge fund managers pay on large
chunks of their hefty take-home pay should be boosted to the ordinary income
rate. But that was widely expected and not new. Wall Street mostly expects it
will have to give up that benefit.
Clinton did gently push into some new ground by urging corporate America to
share more of its record profits with average workers and not just top
management. But Clinton offered little in the way of direct prescriptions for
doing this, leaving that for future speeches.
“I will propose ways for companies to share more of their profits with
employees,” Clinton said. “Later, in New Hampshire, I’ll have more to say about
how we will do this.”
She also argued for tax relief for small businesses and broader corporate tax
reform along with comprehensive immigration reform. But she did not go into
specifics on any of these issues.
Other proposals also harkened back to Obama’s efforts, including an economic
infrastructure bank to pay for much-needed upgrades to the U.S. transportation
and communications systems. She again pressed for policies to address the pay
gap between men and women, another familiar theme from the campaign trail, along
with more early-childhood education.
Clinton perhaps hit her high point with a direct attack on recent comments
from former Bush, who said last week that Americans need to “work longer hours”
to increase economic growth. To significant applause, Clinton cited hard-working
nurses and other Americans and said, “They don’t need a lecture. They need a
raise.”
In a note that struck some as odd given the popularity of the services,
Clinton specifically criticized “gig economy” companies, a group that includes
upstarts such as Airbnb and Uber. These types of scrappy young companies have
often provided corporate homes for former Obama administration officials. Former
top Obama adviser David Plouffe is now a senior executive at
Uber.
Defenders of Uber and companies like it say they are fighting entrenched and
sluggish transportation incumbents such as cab companies. Getting rid of this
opposition and allowing upstart companies to thrive would be a better path to
faster growth than siding with their opponents, some analysts
say.
“I think a lot of people view the sharing economy as a prime example of U.S.
innovation and entrepreneurship,” said James Pethokoukis of the free market
American Enterprise Institute. “They are breaking up these monopoly hotel chains
and taxicab companies and allowing more people to provide not just great
services but to provide more income to workers.”
Pethokoukis gave Clinton stronger marks for taking on corporate
“short-termism” that focuses on quarterly earnings and stock buybacks rather
than long-term investment. It’s an issue popular with Wall Street investors such
as Larry Fink of Blackrock and tech investor Marc Andreessen, among others.
“Republicans should look to get on board that issue as soon as possible,”
Pethokoukis said.
Clinton also continued to straddle a middle ground on trade deals after
strongly pushing for a free-trade agreement with Asia during her tenure as
secretary of state. The halfway stance has enraged members of the Obama
administration struggling to get the Asia deal done while also failing to excite
ardent opponents of free trade deals on the left.
Many on the left strongly opposed to free trade and in favor of cracking down
harder on Wall Street have gravitated to Sanders and, to a much lesser degree,
former Maryland Gov. Martin O’Malley.
“Growth here at home and growth an ocean away are linked in a common global
economy,” Clinton said on Monday. “Trade has been a major driver of the economy
over recent decades, but it has also contributed to hollowing out our
manufacturing base,” she said. “We do need to set a high bar for trade
agreements, supporting them if they create jobs. … But we should be prepared to
walk away if they don’t.”
Clinton also found herself in a bit of a muddle as she praised the economy
under her husband, former President Bill Clinton. But she did not note that Bill
Clinton presided over the collapse of the Glass-Steagall wall between investment
and commercial banking and unleashed a massively speculative market boom in
technology stocks.
In perhaps her sharpest section, Clinton said that as a senator from New
York, she learned “firsthand” the positive role Wall Street can play in growing
the economy by helping innovators raise capital. But she also slammed bankers
who “piled risk upon risk” heading into the crisis and cited her early calls to
crack down on derivatives and subprime lending.
She pledged to both defend existing financial reform and go even further,
almost hinting at a need to break up the largest banks, something sure to go
down poorly with some of Clinton’s biggest supporters on Wall Street. “We have
to go beyond Dodd-Frank; too many of our major financial institutions are still
too complex. … I will offer plans to rein in excessive risk taking on Wall
Street and ensure that stock markets work for everyday investors, not just
high-speed traders.”
O’Malley last week issued specific proposals on this front. Clinton has yet
to do so.
Financial reformers gave her mixed grades. “It’s a good start, but after all
this listening, planning and thinking by the runaway leading candidate, I
expected more,” said Dennis Kelleher of Better Markets, a pro-reform group. “The
American people deserve a concrete, specific, comprehensive plan that really
protects them from Wall Street recklessness and that she as president can be
held accountable for once in office.”
Another financial reformer said the anti-Wall Street crowd was waiting to see
whether Clinton will “put in place a team of advisers who have a demonstrated
history of supporting meaningful reform and tough enforcement, or chooses
instead to surround herself with the same crowd of revolving door
insiders.”
The real test for Clinton on Wall Street will come when and if she turns this
rhetoric into actual policy prescriptions. Big Wall Street titans heavily
funding Clinton’s campaign and other business interests fully expect to take
some heavy rhetorical hits as the Democratic front-runner fights off the Sanders
surge. But they do not expect Clinton to try and fully reshape their
industry.
Many conservatives breathed a sigh of relief after the speech, having feared
a fresh set of innovative proposals that might have required serious responses.
“I think it’s a horse race between what’s more tired, her or the material,” said
Douglas Holtz-Eakin of the conservative American Enterprise Institute. “There
really isn’t anything new here. It’s really more of the same, and I don’t
understand how that would produce an outcome different from the last six or
seven years.”