The current campaign is in no small part fueled by an anti-establishment fervor born of deep dissatisfaction with established Washington politics and the failure of policymakers to address the real economic concerns of the broad middle class. On the right, majorities have soured on tax cuts for the rich and "free trade" as the way to raise their living standards; on the left, Bernie Sanders's followers are fed up with incrementalism and want to leapfrog the current system to a much more interventionist model of social policy than we've had in this country.
While my own positions differ from these, I still think this anti-establishment movement makes great sense, has been a long time coming, and could and should be a valuable force in the American political economy. But that energy is also at risk of being squandered.
For one, Donald Trump takes this movement to a particularly weird and wasteful place.
In his campaign, "anti-establishment" translates into the absence of logic, consistency and numeracy (not to mention decency).
He's basically saying: "The current system is broken, so anything goes. To insist that my numbers add up, or even that what I said on Monday has any bearing on what I'll say on Tuesday, is to revert to failed establishment politics and policy."
Sanders is different and much more substantive. His ambitious policy agenda links up directly to the motivation behind his campaign: the related problems of economic inequality and the power imbalance that has disenfranchised most Americans from a truly democratic process.
The organizing principle is that the establishment has rigged the game and the only way to unrig it is to banish them and their lobbyists from the temple.
The current system is broken, so anything goes. To insist that my numbers add up, or even that what I said on Monday has any bearing on what I'll say on Tuesday, is to revert to failed establishment politics and policy.
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He argues, correctly in my view, that this will take a political revolution, a key part of which is a major increase in the role and size of government.
For example, his agenda would raise federal spending as a share of GDP by roughly half, from around 20 per cent to around 30 per cent (most of the increase comes from Sanders' proposed shift to single-payer health care, so more money flows to the government versus private insurers). The challenge is that this leapfrogs over the present reality. It ignores path-dependency. I may to too old and established myself to envision the path he and his followers see, but I don't see how you get there from here.
If I'm right - if Trump's mad-hatterism is a waste and political revolution is not forthcoming -- how can this current anti-establishment energy, a justified and potent force, be most fruitfully tapped?
I thought the answer, while perhaps not very sexy, was in a recent American Prospect piece by Robert Kuttner headlined "The Other Woman: Elizabeth Warren and the 2016 Election." It is this: Personnel is policy. If the next president comes from the establishment, the best way to realize the progressive goals of the anti-establishment moment would be for her to appoint new and different people to high-level policy positions.
In my field, these should be economists/policy analysts who think well outside the traditional policy box, who do not give public-debt reduction undeserved prominence, who recognize and have concrete ideas about how to rectify power imbalances, who understand the value of expanded trade but are skeptical of inadequately representative trade agreements, who will argue for Federal Reserve governors who adequately weight full employment, who know how markets, including financial markets, work and how they frequently fail, and who don't believe the economic system is so fragile that needed regulation and progressive tax policy is an unholy threat to "job creators."
Though I'm about to share one point of disagreement with Kuttner and Sen. Warren, D-Massachusetts, their insights here are extremely important. The idea that "personnel is policy" has been around forever, but it's hard to know just how profound it is until you've seen the sausage made from the inside. Progressive ideas in the spirit of the last paragraph have no chance of even reaching the president when the gatekeepers possess limited visions.
So where's the disagreement?
People shouldn't be disqualified from the next policy team because they worked in finance. They should be carefully scrutinized, for sure, to make sure they're not overly aligned with the sector, but the advantages of having people on staff who know both the technical aspects and the culture of finance must not be discounted by an undiscerning litmus test.
Given the importance of presidential hires, we spend too little time scrutinizing key appointees relative to the time we spend scrutinizing the candidates themselves.
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Kuttner favorably notes former Goldman Sachs head of finance Gary Gensler in this regard. I'd add Antonio Weiss, currently at Treasury but originally opposed by Warren because of his finance background. But Weiss has deep knowledge of contemporary markets and a progressive orientation. Behind the scenes, he's made important contributions to Treasury's work on progressive tax policy, retirement savings, helping Puerto Rico and the type of serious financial market oversight that I associate with Warren herself.
(Just to be clear here, I was riding the Liz Warren bandwagon long before she was Sen. Warren. I recently participated in a Senate hearing and in response to a question from Warren, I was citing statistics from a book I'd read years ago; halfway through my statement, I realized it was a book she'd written when she was a law professor.)
Simply put, you really need people who know where the skeletons are buried and how to dig them up. To give one example, I've gained insights on how to make a financial transaction tax work from talking to finance insiders who agree that such a tax would be a smart revenue raiser while usefully dampening noise trading.
Given the importance of presidential hires, we spend too little time scrutinizing key appointees relative to the time we spend scrutinizing the candidates themselves. I'd sacrifice many a presidential debate to hear their potential chief economists or chiefs of staff debate.
Like I said, not very sexy, and I may well be revealing my own limited vision. But if we hope to usefully channel this campaign's anti-establishment energy, that's how I'd go about it.
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