Have Wall Street's "Third Way" Democrats Ever Been Right About Anything?

NEW YORK - NOVEMBER 02:  A man stands next to the bronze bull symbolizing financial markets near Wall Street in lower Manhatt
NEW YORK - NOVEMBER 02: A man stands next to the bronze bull symbolizing financial markets near Wall Street in lower Manhattan November 2, 2010 in New York City. The Dow Jones industrial average rose as investors awaited the results nationwide elections, putting the average near its highest point this year. (Photo by Chris Hondros/Getty Images)

Have the Wall Street Democrats of "Third Way" or their predecessors in the Clintonite "Democratic Leadership Council" ever been right about an important economic issue?

That's not meant as a thoughtless insult or flippant one-liner.  We consider it a legitimate line of inquiry, especially at a time when their pronouncements are being used as ammunition for an aggressive campaign against Social Security, Medicare, and other vital government programs.

We can omit topics of limited economic importance from our investigation. The "centrist" Democrats often adopt the 'liberal' line on social issues like gun control or gay marriage -- which, coincidentally or not, are also issues which have little or no financial impact on their corporate and high-net-worth individual sponsors.

But what's the verdict on the core economic issues of our time?

Civil Society

Prof. William K. Black Jr. was understandably displeased by The New York Times' description of the Third Way think tank as "center/left." Prof. Black writes that "Some lies will not die ... Third Way is Wall Street on the Potomac. It is funded secretly by Wall Street (it refuses to reveal its donors), it is openly run by Wall Street, and it lobbies endlessly for Wall Street."

Black adds that "Third Way, like every Pete Peterson front group, is dedicated to shredding the safety net as its highest priority and throwing the Nation back into a gratuitous recession through self-destructive austerity."

The description of Third Way as a "Pete Peterson front group" might seem to contradict the "Wall Street" label. It doesn't. Peterson's a hedge fund billionaire who has devoted decades of his life, as well as an enormous sum (he spent nearly a half-billion dollars in one five-year period alone) to slashing Social Security and lowering taxes for himself, his ultra-wealthy peers, and large corporations.

Black's words are likely to be deemed uncivil in most Washington circles, where it's considered impolite to mention a gentleman's or lady's wealthy (and potentially corrupting) funding sources in polite company. Besides, who wants to find themselves thinking negative thoughts about lobbying when you may want to pursue it yourself someday? 

This "civil" attitude toward an uncivic activity proved very useful in the 1990s, as corporate Democrats joined with Republicans in the extremely civil exercise of deregulating Wall Street on behalf of their common paymasters.

Wild in the Streets

In those days Third Way President Jonathan Cowan was predicting -- or attempting to instigate -- a generational war over Social Security and Medicare benefits. In 1994 Cowan and Rob Nelson co-authored a book called Revolution X, which argued that greedy baby boomers were going to ruin the economy with their rapacious appetites for things like medical care and financial security when they grew old.

Cowan, who was born in 1965, was young enough back then to have employed a slogan like "Don't respect the Social Security Trust Fund of anyone over thirty."

The book predicted cataclysmic events in 2011 when, said the authors, rapacious Boomers "will stop working, many will stop paying taxes, and all will start gobbling up pensions and health care benefits." (Note the use of the word "gobbling": it's a classic Peterson-ism.)

The result, predicted Revolution X, would be a "shock wave" that would "blast people from their homes, rapidly plummet millions into poverty, and threaten the economic security and financial stability of our entire nation." 

Cowan and Nelson were so eager to stir up an anti-elderly frenzy that they actually actually conducted a demonstration outside the headquarters of the American Association of Retired Persons (AARP). That was done while they were leading a Peterson-funded group called "Lead or Leave," and it was as unsuccessful in provoking intergenerational warfare as their subsequent efforts have been.

Their failure did not, however, prevent them from continuing to "gobble up" Peterson funds.

It's the nineties now. The time's ripe for a generational uprising which calls for lower government spending, right? Wrong.

Fresh Princes of Wall Street

A decade and a half later something did "blast people from their homes, rapidly plummet millions into poverty, and threaten the economic security and financial stability of our entire nation." In fact, the entire world was wounded.

But "greedy geezers" didn't cause that cataclysm: Third Way's Wall Street sponsors did. They trashed the global economy like a Baby Boom rock star trashes a hotel room. We didn't hear much about that from Cowan and Company.

Given their close relationship with Wall Street, one might hope that Third Way and its peers could offer some useful thoughts on ways to improve regulation and oversight. One would be wrong.

That's not to say that Third Way has been completely silent on the banking issue. In one notable example, it put forward a proposal that would preempt state law in order to protect bankers who illegally foreclose on homeowners.  They don't put it that way, of course, but that would be the end result. (Yves Smith and Bob Borosage have more.)

Third Way's board members include a number of prominent financial types who benefited mightily from bank deregulation, including some (like William M. Daley) who lobbied and fought for deregulation.

Funny. The Third Way crowd keeps saying they're bringing "fresh" and "new" perspectives to the debate, but all they do is keep rehashing twenty-year-old talking points. They don't seem to have learned from the economic shocks -- and financial revelations -- of the 21st Century. The world has learned some hard lessons, but they still want to party like it's 1999.

Hey, bankers deserve a break, right? Wrong.

Classic Rock

Cowan's still try to fan the flames of intergenerational fear and loathing, most recently as part of an absurdly inept Pete Peterson publicity gambit called The Can Kicks Back. (Cowan's role is documented by Eric Laursen.) His war on Boomers is entering its twentieth year, and the youth of America still aren't interested.  

Cowan will be fifty in a couple of years. But he's still playing the oldies, like a classic rock act working half-empty arenas. As Spinal Tap would say:  Hello, Cleveland! 

"The Can Kick Back": It can't miss. This time the kids'll turn on the old folks, right? Wrong.

(Deficit) Apocalypse Now

Cowan and Nelson suggested in 1994 that the nation's most urgent crisis was the allegedly intractable Federal deficit -- a deficit which disappeared altogether several years later.

Cowan's still prone to statements like this one: "The fiscal cliff provides Congress with a now or never moment to solve our most pressing long term problem -- the nation's deep and chronic deficits."

We're currently experiencing crisis-level unemployment, record-high poverty (than includes one American child in six), wage stagnation, and a decline in social mobility. Citizens struggling with these problems will be surprised to learn that deficits are a more "pressing long-term problem" than their future, or that of their children.

Deficit spending re-emerged during the Bush years as the result of tax cuts (especially for the ultra-wealthy and corporations) and two wars "paid for on a credit card." And it escalated significantly when Third Way's Wall Street patrons crashed the economy in 2008.

Current debt levels would be far more sustainable after a short-term stimulus program restarted the economy. The Congressional Progressive Caucus budget reduces the deficit far more aggressively than any Third Way-backed plan, but it also might discommode Third Way's wealthy backers.

Federal deficits are our most pressing problem? Wrong. (They don't know how to fix them, either.)

Less Is More Less

As part of the Pete Peterson family of companies lobbying groups, Third Way routinely lobbies for lower taxes -- which, of course, increases those deficits.

Their latest initiative is an attempt to cut corporate taxes -- which, despite the propaganda, are actually lower in the United States than in most other developed countries. (You have to look at the rates corporations actually pay, not the nominal rates that are on the books -- but which they all use loopholes to evade.)

Third Way argues that their patrons' preferred system of (lower) taxes would increase employment in the United States. The response to that is simple: We've had more than a decade of low taxes for wealthy individuals and corporations. How's that working out for you?

But lower taxes lead to economic growth, don't they? Look around you: Wrong.

Power to the (Right) People

When Occupy Wall Street first hit the scene, demonstrating the potential to transform political landscape, Third Way sent its best person out to craft a response. That turned out to be Bill Schneider, the former CNN political analyst who is now a Third Way "Distinguished Senior Fellow & Resident Scholar."

Schneider was born in 1944, and is therefore too old to be a Baby Boomer. That might explain why he's socially acceptable to the generationally-obsessed and Boomer-loathing Third Way crowd. Scheider's piece dismisses Occupy Wall Street as a group which would inevitably alienate the majority of Americans.

Perhaps predictably, the opposite happened. The Occupy movement became enormously popular, and remained that way until unsympathetic media coverage, relentless police harassment, and internal friction turned the public against it.

Like-minded political pollster Douglas Schoen, another faux "centrist," promptly produced an unscientific and unprofessional poll for The Wall Street Journal which purported to show that Occupy's agenda was wildly unpopular with Americans. As we discussed then, the opposite is true: That agenda was, and is, extremely popular with the electorate.

Schoen began his Journal piece by red-baiting Occupy, writing of the movement's "intense opposition to free-market capitalism and support for radical redistribution of wealth, intense regulation of the private sector, and protectionist policies." With the unerringly inaccurate political instincts of the "centrist" operative, Schoen then advised the Democrats thusly:

"President Obama and the Democratic leadership are making a critical error in embracing the Occupy Wall Street movement-and it may cost them the 2012 election."

We now know that President Obama and the Democrats continue to emphasize Occupy themes throughout the campaign -- job creation, restraining Wall Street, protecting Medicare and Social Security -- which was critical to their 2012 victories for the Presidency and Senate. (They won the House, too, by a million votes -- but only in the popular vote.)

Populism will never sell. What the public really wants is corporate-friendly policies like the ones that got us into this mess, right? Wrong.

But wait. There's more...

Third Way on health care? Wrong.  (And wrong in a way that will drive up health care costs, which should be a deficit hawk's biggest concern.)

Have they been right about any economic issue of import? We haven't found any evidence for that. But we promise to keep on looking.  

Up next: Third Way finds a new issue -- with predictable results.