Hillary Clinton's record in office suggests that she is more liberal than either her husband or Barack Obama, and in a Monday speech outlining her economic vision she is set to confirm that.
Background briefing documents provided by her campaign to journalists in advance of the speech suggest she's making an effort to avoid a hard break with the previous two Democratic presidents, pointing out instead that times have changed since 1992 or since the circumstances of the 2008 economic crisis.
But the documents nonetheless hint at a fundamental philosophical difference: Clinton is less inclined to favor a market-oriented approach than a left-wing approach, a real change from the past quarter century of Democratic Party economic policymaking.
What we won't get on Monday is much policy detail to flesh out how this difference might look in practice. And many left-wing interest group leaders and intellectuals to whom this new way of thinking has been previewed have expressed skepticism to me about its sincerity. But history suggests that presidents generally try to implement the agenda they have promised, so it's worth paying attention.
The great divide in left-of-center economics
The biggest divide in American economic policy is, of course, the one that separates the Republican approach from the Democratic one. But within the left-of-center camp there is a long-running conceptual dispute between what you might call neoliberalism and paleoliberalism.
The keys to the neoliberal approach that dominated both the Clinton and Obama administrations are, roughly:
- The main way the government can impact the pre-tax distribution of income is by providing high-quality education to as many people as possible.
- Financial markets should be regulated to guard against catastrophe, but also should take a leading role in driving investment decisions across the private sector.
- To the extent that the education path fails to generate a satisfactory distribution of economic resources, progressive taxes should fund redistributive programs to produce a better outcome.
The paleoliberal approach denies most of this, harking back to an era in which government regulation and labor unions played a more direct role in compressing the pre-tax distribution of labor income and the financial sector was deliberately regulated in a heavy-handed way rather than allowed to lead the economy.
Neither Clinton nor Obama ever adhered purely to the neoliberal philosophy (both endorsed minimum wage hikes, for example, and saw a large constructive role for the government in guiding the health-care sector) but it has been a dominant strand in both administrations' thinking.
The new paleoliberalism
The philosophy Clinton will outline is essentially a modern-day revival of the old paleoliberal side of this fight. The ideas and people referenced on background clearly reflect the influence of a new set of institutions that have arisen in the 21st century that all aim to push against the hegemony of neoliberal ideas. Key focus points for this paleoliberal revival include the Washington Center on Equitable Growth that Clinton's campaign chair John Podesta founded in 2013 (and where, full disclosure, my wife used to work), the Roosevelt Institute, and George Soros's Institute for New Economic Thinking.
These groups promote concepts that we can expect to see Clinton embrace but that reverse the neoliberal formula of her husband's administration:
- The government should take an active role in writing economic rules that promote high wages, rather than relying on taxes and transfer payments.
- Financial markets do a poor job of guiding private sector investment (she will frame this as a critique of short-term thinking).
- Increasing educational attainment is an inadequate strategy for curbing inequality.
Clinton intends to bring this all together under the idea that high levels of inequality reduce the rate of economic growth rather than being an inevitable result of growth-friendly policies, technology, and globalization.
Conceptually, this sets Clinton up for a much more vigorous regulatory approach than either the Obama or (especially) Clinton administrations took. One that is much less worried that rules that reduce business profits will also reduce investment and growth, and one that is much friendlier to the idea that strong labor unions are not only compatible with but arguably necessary for rapid economic growth.
What does it mean?
Politics is more about concrete policy choices than abstract philosophy, and thus far we've seen relatively little indication of how Clinton would deliver on these ideas in a concrete way that differs from her predecessors.
Joining the congressional Democratic backlash against the Trans-Pacific Partnership would have been one way to do that, but it's a step she rather pointedly declined to take. Nor has she embraced liberals' call to expand Social Security, and she's been somewhat cagey about whether she endorses the movement for a $15-an-hour minimum wage. She certainly hasn't joined Elizabeth Warren, Bernie Sanders, and Martin O'Malley in calling for a breakup of Wall Street's biggest banks.
Many veterans of the intra-Democratic clash on economic policy doubt the sincerity of Clinton's moves to join their camp. Ironically, the fact that leading neoliberals like Larry Summers are now singing from a more paleoliberal songbook gives the old-time paleoliberals heartburn. They see a ploy by their old rivals to bend with the wind rather than breaking so as to retain control over the highest levels of the Democratic Party. Clinton's team is explicitly intending to stay abstract initially. Rather than a laundry list of policy initiatives, they want to paint a broad vision that they then fill out over time. Only when that happens will we really get a sense of how much Clinton intends to break with the past.