Column: Hillary Clinton’s fair growth gambit
For most of a generation, Democrats have divided into two broad camps on economic policy. There are “growth Democrats,” who argue that a rising tide will lift all boats; that was the reigning view during the Bill Clinton administration under Treasury Secretaries Robert Rubin and Lawrence H. Summers. And there are “fairness Democrats,” who argue that the central problem is inequality. That’s the view of the party’s progressive wing, led today by Sen. Elizabeth Warren of Massachusetts and Sen. Bernie Sanders of Vermont.
As she began spelling out her views for the 2016 presidential campaign, Hillary Rodham Clinton faced a choice: Which Democrat was she going to be?
Her answer: She wants to be both. “I believe we have to build a growth and fairness economy,” she said last week. “You can’t have one without the other.”
Politically, that put Clinton exactly where she wants to be: to the left of her husband’s long-ago administration, which progressives think was too solicitous toward Wall Street, but to the right of Sanders, who’s running as the scourge of the billionaire class.
So her economic policy speech included a dose of the pro-worker Hillary, calling for stronger union bargaining power and demanding equal pay for equal work, but also the pro-business Hillary, extolling entrepreneurs and promising to be “the small-business president.”
There was recycled Obama administration policy too: a higher minimum wage, an infrastructure bank, investment in education and renewable energy. In economic policy a Hillary Clinton presidency would look more like a third Obama term than a third Bill Clinton term.
But she offered some intriguing new elements as well — policies that could not only help her bridge the gaps between her party’s wings but also make her pitch more than just a warmed-over version of the last eight years.
She promised proposals to promote long-term investment by businesses instead of a chase for quarterly results — a problem she called “short-termism.” (It may be the first time any presidential candidate has ever used that word.)
“Too many pressures in our economy push us toward short-termism,” Clinton said. “Everything is focused on the next earnings report or the short-term share price, and the result is too little attention to the sources of long-term growth: research and development, physical capital and talent.”
She promised proposals for “making sure stock buybacks aren’t used only for an immediate boost in share prices,” a practice economists fear is soaking up funds that might go to more productive investments. And she said she wants to make sure stock markets “work for everyday investors, not just high-frequency traders.”
Clinton hasn’t spelled out any details yet. But it sounded as though she may propose changing Securities and Exchange Commission rules to make it harder for companies to buy back their own stock, an idea Warren and other progressives have championed.
Aides said Clinton also plans to propose changes in the tax treatment of capital gains — income from investments — to reward long-term investors. Laurence Fink, chairman of the investment firm BlackRock, has proposed lengthening the holding period for long-term capital gains (which benefit from a low tax rate) from one year to three years, and perhaps making all gains tax-free after 10 years.
“U.S. tax policy, as it stands, incentivizes short-term behavior,” Fink wrote. “Tax reform that promotes long-term investment will benefit both the companies who rely on capital markets and the hundreds of millions of people saving for retirement.”
Finally, Clinton called for a broader shift in the way American businesses behave. “We need to get businesses back looking after their employees and their customers and their communities and our country, not just their executives and their shareholders,” she said in New Hampshire on Thursday.
In effect, she was arguing for abandoning a principle many U.S. firms have followed since the 1970s: the idea that the sole duty of a corporation is to maximize shareholder value.
“There’s increasing debate in the business community over a fundamental question: What’s the purpose of a corporation?” Judith Samuelson, director of the Aspen Institute’s Business and Society Program, told me. “We’ve been in thrall to a very simplistic idea — that the purpose is to maximize shareholder value. But that’s not the only purpose, and it doesn’t need to be.”
Some of these ideas, intriguingly, appeal not only to Democratic business leaders but to some Republicans. too. Conservative writer James Pethokoukis of the American Enterprise Institute warned: “Arguing against short-termism should be a natural fit for Republicans…. Hillary Clinton just stole a potentially powerful theme right from under them.”
The details will be important, of course. But Clinton has managed not only to find a sensible starting point in the middle of the Democratic Party; she’s introduced some useful new ideas to the campaign and launched a debate that will force rivals in both parties to respond.
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