No Way

While Democrats are gleefully watching the fratricide in the Republican Party, they've had a little skirmish of their own. Perhaps you've heard about the brouhaha caused by Third Way, a think tank for centrist Democrats. Its president and vice president for policy published an op-ed in the Wall Street Journal attacking "economic populism" (i.e., a focus on economic inequality) as a strategy for Democrats, and singling out for criticism Senator Elizabeth Warren and New York's mayor-elect Bill DeBlasio. This has provoked a strong reaction from the populists, with some of them pointing out that the board of Third Way is predominantly investment bankers and suggesting that the group represents the interests of the Wall Street rich.

Now, I've got nothing against moderates. The World's Smallest Political Quiz shows me just a smidgen, if at all, to the left of the boundary between liberal and moderate, and I would add that the party that purged all its moderates lost the last Presidential election. Also, it turns out that I (to my surprise) know one of the investment bankers on the board of Third Way, and although I haven't spoken to him in many years, I think he is a genuine Democrat rather than an agent of influence for Morgan Stanley.

But I have to say that I score this one for the liberals. This op-ed does read like the work of apologists for Wall Street, and not overly scrupulous ones.

They begin by dismissing the broader significance of the recent election of DiBlasio and Warren: Since they're from heavily Democratic New York City and Massachusetts, they're not very good indicators of the mood of rest of the country. True, but New York had a two-term Republican mayor (Rudy Giuliani), followed by a three-term centrist independent billionaire (Michael Bloomberg) who pretty much incarnates Third Wayism. DiBlasio represented a clear repudiation of Bloomberg, and he won not just in a landslide but in a big landslide (73%). As for Warren, she defeated an incumbent Republican, who ran on his regular-guy, moderate image against liberal "Professor" Warren. I don't know exactly what those elections mean, but it doesn't seem safe to say they mean nothing.

But even worse, the authors go on, are the actual policies of these woolly-headed liberals ("the Warren wing of the Democratic Party"). The authors first sneer at, but do not refute, "the 'we can have it all' fantasy" that we can pay for all sorts of good things if we tax the rich more, "close a few corporate tax loopholes, and break up some big banks." (No one that I'm aware of has suggested that breaking up big banks would raise money, but apparently Third Way is so much against it that they wanted to take an extra opportunity to sneer at it.)

But they quickly go on to their main targets, middle class entitlements. At the present rate, they warn, the Social Security Trust Fund will be used up in 18 years. Then they cross the line into deceit:

Undeterred by this undebatable solvency crisis, Sen. Warren wants to increase benefits to all seniors, including billionaires, and to pay for them by increasing taxes on working people and their employers.

The plan Warren is supporting would remove the cap on payroll taxation, thereby raising the marginal payroll tax rate from zero to 12.4% on earnings above $110,100. (For simplicity, let's assume that the employer share ends up being paid by the employee as lower wages.) The change would have no effect on anyone earning less than $110,100. Of course, anyone paying payroll taxes is by definition a working person, but somehow the phrase "working people" does not normally evoke images of people whose individual earnings are over $110,100, and only those people. That's why I call it "deceit" rather than "falsehood."

Because of the current cap, rich people actually pay a lower average rate on earnings than other people. If you have a salary of $1 million, you will pay payroll taxes of 12.4% x $110,100 = $13,652, for an average tax rate of 1.4%. Having that increase to the same 12.4% that most people pay will hurt, especially because your higher taxes won't increase your own social social security check, which will remain a tiny fraction of your income. But in the funhouse mirror of Third Way, working people are paying to benefit billionaires.

I could go on to discuss their comments about Medicare, or their peculiar interpretation of some election results from Colorado. But you get the point. I don't want to sound immoderate or anything, but this is hackery by Wall Street's performing monkeys.