The Democratic Party’s left wing is stronger today than at any time since the “silent majority” loudly rejected George McGovern. Team Blue’s top presidential prospects have pledged their allegiance to socialized medicine, free public college, universal child care and paid family leave, while the party’s Establishment think-tank has gone so far as to propose a federal job guarantee. Moderate Democratic senators are now pushing the same sort of public option for health insurance that their centrist predecessors once lived to kill. And the Democratic leadership’s official 2018 platform – ostensibly, the consensus agenda of the party’s mainstream – calls for a $15 minimum wage, labor law reforms that promote unionization, and vigorous antitrust enforcement.
Meanwhile, less than two decades after 40 congressional Democrats voted for George W. Bush’s regressive tax cuts, not a single one backed Donald Trump’s – even though ten Democratic senators were staring down tough reelection bids in states that the GOP president had won.
By all appearances, the Democratic Establishment has finally concluded that a “stopped-clock socialist” is right a couple times a century – and that their party’s path out of the wilderness cuts away from Wall Street and toward the left.
Or, so it appeared until last week – when more than a dozen members of the Senate Democrats voted to advance a bill that would make it easier for banks to discriminate against black people, coerce mobile-home buyers into predatory loans, and pursue high-risk lending strategies that increase the likelihood of a future financial crisis.
You can pursue more thorough accounts of the legislation’s toxic flaws here and here. But the upshot is simple: In the name of providing regulatory relief to “community banks,” the bill empowers small lenders to abuse consumers; liberates medium-size banks (including ones large enough to have required bailouts ten years ago) from the heightened regulatory scrutiny that Congress had put on them after the 2008 crisis; and provides the nation’s largest banks with various loopholes that will make it easier for them to take bigger risks and evade regulatory oversight.
For these reasons, among others, the Congressional Budget Office has concluded that the bill would significantly increase the odds of taxpayers having to bail out a failed bank in the near-future.
Thus, the fact that so many Democratic senators are eager to help Mitch McConnell pass it – and that Chuck Schumer has made no discernible effort to dissuade them from doing so – raises the question: Have progressives really changed the ideological orientation of the Democratic Party, or does Wall Street still hold the deed to blue America’s “big tent”?
This week, BuzzFeed News argued that the party’s handling of the banking bill actually confirmed the former interpretation:
Democratic presidential hopefuls are scrambling to come out against the first big bipartisan legislation of the Trump era, positioning themselves as hardliners on Wall Street regulation and free from the influence of banks.
It’s a sign that on a national political scale, many Democrats are betting there will no longer be any room with voters for nuance on the issue of Wall Street — or any appetite for bipartisanship. Ahead of a potentially bruising Democratic primary, some of the country’s top Democrats are apparently hoping to shed any perception that they are cozy with Wall Street donors.
There’s something to be said for this reading. It was not always the case that rising stars in the Democratic Party took pains to distance themselves from Wall Street. Just a few short years ago, Cory Booker called Barack Obama’s besmirching of Bain capital’s good name “nauseating”; now, the New Jersey senator is calling for strengthening regulatory constraints on Wall Street’s “greed.”
On the other hand, one shouldn’t have to be an anti-Wall Street “hardliner” to reject this bill. Less than a decade after the financial sector’s malfeasance triggered a global economic crisis (that we still haven’t fully recovered from), it should not be considered “extreme” – or, in BuzzFeed’s framing, a rejection of all “nuance” – to oppose legislation that will increase the probability of a systemic bank failure, according to the government’s nonpartisan scorekeepers.
There is a case for lightening the regulatory burden that post-crisis regulations heaped on community banks. But the idea that this objective is so urgently necessary, it is worthwhile for Democrats to accept a bipartisan compromise – that undermines protections against discriminatory lending, and increases the likelihood of a future financial crisis – is completely insane. As of late 2017, 96 percent of America’s community banks were profitable, and a high percentage of those were posting record-high profits. Meanwhile, such banks have been showing higher rates of loan growth than any other class of financial institutions in the United States. We do not have a community banking crisis in this country – let alone, one big enough to justify the compromises that Senate Democrats are making in its name.
And the political case for supporting this bill is nearly as weak as the substantive one. BuzzFeed, Politico, and other mainstream outlets have suggested that moderate Democrats are backing the legislation out of a desire to “burnish their bipartisan credentials” ahead of tough reelection bids this fall. And it’s true that many of the Democrats supporting this bill will be on the ballot in pro-Trump states in November. But the notion that what swing voters in North Dakota, West Virginia, and Indiana are looking for is a Democrat who’s willing to take it easy on Wall Street is bonkers. Donald Trump did not attack Hillary Clinton for being too hostile to Goldman Sachs; the attendees at his rallies did not cheer promises to lower Citibank’s capital requirements. Does anyone actually believe that there are a significant number of voters in Montana who are ready to forgive Jon Tester for voting against tax cuts and Obamacare repeal — but would turn against him because he refused to help mobile-home retailers exploit their customers?
The reality is, there are exactly two reasons why Democrats are supporting this bill: Some of their well-heeled campaign donors really want it to pass, and virtually no one but those donors is paying much attention to it.
That last point is critical. In my view, it’s the key to understanding the tension between the Democrats’ leftward drift, and their right-flank’s stubborn support for Wall Street giveaways: Progressives have pushed the Democratic Party left on high-visibility issues; but on highly technical, regulatory matters – where public (and/or media) interest is inherently limited – it will remain very difficult for grassroots activists to exercise more influence over policy than than the party’s corporate donors, and their armies of lobbyists. And this challenge will be further exacerbated by the fact that those donors’ demands will often be “bipartisan” – which means that the mainstream media will reflexively frame them as sensible, moderate, and uncontroversial.
Now, if Democrats had full control of the government, progressives would almost certainly be able to kill anything resembling this banking bill. After all, only a small minority of Chuck Schumer’s caucus is bucking the base on it. But even a bill this wonky and low-profile is still more visible than much of the policymaking that’s conducted within the Executive Branch’s regulatory agencies – and it is, therefore, rather easy to imagine corporate America outdueling the left on that front the next time Democrats take power.
All of which is to say: Social democracy dies in darkness. This terrible bank bill is a reminder that the left will always have trouble outmuscling the Democrats’ Wall Street wing in policy fights that happen far from the media spotlight. One upshot of this is that the personal ideology of the next Democratic standard-bearer matters an awful lot. Progressives may have enough clout to force the next Democratic president to push major legislation that reflects their priorities, regardless of his or her own inclinations; but he or she is likely to enjoy much greater flexibility when it comes to cabinet appointments.
Given these realities, the case for the left to back a 2020 candidate who’s consistently evinced a personal, ideological commitment to combating Wall Street power (like, say, Elizabeth Warren) over one who’s only recently had their “come-to-populism” moment (like, say, Cory Booker, Kirsten Gillibrand, or virtually every other rumored 2020 hopeful) seems strong.