Wednesday, August 10, 2016

The Shell Game of the Economic Elite’s Hamilton Project

Posted on Aug 9, 2016

Beneath the marionette theater of American electoral and parliamentary democracy, policy is made by a “deep state” oligarchy of corporate and financial elites. The political actors atop the great quadrennial campaign carnivals speak in progressive-sounding terms of their commitment to equality, justice, peace, popular self-rule and the common good. Behind stage and screen, however, the contenders on both sides of the nation’s party duopoly—“two wings of the same bird of prey” (Upton Sinclair, 1904)—are captive to the nation’s unelected and interrelated dictatorships of money and empire.

After candidates who masqueraded as champions of the people get into office, voters and pundits who believed the politicians’ election season rhetoric and imagery express surprise and disappointment at the citizenry’s betrayal by those in whom they placed hope for change. But before the election, these disillusioned citizens had failed to notice numerous clues to the candidates’ plutocratic, imperial and authoritarian essences.

Take Barack Obama, who hopes to burnish his legacy by securing final congressional passage of the arch-global-corporatist Trans-Pacific Partnership (TPP). If achieved, this measure will be a fitting capstone to what Robert Reich calls “one of the most pro-business administrations in America history.” Obama has continued the cringing, Wall Street-directed corporatism of Bill Clinton, helping bring the United States to a new Gilded Age in which (as Bernie Sanders said repeatedly during his presidential campaign) the top 1/10th of the United States’ top 1 percent has nearly as much wealth as the nation’s bottom 90 percent—this while more than a fifth of the nation’s children (including nearly four of every 10 black children) are growing up beneath the federal government’s notoriously inadequate poverty level. Thanks in no small part to Obama’s chillingly fake-progressive presidency, fully 95 percent of new national income generated during his first term went to the nation’s top 0.1 percent. Corporate profits (primarily now financial sector profits) have risen to their greatest state in the U.S. economy since 1929.

The Man Behind the Curtain

Numerous liberals and progressives (including Sanders) have at various times expressed surprise and disappointment over Obama’s stealthy service to business rule as usual. But cautionary omens were widely available to those willing to look for them well before he ascended to the White House. I collected dozens of these unheeded alarms in my early 2008 book, “Barack Obama and the Future of American Politics.”

One of the many early clues to the coming neoliberal nature of Obama’s presidency came when he affiliated himself from the start with The Hamilton Project (THP), a key neoliberal Washington, D.C., think tank. THP was founded with Goldman Sachs funding inside the venerable centrist and Democratic-leaning Brookings Institution in spring 2006. Its creator was no less august a figure in the country’s ruling class than Robert Rubin, the former Goldman Sachs CEO who served as Bill Clinton’s top senior economic policy adviser and treasury secretary. A legendary Democratic Party “kingmaker” who is often half-jokingly called “the wizard behind the curtain” of Democratic economic policy, Rubin is the veritable godfather of late 20th century and current U.S. neoliberalism. He is co-chair of “Wall Street’s Think Tank,” the Council on Foreign Relations (CFR), which formulates America’s grand imperial strategy in accord with the globalist “open door” ambitions of the nation’s leading finance-led multinational investment firms and corporations. Under Rubin’s influence, and in accord with the “Rubinomics” trilogy of balanced budgets, free trade and financial deregulation, Clinton joined with corporate Democrats and Republicans to: enact the great job-killing and anti-labor North American Free Trade Agreement, slash government spending, eliminate restrictions on interstate banking, repeal the 1933 Glass-Steagall Act (which had separated commercial from investment banking), and prevent the regulation of toxic “over-the-counter” financial derivatives with the so-called Commodity Futures Modernization Act. All this helped distribute wealth and power upward and prepare the ground for the financial collapse of 2008.

Rubin left the Clinton administration in 1999, with Clinton hailing him as “the greatest Secretary of the Treasury since Alexander Hamilton.” Rubin exited to join Citigroup, the primary benefactor of the Glass-Steagall repeal, making him what American Banker calls “Exhibit A when progressives talk about the ‘revolving door’ between banks and Washington.” His formal return to the private sector hardly meant a full retreat from national politics and policy, however. Along with top positions at the CFR and Brookings, Rubin helped organize financial backing for Obama’s presidential campaign. As Greg Palast notes, “Rubin opened the doors to finance industry vaults for Obama. Extraordinarily for a Democrat, Obama in 2008 raised three times as much from bankers as his Republican opponent.”

Rubin also served as a top informal Obama adviser and placed a number of his protégés in high-ranking positions in the Obama administration. Rubin’s Obama appointees included Timothy Geithner (Obama’s first treasury secretary), Peter Orszag (Obama’s first Office of Management and Budget director), and Larry Summers (first chief economic adviser).

Following in his mentor’s revolving-door footsteps, Geithner has since moved on to the presidency of Warburg Pincus, a leading Wall Street equity firm. Orszag went on to become a Citigroup executive and a merger-and-acquisitions director at Lazard, an investment bank once used by the legendary junk-bond-wielding corporate raider Carl Icahn. Summers became director of the National Economic Council for President Obama and now is Charles W. Eliot professor and president emeritus at Harvard University.

‘A New Kind of Third-Way Neoliberalism’

THP’s post-ideological founding document (smart neoliberals have long claimed to have transcended ideology in the name of technocratic pragmatism) was crafted by Rubin and Orszag. Beneath standard boilerplate on its commitment to “broad-based economic growth,” “individual opportunity” and “an effective role for government in making needed investments,” THP has remained steadfastly devoted—in the words of the left political economist Jamie Peck—“to fiscal discipline and free trade, to market-oriented approaches, and to strategies for attacking inequality that are attached from new [social-democratic] entitlement commitments.”

Rubin’s THP has spent the last decade advocating what leading international relations scholars Bastiaan van Apeldoorn and Nana de Graaf call “a new kind of Third Way neoliberalism (reviving that of Bill Clinton) in the context of an economy characterized by growing inequality.” “The latter,” Apeldoorn and de Graaff note, “worried a part of America’s (corporate) elite because of how it might harm social and political stability and because of the protectionist backlash it might create.” These ruling-class fears had some real basis in the wake of the populist and left-led Occupy Wall Street movement, the nominally socialist Sanders campaign, and the right-wing Donald Trump phenomenon.

Since its formation, THP has been directed by a succession of elite neoliberal economists who have been groomed by Rubin and served in top federal policy positions. The list includes Orszag, Jason Furman (chair of Obama’s Council of Economic Advisers [CEA] since 2013), Doug Elmendorf (a former Clinton treasury staffer who headed the Congressional Budget Office from 2009 to 2015), and Michael Greenstone (chief economist for Obama’s CEA and currently the Milton Friedman professor of economics at the University of Chicago). Goldman Sachs personnel and veterans are prominent across THP’s Advisory Council.

Pre-emptively Pacifying Wall Street

As an Illinois U.S. senator, Obama was the keynote speaker at THP’s opening event in April 2006. Beginning with a special nod of thanks to “the wizard” (who sat two chairs to his right), Obama offered curious praise to Rubin, Orszag and other Clinton administration veterans in the room. He lauded them for having “taken on entrenched interests” to “put us on the pathway to a prosperity we are still enjoying.” Obama called the new body a “breath of fresh air,” a welcome nonpartisan and non-ideological agent of economic “modernization.” He hailed THP for seeking “21st century solutions” and a practical handle on “what actually works” in a national capital plagued by “tired ideologies” of right and left. It was a classic triangulating “Third Way” speech. Obama’s carefully clipped words functioned to “preemptively pacify Wall Street before declaring his presidential ambitions” (per Peck)—ambitions Obama had been harboring from the start of his U.S. Senate career—indeed, long before that.

Obama’s deference to Rubin made perfect Machiavellian sense. As Harold Myerson noted in a Washington Post column on THP’s rollout, “Rubin has … become a seal of good housekeeping for Democratic candidates seeking money from Wall Street. When Bob Rubin talks, Democratic pols don’t just listen; they scramble for front-row seats and make a show of taking notes.” The junior senator from Illinois went on to set new presidential campaign fundraising records with help from Rubin and other Wall Street-connected kingmakers.

‘Warm-Hearted but Cool-Headed’

Over the last decade, THP has helped define “the philosophical core of Obamanomics” (Peck) by producing a small library of issue briefs and policy papers. These documents have matched Obama’s political persona by striving to be, in Orszag’s words, “warm-hearted but cool-headed.” There’s a useful translation for Orszag’s phrase: outwardly progressive and socially concerned but substantively neoliberal and Wall Street friendly.

A consistent neoliberal formula holds across THP’s policy literature. Analysts tackle topics of concern to “warm-hearted” progressives—poverty, household expenditures, joblessness, automation, inequality, health care access, barriers to employment, declining social safety nets, over-incarceration, environmental hazards and more. These subjects are often examined with sophisticated empirical rigor but always in “cool-headed” (wealth- and power-serving) ways that stop short of any serious confrontation with underlying causes of unequal growth and regressive distribution rooted in the rule of the nation’s corporate and financial elite and the profit system that the reigning stratum sits atop.

A typical THP brief from last June is titled “Where Does All the Money Go: Shifts in Household Spending Over the Past 30 Years” It shows that real consumption fell in lower-income households and that a rising share of those households’ expenditures shifted to meeting basic needs between 1984 and 2014. The study says nothing about the rising percentage of ordinary Americans’ budgets spent to meet the escalating costs of debt service payments to the nation’s leading financial institutions—to the creditor class headquartered on Wall Street. It does not mention how U.S. households’ outstanding debt rose from 83 percent of their disposable income in 1991 to a remarkable 130 percent on the eve of the Great Recession—this courtesy of the nation’s oversized financial sector. The authors conclude with milquetoast recommendations for the maintenance of minimal safety-net protections.

The same basic moral and political shortfall is evident in another recent THP policy paper that reflects on data showing that the life expectancy of “low-income whites” has fallen dramatically in the U.S. in recent years. The paper makes mild calls for improved educational opportunities and “increased access to health care—including mental health care.” It makes no reference to how the U.S. working class has been subjected to a relentless top-down and Wall Street-led class war on its livelihoods, unions, job and workplace protections, and living standards. The authors do not mention how American workers in the long neoliberal era (1973-present) have been subjected to unprecedented (for U.S. workers) labor market competition with the global proletariat, including immigrant workers and workers across the low-wage global periphery, to which U.S. capital has relocated much of its manufacturing in pursuit of cheap labor. They don’t reflect seriously on how the neoliberal and global policies advanced by Wall Street and corporate America have turned millions upon millions of once “productively employed” white and nonwhite working-class people into “surplus Americans.”

The same modus operandi—strong empirical work on matters related to rising American inequality and poverty combined with mildly ameliorative policy recommendations that sidestep the finance-led capitalist elephant in the national room—is evident in the rest of
THP’s voluminous output. The topics range in subject matter, but the basic banker-pleasing blueprint holds. Outwardly, concerned- and liberal-sounding policy researchers are careful not to ruffle ruling-class feathers. They make no calls for genuinely progressive taxation, serious regulation of the financial sector, major public jobs programs, a rollback of the gigantic Pentagon budget to fund expanded public welfare, or the passage of legislation to re-legalize union organizing to help spark a re-expansion of what the disgraced former presidential candidate John Edwards once rightly called “the greatest anti-poverty program in American history—the labor movement.”

The Skills Gap Trope

A recurrent theme in THP’s impressive corpus of work is the “skills gap” explanation of American workers’ economic insecurity and inequality (see this study for one among many examples). According to this thesis, the national plagues of unemployment, underemployment and inadequate wages are mainly about American workers’ lack of adequate training for the supposed plethora of high-skills jobs that would be available to them if only they were properly instructed and certified. The skills gap thesis is invalidated by numerous facts its many establishment champions ignore (see this useful critique). It continues nonetheless to hold a prominent place in elite corporate, financial, academic and policy circles for a simple reason. As University of Wisconsin-Milwaukee urban policy researcher Marc Levine notes: “There’s a strong ideological component behind the skills gap trope: it diverts attention (and policies) from the deep inequalities and market fundamentalism” that have undermined U.S. working and living standards. As the political economist Gordon Lafer noted in his book “The Job Training Charade”: “Workers are encouraged not to blame corporate profits, the export of jobs abroad, or eroding wage standards—that is, anything that they can fight—but rather to look inward for the source of their misfortune and the seeds of their resurrection.”

The Real (Alexander) Hamilton Program versus Rubin-Era ‘Hamiltonism’

Mention “the Hamilton Project” (or any other elite U.S. or global think tank) to most Americans and you will receive blank stares. You might hear a reference or two to the recent, spectacularly successful Broadway musical “Hamilton”—an Obama-lauded, multicultural paean to leading U.S. founder Alexander Hamilton’s purported embodiment of the American dreams of immigrant striving and upward mobility.

Americans who paid attention in well-taught U.S. history surveys may recall Mr. Hamilton (after whom Rubin’s Brookings project is named) as the nation’s first treasury secretary and a major proponent (along with James Madison and John Jay) of the U.S. Constitution. Some might recall the essence of Hamilton’s policy agenda under U.S. Presidents George Washington and John Adams: to make the United States a major commercial and military power ruled by and for an opulent mercantile, financial and, he hoped, industrial elite. Hamilton was the early republic’s “captain of the one percent,” notes distinguished U.S. historian Gerald Horne. “A leader of finance capital … he represented the interests of big finance at the beginning of the United States.”

Hamilton pursued his wealth-concentrating agenda in a spirit of open aristocratic disdain for the egalitarian tendencies of the revolutionary times in which he lived. Like other top U.S. founders and constitutional framers, Hamilton was revolted by the democratic “leveling” sentiments of the new nation’s artisans, small farmers and laboring classes. For Hamilton and others of his “rich and well born” ilk in the Federalist Party of the 1790s (the “Hamiltonian” party), “freedom rested on deference to authority. … The Federalists,” notes distinguished U.S. historian Eric Foner, “may have been the only major party in American history forthrightly to proclaim that democracy and freedom were dangerous in the hands of ordinary Americans.”

The “Obamanomics”-defining Hamilton Project of the last decade is a continuation of the original Alexander Hamilton program in its commitment to capitalism and the free market merged with the limited use of state power to promote and protect private accumulation. Still, there are two key differences between the nation’s founding treasury secretary and the neoliberal think tank that bears his name today.

The first and most obvious contrast is that contemporary neoliberals naturally eschew openly anti-democratic and aristocratic language even while they advance the interests and agenda of the wealthy few. Reflecting subsequent centuries of popular struggle for political and social rights and the United States’ doctrinal sense of itself as a global beacon of democracy, THP wraps its “cool-headed” findings and recommendations in the “warm-hearted” rhetoric of progressive concern for the many and the poor.

For all Hamilton’s authoritarian disdain for the people and commitment to the upward concentration of wealth, he sought to advance an accumulation of capital designed to make the United States into a broadly developing and industrialized state. Today’s financial elite and financialized “casino capitalism” is all about Wall Street “killing the host”: de-industrializing and dismantling productive enterprise in service to a ruling and largely globalist financial “superclass” that sees no particularly strong relationship between its bottom line and the strength of the U.S. productive base and the health of American society.

We can certainly expect the long shadow of Robert Rubin and the fake-progressive neoliberal vision of his Hamilton Project and other, bigger “corporate elite networks” to loom over the expected Clinton 45 administration. The coming heavily Wall Street- and Pentagon-backed presidency of the arch-neoliberal Hillary Clinton will be no less staffed than Obama’s presidency was with neo-“Hamiltonian” elites linked to the multinational and financial sectors and to the usual top policy-planning institutions.

Paul Street holds a doctorate in U.S. history from Binghamton University. He is former vice president for research and planning of the Chicago Urban League. Street is also the author of numerous books, including “Racial Oppression in the Global Metropolis” (2007), “The Empire’s New Clothes: Barack Obama in the Real World of Power” (2010), and “They Rule: The 1% v. Democracy” (2014), and is a regular contributor to Counterpunch, Z Magazine/ZNet, Black Agenda Report and teleSUR English. He has taught American history at several Chicago-area colleges and universities and currently lives in Iowa City, Iowa.

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