The wonk case for Clinton is weak

In general, I’m a huge fan of policy wonks–people who love getting into the details of policy, and who know enough about economics and foreign relations and so on to make informed predictions about the effects of various proposals. But lately, some of my favorite wonky writers–like Paul Krugman and a number of folks at–have been making arguments for Clinton that don’t make a great deal of sense.

This post is not a defense of Sanders. I think his views on trade and immigration don’t give enough credit to the enormous benefits trade and immigration can have for ordinary people in all the countries involved. I think a $15 minimum wage (which Sanders has proposed) would risk pushing too many people out of the work force, particularly in rural, lower-income parts of the country. And I’m pessimistic about many (though not all) of the things he wants to do to reform Wall Street and the Federal Reserve.

However, I don’t think Clinton comes out looking much better here, particularly on the two issues–Wall Street reform and health care–where Sanders has been taking the most heat recently from policy wonks. Clinton could make a wonky case against Sanders, but she hasn’t, instead going for a series of remarkably dishonest attacks that only give me more doubts about her.

For example, Clinton has been trying to deflect scrutiny of the money she’s gotten from Wall Street by saying that actually, she’ll be tougher on Wall Street than Bernie Sanders–even once going so far as to claim “Everybody who’s looked at my proposals says my proposals are tougher, more effective, more comprehensive.”

To say that “everybody” says this is a wild exaggeration, as the Washington Post has shown, but worse, the version of the “plan” posted on her website is very puzzling. In fact, when I first saw it, my reaction was, “wait, so where’s the actual plan?” I couldn’t believe that it was what everyone was praising as so detailed.

For example, consider this bullet point:

Impose a “risk fee” on the largest financial institutions. Dodd-Frank’s reforms and higher capital requirements on the largest banks are already helping address the problem of “Too Big to Fail.” But we need to go further to deal with the risk posed by size, leverage, and unstable short-term funding strategies.

Clinton would charge a graduated risk fee every year on the liabilities of banks with more than $50 billion in assets and other financial institutions that are designated by regulators for enhanced oversight. The fee rate would scale higher for firms with greater amounts of debt and riskier, short-term forms of debt—meaning that, as firms get bigger and riskier, the fee rate they face would grow in size. The fee would therefore discourage large financial institutions from relying on excessive leverage and the kinds of “hot” short-term money that proved particularly damaging during the crisis.[xii] Moreover, the strength of this deterrent would grow for firms with larger amounts of debt. The risk fee would not be applied to insured deposits and would therefore have no impact on traditional banking activities funded by insured deposits and equity capital.[xiii] In implementing the risk fee, Clinton would also call on regulators to impose higher capital requirements if she determines that such a step is a necessary complement to the fee.

The problem with this passage is it says nothing about the size of the fee. A small enough fee could wind up being a purely symbolic measure, while a large enough fee could be a de facto bank breakup move. It’s impossible to say what the effects of the fee would be without more policy details. And the entire “plan” is like this–the plan is “detailed” in the sense of having many bullet points, but each bullet has major blanks that would need to be filled in before anyone could analyze the plan’s likely effects.

Here’s what really has me scratching my head–see those little lower-case Roman numerals in brackets? They look like footnotes. But there are no footnotes at the bottom of the page. As far as I can tell, Clinton’s campaign didn’t post the footnotes to the document anywhere. My guess is that there was a footnoted version circulated privately, and not including footnotes in the public version was intentional–but if so, why not take the fifteen minutes to clean up the document so it doesn’t have these mysterious footnotes to nowhere? This looks awfully sloppy, like Clinton’s team doesn’t take presenting her policy proposals seriously. It also makes me wonder if some of the people praising Clinton have seen details in the footnotes that are being kept secret. Or maybe not–but it’s still weird.

If you have a generally favorable view of Clinton, you’ll probably assume that the blanks in her plan will be filled in in a reasonable way. That’s fair–but it requires Clinton’s good intentions as an assumption. The “plan” is not itself evidence that Clinton deserves anyone’s trust. People who think politicians that take in millions of dollars in Wall Street money are unlikely to regulate Wall Street effectively shouldn’t find anything about this plan reassuring.

In fact, if you’re worried about the influence of money on Wall Street, consider this: Wall Street is not a monolith. A regulation that’s bad for one firm could be great for another. A canny politician could put together a “get tough on Wall Street” plan that’s really a “get tough on my donors’ competitors” plan, and most people would be none the wiser (especially if you toss in a small fee on your backers for appearances’ sake).

The criticisms of Sanders’s health care plan are even more baffling to me. It’s been widely claimed that plan is impossibly expensive. Politifact for example, seems to think you’d have to cut health care costs 42 to 47 percent in order to make Sanders’s plan work. But this is, uh, exactly what would happen if you brought US health care spending as a percentage of GDP down to Western European levels. In 2013 the US spent 17.1% of GDP on healthcare, whereas the United Kingdom only spent 9.1%–which is about 47% less, according to my calculator. And most people seem to agree health outcomes in the United States aren’t any better than they are in Europe. Passing the necessary cost-control measures might be politically difficult, but that doesn’t make the plan voodoo economics.

Clinton, meanwhile, has only proposed a threadbare set of tweaks to the Affordable Care Act. I can imagine formidable alternatives to single-payer–perhaps involving a public option or one or more of these ideas. Clinton’s proposal ain’t that alternative. Instead, she’s made the absurd suggestion that trying to pass single-payer could lead to the Affordable Care Act getting repealed with nothing in its place–which is obviously false, as Sanders would just veto that bill if Congress sent it to him.

One other thing: Gerald Friedman, an economist who isn’t affiliated with the Sanders campaign, analyzed his proposals and said he believed they could produce 5.3% economic growth. This led to some Clinton supporters jumping on Sanders for promoting voodoo economics. However, based on Friedman’s interview with Chris Matthews, it looks like the critics didn’t even read Friedman’s report before attacking.

I don’t expect Friedman’s arguments to convince every economist, but they aren’t obvious nonsense either. Basically Friedman thinks we’re still a far way away from the pre-Great Recession trend, and demographic trends only explain a small part of the decline in labor force participation rate. Other economists think–and Friedman acknowledges this–that the demographic effect on labor force participation rates is larger and that we’ve run out of low-hanging technological fruit that could cause big worker productivity gains. But Sanders’s critics are wrong to equate Friedman’s view with the Republican view that tax cuts are the solution to every economic problem.

(For what it’s worth, the Financial Times’s Alphaville blog, which caters to people who want to be financial big-shots, has come to Friedman’s defense, even though they’re the last people you’d expect to be rooting for Sanders.)

Part of the problem here is that Clinton is running an incredibly risk-averse campaign. Providing an actual wonky alternative to Sanders would require proposing some ideas that voters may or may not like. So instead we get deeply silly attacks. What’s really disappointing, though, is seeing people who should know better jumping on the anti-Sanders bandwagon.


6 thoughts on “The wonk case for Clinton is weak

  1. When talking about efficiency of health care spending, spending per capita is more relevant than spending as a fraction of GDP. (This is a nitpick that doesn’t effect your point, since the USA is about as rich as the countries you’re comparing it to.


  2. I’ll note that as someone who has actually been involved in the bank regulatory process, your description of Clinton’s proposal, parameters left blank, seems like a realistic detailed proposal of the kind that actually happens.
    No politician could ever hope to just make up a bunch parameters without missing wildly. Politicians just don’t have access to the inside information that regulators do, or to their analytical apparatus, or the ability to compel private industry to respond to requests for information.
    Once a proposal like that goes to a rule making body, it would collaborate with the Fed, which would compel banks to compile a great deal of data and run various analyses and scenarios and provide the data and the output to the Fed. The Fed would then crunch the data, look for inconsistencies and outliers, send out clarification requests, etc. Then based on that it would estimate what specific parameters would accomplish the policy goals stated in the proposal / legislation. Then it would issue a notice of proposed rule making that would be subject to public review and comments. Then they (the Fed) would issue another round and iterate a few times until they reached parameters that accomplished the political goal without accidently triggering a second financial crisis.
    I have not read the Hillary plan myself, but your description of it sounds like the kind of document that would be produced by someone familiar with the actual regulatory process.


    • As someone who has been involved in the bank regulatory process, how would one go about setting up expectations or goals or what-have-you which would allow an observer to distinguish between “our plans changed because they weren’t viable, but we got as close as we possibly could” and “our plans changed because we only care about having the appearance of doing something.”


      • Sorry for the delayed reply. Hopefully it will still be useful to anyone reading this later.

        Honestly, I think it would be hard to describe how an outside observer could differentiate between the two without engaging with object level claims. Responses to a notice of proposed rule making usually consist on two parts, a quantitative impact study (QIS) which has lots of private information, and a public comment which sums up the position, has high level numerical support for the position and is part of the public record. The QIS is private and there is no way for an outside observer to check it. The public comments are public though (inane but important).

        As an outside observer you would probably want to read trough a large number of public comments, plausibility check them, and potencily build some models to play with the numbers yourself. If you didn’t already have some background in the area, doing this would probably be a huge pain in the rear.


      • No problem. I’m not so much concerned with being able to verify as an outside observer. I don’t have the knowledge base. I just wasn’t sure if it would be possible for an expert to verify the matter.


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