Big banks now have to contend with an old enemy in a new position of power.
Bernie Sanders, the United States senator from Vermont, plans on using his new position as ranking member of the Senate Budget Committee to take on too-big-to-fail financial institutions by advocating for their dissolution. Though a registered independent, Sanders caucuses with the Democrats, allowing him to assume the ranking member role representing the minority party.
While normally the domain of the Senate Banking Committee, the oversight of Wall Street, Sanders and his staff believe, is a critical budgetary issue. Democrats need to directly challenge Wall Street’s power, they assert, by boldly reframing the argument against the consolidation of financial institutions in terms of its cost to the national coffers. Though the term “ranking member” might not ordinarily have the barons of finance quaking in their custom-made oxfords, Sanders knows how to draw the media spotlight when advocating for a cause.
“Being the ranking member of the budget committee gives Senator Sanders the opportunity to say, look, people on food stamps didn’t cause the economic crisis, people that lost their jobs weren’t responsible for the economic crisis that we faced,” explained Warren Gunnels, director of the committee’s minority staff, during an interview in his office. “Average ordinary Americans weren’t responsible for the financial crisis we had.”
While centrist Democrats have expressed displeasure with progressives' forceful defense of regulations included in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Sanders plans on pushing the boundaries of the debate in the other direction. This potentially puts Sanders, who is seriously considering a run for the White House, in a head-on conflict with Hillary Clinton, Wall Street’s favorite presidential candidate.
As media types muse over Sanders’s prospective presidential campaign, the focus of the minority Budget Committee staff, hard at work in a corner suite on the sixth floor of the Dirksen Senate office building, is elsewhere. Such a run by the senator would no doubt shine a light on the mission he’s set before his committee staff, but the work in this office has no connection to that effort.
Packed boxes are stacked almost randomly as the staff focuses on more important matters—unpacking would be just a temporary process, anyway. Republicans, having won the Senate in the midterms, will take over the office in a few months after the rush of budget season subsides.
Warren Gunnels’s office has a sweeping view of the Capitol dome, but for most of the hour I spent speaking with him about Sanders’s plans for the upcoming Congress, the blinds remain closed.
Gunnels has worked for Sanders in a variety of capacities since 1999, journeying with the Vermonter from his House staff to his Senate staff, when Sanders won the office in 2006, and now to the Budget Committee. There Sanders has recruited a hard-charging group that is by far the most progressive of any committee on Capitol Hill. Instead of sulking in the Democrats’ new minority status, Sanders is preparing to use his staff to advocate aggressively on behalf of a progressive agenda.
Even late on a Friday afternoon, with the senator back in Vermont, there is a sense of hustle in the office, with several meetings taking place around desks.
Gunnels put the blame for our economic collapse squarely on Wall Street. “The people responsible for the financial crisis were the CEOs in charge of the largest financial institutions in this country,” he said. “That nearly drove the economy off a cliff. We are still paying for that today.”
One way to make sure the nation doesn’t approach that cliff again anytime soon is to reverse the consolidation of the big banks, Gunnels said.
“If we are serious about making sure the deficit doesn’t get out of hand, if we are concerned about protecting the homes [and] life savings [of Americans] and making sure that banks provide more affordable lending in the productive economy—and aren’t allowed to make risky bets using taxpayer money and the federally insured bank deposits of the American people,” Gunnels explained, “then we have to break up too-big-to-fail financial institutions so that they can’t put us into a situation like we found ourselves in 2008.”
Sanders, by reframing the financial crisis in budgetary terms, and using his platform as ranking member, opens up a new front in the debate over Wall Street, removing its oversight from the purely regulatory space. The argument over Wall Street’s proper role in the economy now becomes one about dollars and sense.
How much revenue was lost by the federal government due to the 2008 financial crisis? Sanders wants that question asked when Congress considers rolling back Dodd-Frank or discusses future reforms.
As part of that effort, Sanders and Gunnells hired Matt Stoller, a pioneering blogger and online organizer who served twice in the office of Representative Alan Grayson of Florida, where he worked on financial services issues, including the congressman’s audit-the-Fed legislation, and investigating foreclosure fraud.
Were Washington’s conventional wisdom your only guide, it would be easy to dismiss Bernie Sanders as a gadfly. But the Vermont progressive’s bipartisan track record of success challenges that notion.
In the last Congress, as chairman of the Veterans Affairs Committee, he teamed with John McCain, Republican of Arizona, to pass much-needed reforms to the scandal-wracked Veterans Administration. In two years marred by partisan recriminations and fighting, the Sanders-McCain bill passed the Senate 93-3 and was signed into law by the president. In crafting this legislation, Roll Call's Humberto Sanchez wrote that Sanders “bridge[d] Washington’s toxic partisan divide” calling it “one of the most significant deals in years."
The role of ranking member of the Budget Committee is one that can drastically change based on the personality and politics of the senator holding the position. Patty Murray, who left the Budget Committee to become ranking member of the Health Education Labor and Pension Committee, used her former position as committee chair (when the Democrats held the majority) to lead the negotiations with Paul Ryan that ushered in the end of sequestration.
Paul Ryan, as Republican chief of the House Budget Committee, used his position as a platform to push conservative policies on entitlements and taxes in the media.
Sanders is planning to fight for an aggressive and progressive agenda. Using the bully pulpit of his status as ranking member, he will push for a multipart agenda that, in addition to Wall Street reform, includes proposals for reducing unemployment, raising wages and thereby reducing income and wealth inequality, and expanding Social Security.
Before the new Congress officially began, Sanders announced that he will introduce a $1 trillion infrastructure bill “to rebuild crumbling roads and bridges and invest in other infrastructure modernization projects.”
The plan, according to Budget Committee minority staff, would “put 13 million Americans to work.”
Sanders’s focus on the unemployed reaches beyond simply lowering the conventional unemployment rate, termed U3 by the Bureau of Labor Statistics. Instead the mandate assigned to his Budget Committee staff is to focus on the category known as U6 unemployment, which includes discouraged job-seekers who have given up actively looking for work, as well as workers who would like employment but haven’t searched for a job recently, and part-time workers who would like full-time roles. Current U6 unemployment sits at 11.2 percent; while significantly lower than its recession peak of 17.1 percent, it remains uncomfortably high. Sanders also would like a greater focus put on joblessness among African Americans and young people, groups that suffer much higher rates of unemployment than the general public.
Sanders will also use his platform to look at the budgetary impact of certain trade treaties, most prominently the Trans Pacific Partnership (TPP).
To protect existing jobs, committee staff tells me that Sanders plans to examine the budgetary impacts of past trade deals to help make the case against the Trans Pacific Partnership and the granting of “fast track” authority to the president for such deals—authority that limits Congress's role in ratifying trade deals to a simple up-or-down vote, with no amendments, under severe time constraints. The senator's opposition to trade deals puts him out of step with the White House—which is aggressively lobbying for the fast-track authority that would clear the way for ratification of the Trans Pacific Partnership—but in sync with Minority Leader Harry Reid.
Reid, who calls Sanders “a passionate and tireless fighter for middle-class Americans,” has been a decades-long opponent of nearly every trade treaty that has come up for a vote in the Senate. (Disclosure: I served on the staff and as a consultant to Senator Reid from 2004-2008.)
The passage of free trade bills is one of the few issues where the White House is in direct agreement with Republican leaders in both chambers. Historically, the Senate is friendly to such treaties, making Sanders’s and Reid’s fight against TPP an uphill battle. But Sanders’s novel use of the Budget Committee provides a new battleground.
If there’s one indication of the radical new direction in which Sanders plans to take the Budget Committee, consider the most eye-popping minority staff hire so far. As his committee staff’s chief economist, Sanders chose Stephanie Kelton, a leading proponent of Modern Monetary Theory (MMT). It was Kelton who coined the term “deficit owl,”—in contrast to “deficit hawks” and “deficit doves”—to describe those, like her, who “don’t concede we need to balance [the budget] at all,” according to the Washington Post’s Dylan Matthews.
Matthews writes that “owls” such as Kelton and the University of Texas’s James K.Galbraith “see government spending that leads to deficits as integral to economic growth, even in good times.”
The MMT has existed far outside the Overton window of fiscal policies pushed by either party. Galbraith described being “laughed at” by “hundreds” of “economists” during a panel at the White House in April of 2000 for his assertion that the surplus then run by the government posed a danger.
Reporters suggest the hiring of Kelton by Sanders was a move towards this school of economics.
Not so according to Sanders’s staff. Sanders does believe that deficits matter, they insist. When I raised MMT on two separate occasions, Sanders aides chafed at the notion, proclaiming their boss, far from an “owl,” is a “deficit hawk.”
Sanders, according to staff members, has a long history of taking stands against deficits—but in distinctly progressive terms. They cite rising deficits as part of the reasoning behind his opposition to the war in Iraq, his votes against the 2001 and 2003 Bush tax cuts, and his opposition to Medicare prescription drug coverage because the legislation did not allow program officials to negotiate with pharmaceutical companies for lower drug prices.
But Sanders is not opposed to running deficits for spending that could produce future gains, such as new and rebuilt infrastructure, or to pull the nation out of economic downturns. This position is one articulated even by leaders of centrist Democratic institutions.
One strategic question that faces Sanders is whether to introduce his own budget. While no decision has been made yet, the Senate’s processes make it far less of a strategic imperative for the minority party to produce one than it is in the House of Representatives. There, during floor debate, amendments are restricted by the Rules Committee to whole budgets typically presented by different factions in the chamber—the Progressive Caucus, the Black Caucus, the Republican Study Committee, and others.
On the floor of the Senate, the budget process is open; hundreds of amendments submitted on their own merits, culminating in what’s known as a “voto-rama” that brings members of the chamber to the floor into the wee hours of the morning.
This provides Sanders or, in fact, any member of the Senate, the opportunity to introduce a slew of progressive amendments covering any pertinent issue. While some, on issues such as funding for infrastructure, might be added to a final bill by unanimous consent, others could create politically toxic votes for Republicans in blue states.
In many ways the Budget Committee is the ideal platform for Bernie Sanders, allowing him to use the implied power of the ranking member position to take a leadership role on a host of issues. For progressives this means having a Democratic committee chief willing to increase the volume of their voices by pushing the boundaries of acceptable policy debate in their direction.