Jeff Chiu/AP Photo
At a rally calling for California Gov. Gavin Newsom to build more affordable homes, September 26, 2024, in Oakland, California
The struggle for the soul of the Democratic Party needs to be understood as two different kinds of conflicts. One is wonky and principled. The other is opportunistic and corrupt.
Consider the corrupt part first. Crypto is only the latest and most extreme case of the financial industry using its money to neutralize the Democratic Party as a plausible champion of ordinary working people.
As David Dayen has explained better than anyone, the crypto industry showered so much political money on so many elected Democrats that the skids were greased for quick passage of a bill that would allow crypto into the regulated financial system, just like financial derivatives in the 2000s. But some community banking interests are fighting back, and there is a quixotic effort brewing in the Senate to attach a bill to increase competition in the payments space that the credit card industry hates.
For the moment, the bill is blocked, but this predatory industry will only become more powerful over time. Its political influence is pure corruption.
Crypto is only the latest iteration in the all-too-successful hostile takeover by the financial industry of Democratic politics. The deregulation of finance under Bill Clinton and Robert Rubin can be understood as an ideological expression of “neoliberalism,” but it is better understood as simple corruption.
The deregulation allowed Wall Street to create exotic and opaque financial instruments that drastically increased leverage and made a lot of insiders very rich, before the house of cards collapsed, along with the economy. Robert Rubin, the architect of many of these policies, went from being co-chairman of Goldman Sachs, to two senior posts under Clinton, and then back to Wall Street at Citigroup, a financial conglomerate whose structure was enabled by the dismantling of the Glass-Steagall Act—that is, by Rubin and Clinton. Rubin then became even richer.
What is the difference, after all, between Robert Rubin and Donald Trump? As I have suggested in another context, both use public office for private gain. Trump’s grifting is more crass and overt, while Rubin’s is concealed by good manners and supposed public purpose.
The larger challenge is to fashion a narrative and program that would speak to the life situation of the kind of Americans who used to vote for Democrats.
The fallout from Rubin’s policies doubly damaged the Democrats. The Great Recession that ensued destroyed Democrats as a credible party of working people. And the corruption of both parties by big money led voters to accurately conclude that they all do it, and that democracy was hopelessly compromised. Both conclusions paved the way for Trump.
There is now wide agreement that “the Democrats” are a badly tarnished “brand.” The commentators keep repeating that cliché, and the polls show it.
One faction, Wall Street Democrats, concludes that the solution is for the Democrats to turn away from anything that smacks of progressive populism. This is self-interest masquerading as strategic advice. A Democratic Party even more beholden to Wall Street would be even less credible to regular people.
The larger challenge, however, is to fashion a narrative and program that would speak to the life situation of the kind of Americans who used to vote for Democrats. The broad working middle class can’t afford decent housing, can’t pay for college, is anxious about health coverage, and is watching career jobs turn into gig work. Only a transformative program could alter that trajectory.
While Joe Biden is coming in for withering criticism as more details emerge about the degree of his impairment, Biden’s program was a lot better than Biden. It was a good first rough draft of the direction where Democrats need to head—it just needed a more plausible and inspiring leader than either Biden or Kamala Harris.
THIS BRINGS ME TO THE PRINCIPLED PART of the debate about what Democrats should be for. Exhibit A is our former colleague, Ezra Klein. Nobody has accused Ezra of being corrupt, just partly misinformed.
In his latest defense of his proposed “abundance” agenda and his emphasis on removing obstacles such as zoning, Klein takes issue with critics who faulted him for ignoring the role of corporate influence on the weakness of today’s Democrats. Klein, whose emblematic case in point is the failure of Democrats to address the shortage of affordable housing, points out that it takes 22 months longer to bring an affordable-housing project to completion in California than in Texas.
He writes, “I find it implausible to argue that the reason for this disparity is that Texas has solved the problem of corporate power and oligarchic influence and California has not.” Touché. Klein also points to the astronomical cost of getting housing built in the bluest cities, such as Chicago and New York.
Klein has a fair point when he notes that with all of the regulatory requirements that have been piled on since the first round of modern environmental regulation in the 1970s, it has become far easier to block than to build. And this is indeed a problem for progressives who rely heavily on the public sector. Somewhere, between the autocracy of a Robert Moses, and the blockages of NIMBY, there has to be a happy medium of efficient government and community accountability. That is worth pursuing.
But Klein’s analysis of housing also downplays the most fundamental principle of economics—supply and demand. Housing costs are sky-high in New York and Boston because well-to-do people want to live there, bidding up prices and causing a gross imbalance between the demand and the supply. Conversely, across the state of Massachusetts, there is plenty of cheap decent housing in Pittsfield, which has basically has the same set of environmental and regulatory and zoning requirements as Boston.
Why is housing so cheap? Because Pittsfield’s economy collapsed when the giant GE plant, which once employed 13,000 people, gradually closed down between the 1970s and the 1990s. The city’s population dwindled from a peak of about 58,000 in 1960 to about 43,000 today. Few people want to move there because it’s hard to make a living; a surplus housing supply, and not much demand.
And while Klein selectively compares U.S. cities for housing regulations and costs, he doesn’t look outside the U.S. The major European capitals also have astronomical housing costs, not because of regulatory impediments, but because affluent people want to live there, bidding up prices—imbalances of supply and demand again.
One notable exception is Stockholm, where there is affordable housing—not because of a zoning free-for-all but because the government has plenty of regulatory and environmental requirements in service of more housing, not less. Unlike in Klein’s no-zoning Texan utopia, you can’t build housing just anywhere in Stockholm. On the contrary, development land is municipally owned and a careful planning process coordinates new housing construction with extension of mass transit lines.
Surely we need both a more effective and streamlined government that delivers the goods for citizens and constraints on financial abuses. That combination was the legacy of the New Deal era, which ensured that government both worked and promoted benign as opposed to toxic capitalism by tightly regulating finance.
Klein, at least, is offering a principled, if slightly wonkish debate. (The Prospect taught him well.) That’s not true of the Wall Street wing of the people’s party. Theirs is a politics fought out in corporate contributions and paid ads, not on the ground where real people engage democratically. If Wall Street dominates Democratic politics, Democrats will continue to lose, or will not be worth electing.
