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Sun Nov 18, 2012, 05:38 PM

Third Way, William Daley, and the Grand Bargain. [View all]

Last edited Sun Nov 18, 2012, 09:57 PM - Edit history (1)

Third Way: Friends in High Places.

Third Way is a self-described "moderate" think tank. They are currently advocating for a Grand Bargain on entitlements. Third Way was founded in 2005 but is closely linked with former Clinton staffers as well as former and current members of the Obama administration. Former Third Way Honorary Co-chairs include Secretary of Health and Human Services Kathleen Sebelius and Secretary of the Interior Ken Salazar.

The current roster of Honorary Co-chairs is: Representatives Clyburn (SC), Dingell (MI), Kind (WI), Crowley (NY), Schwartz (PA), and Polis (CO) and Senators Carper (DE), Coons (DE), McCaskill (MO), Udall (CO), Shaheen (NH), and Hagan (NC). All are Democrats. It seems reasonable to suppose that if these Democrats are willing to lend their name to Third Way they are also sympathetic to their policy positions.

Third Way's website includes the following description of their methods: "Unlike traditional think tanks, which focus on producing academic-oriented papers, we aggressively market our ideas to policymakers and advocates to maximize their impact on the national debate. Third Way’s policy and political work has been incorporated into President Obama’s State of the Union addresses, introduced in more than fifty bills in Congress, included as part of major bipartisan budget deals and the President’s Deficit Commission recommendations..." They aspire to be a neoliberal ALEC.

Third Way = Wall Street Power Play?

President Obama's former Chief of Staff, Bill Daley, is on Third Way's Board of Directors. During the Clinton administration, he served as Special Counsel and coordinated the campaign to pass NAFTA. He also served as Clinton's Commerce Secretary. Prior to joining the Obama administration he was a Vice Chairman of JP Morgan Chase.

Including Daley, Third Way has 29 Directors. The Board is dominated by representatives of the financial industry. Chairman John Vogelstein is Chairman of New Providence Asset Management and is the retired President of the private equity firm Warburg Pincus. The Vice Chairman is David Heller who was formerly the global head of equity trading for Goldman Sachs.

David Coulter is Managing Director of Warburg Pincus. He is an alumnus of JP Morgan Chase and Bank of America. Andrew Feldstein is the CEO and Chief Investment Officer of BlueMountain Capital Management. He also previously worked at JP Morgan. Derek Kaufman is Head of Global Fixed Income at Citadel LLC. He previously worked at JP Morgan. Michael Novogratz is President and Director of Fortress Investment Group LLC. He previously was a partner at Goldman Sachs.

Brian Frank is a Director and Portfolio Manager at MSD Capital and previously worked in mergers and acquisitions at Lazard Freres. Michael Goldberg is Managing Director at the private equity firm Kelso & Co. He also has prior experience in mergers and acquisitions at First Boston Co. Derek Kirkland is a Managing Director and Co-Head of the Global Financial Institutions Group at Morgan Stanley’s Financial Institutions Group in Investment Banking. He has a background in mergers and acquisitions. Joseph Zimlich is the Chief Executive Officer of Bohemian Companies, a group of family-owned real estate and private equity holdings. Mr. Zimlich also has a background in mergers and acquisitions.

John Dyson is Chairman of Millbrook Capital Management. Robert Dyson is Chairman and CEO of Dyson-Kissner-Moran Corp., a privately owned investment holding company. Andrew Parmentier is a founding partner of Height Analytics, an investment research firm. Howard Rossman is President of Mesirow Advanced Strategies, a manager of hedge fund portfolios. Kirk Radke is an internationally recognized private equity attorney. Barbara Vogelstein has a background in venture capital and private equity, including a tour as a partner at Warburg Pincus.

Two other Directors who do not have a Wall Street background are worth a mention because they help complete the picture of Third Way. Jonathan Cowan is a co-founder who also co-founded Lead...or Leave, a Generation X advocacy group that was largely financed by Pete Peterson. The other director is Ron Klain who recently served as a senior White House aide to President Obama, and Chief of Staff to Vice President Joe Biden. Pairing Klain with Daley gives Third Way recent Chiefs of Staff of both the President and Vice President. If Daley and Klain can't provide access to the administration, it's difficult to imagine who could.

This think tank/advocacy group, which seeks to shape Democratic Party policy, includes no representives from the labor movement. By contrast, individual financial firms including JP Morgan Chase, Goldman Sachs, and Warburg Pincus each provide more than one Director to Third Way's Board.

Pushing a Grand Bargain- the Talking Points.

Third Way recently released a Memo entitled "Six Facts About a Grand Bargain."
Link: http://www.thirdway.org/publications/609

Claim #1: The deficit is not a real economic problem.
Fact #1. Our current fiscal path, unchanged, guarantees higher interest rates and lower economic growth.

Claim #2: Social Security and Medicare don’t contribute to the deficit.
Fact #2. Social Security and Medicare’s fiscal shortfalls directly contribute to the deficit problem.

Claim #3: A grand bargain “betrays” voters.
Fact #3. Large majorities of voters support the core principles of a grand bargain.

Claim #4: A grand bargain means austerity.
Fact #4. A grand bargain is the best alternative to austerity.

Claim #5: Taxing the rich is enough to resolve deficits.
Fact #5. Leaving Social Security and Medicare untouched guarantees middle class tax hikes, because no plausible tax increase on the wealthy, alone, can stop deficit growth.

And finally, in its entirety:
Claim #6: President Obama promised not to touch Medicare and Social Security.
Fact #6: The president has repeatedly endorsed a deal that includes reasonable savings to make Social Security and Medicare stable for future generations.

President Obama has been entirely consistent on the deficit and entitlements. He proposes to cut deficits by $4 trillion, over ten years, “in a balanced way.” There is no question as to what balance means to the president. In the midst of the 2011 debt ceiling negotiations, Obama said, “Despite what some in my own
party have argued, I believe that we need to make some modest adjustments to programs like Medicare to ensure that they’re still around for future generations.”

The president has maintained that position throughout the presidential campaign. In the first presidential debate alone, he referred to “balanced” deficit reduction seven separate times. And the transcript of his Des Moines Register interview is clear: “I am absolutely confident that we can get what the equivalent of the grand bargain that essentially I’ve been offering to the Republicans for a very long time, which is $2.50 worth of cuts for every dollar in spending, and work to reduce the costs of our health care programs.”

What does it mean to be a Third Way Democrat?

A more expansive exposition of Third Way's policy prescriptions is contained in a recently released paper entitled "The Bargain."
Link: http://content.thirdway.org/publications/613/Third_Way_Report_-_The_Bargain.pdf

Third Way's program is based on the premise that America's biggest problem going forward is a reduction in projected growth of GDP from 3.3% to 2.3% per year. This leads, in short order, to an economy that is too small to sustain promised safety net benefits. In this paper they offer a 7-point plan to spur growth in the economy and thereby save as much of the safety net as possible.

A summary of their prescription:

1. Entitlement reform and tax increases. "Democrats must accept reconfiguring the budget so that, in relative terms, the amount of spending on health care and income supports is reduced compared to public investments."

2. Become an export giant. "Democrats must accept that expanding U.S. exports comes primarily through aggressive new trade measures like the Trans Pacific Partnership."

3. Reform corporate taxes and business regulations. "Democrats must accept that a simpler tax code with a low corporate rate and a streamlined regulatory regime that helps businesses grow is good for America."

4. Increase the productivity and educational attainment of the American workforce. "Democrats must accept that education funding comes with a commitment to reform that puts student performance above all else. They must accept that it is virtually impossible to reform and improve education without restructuring the way teachers are hired, promoted, and dismissed." Third Way Directors active in the charter school movement include William Budinger, Andrew Feldstein, and Derek Kaufman.

5. Become a global magnet for talent. "Democrats must accept that legislation must tilt future immigration flows into the country decidedly in the direction of skills and education." The vague language here suggests support for expanding HB1 visas.

6. Improve infrastructure.

7. Spur breakthrough innovation.

Notably absent from the list are cuts to military spending and serious reform of our hugely expensive employment-based and private insurance-based health care system. Third Way's program appears to be indifferent to the interests of minorities and hostile to the interests of teachers and labor unions. A party that disregards the concerns of a sizeable portion of its base is likely to shatter- sooner rather than later.

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