Back to the Future
Ex-DLC Boss Al From: Bye Bye, Payroll Tax; Hello, Pollution and Wall Street Taxes
Years ago, Al From drove the Democrats’ move to the center. Now he has some ideas that don’t sound very...Al From-ish.
Out of power and out of ideas. That’s where Democrats are today, and that’s where they were in the late 1980s when Al From co-founded the Democratic Leadership Council (DLC), which brought Democrats back from the dead on the strength of “New Democrat” ideas, sending Bill Clinton to the White House.
Now the party is in need yet again of a savior. “Somebody will pick up the mantle,” says From. “The Democratic Party has lasted a long time.”
The policy ideas the DLC championed moved the party more to the mainstream and recaptured Reagan Democrats—the white blue-collar voters who had strayed. These working-class voters won the White House for Clinton in ’92—but they lost it for Hillary Clinton in 2016.
A couple lessons, says From. Hillary Clinton won California, New York, and Massachusetts by about five million votes, and Donald Trump won the rest of the country by a couple million. “We need to win in more places, and we need to compete in more places—and that doesn’t mean just getting out the vote and having labor leaders for you,” From says. “Labor turned out in those ‘blue wall’ states—and the white ones voted for Trump.”
From continued his analysis over a bunless burger at The Palm, his favorite lunch spot in downtown Washington: “In December 1990, Doug Frazier of the UAW [United Auto Workers] told me black union workers vote Democratic for reasons that have nothing to do with politics, and white union workers are for Reagan and Bush.”
Does watching Democrats come full circle back to where they were in the ’80s, losing touch with the white working class, make him yearn to get involved? “No,” he says. “What I do feel a yearning to do is remind my fellow Democrats why what we stand for matters—that ideas matter—that you need a compelling message to move voters.
“We don’t need the DLC—at least we don’t need me. We need new young people whose future depends on it,” he says.
But he does have some ideas, and they have to do with “Making Work Pay Again.” His defining idea for making work pay is eliminating what the late, great Senator Patrick Moynihan called the tax on work, which is the payroll tax.
From would replace the payroll tax that funds Social Security and Medicare with consumption taxes, including taxes on pollution, or green taxes, and taxes on Wall Street, plus eliminating the carried-interest loophole.
“The point is to find different ways other than taxing the working class to pay for Social Security. This would be a good debate for our party to have,” he says. “It would give workers a lot more money,” and it would also eliminate the employer’s contribution, which is an obstacle to employing low-income people. Republicans would support that aspect, and the concept could win bipartisan support.
Moynihan was one of Washington’s most original thinkers, and in a keynote speech in 1990 to From’s “New Mainstream” Democrats, he called on them to “cut the tax on work.”
If Hillary Clinton had embraced the idea of ending the tax on work, she could have laid claim to a big, bold idea that might have blunted the Bernie Sanders challenge, and given her an avenue to hold those Reagan Democrats. Growing the economy and making government work are progressive goals, says From: “You’ve got to create the wealth to redistribute. And if you believe in government, government has to work.”
This is a vastly different world than 1935, when FDR signed into law the Social Security Act. There were 16 workers for one retiree. Now it’s fewer than three. Tax reform is on the agenda for Republicans and Democrats, but the focus is on lowering the corporate tax rate.
Moynihan never called for eliminating the payroll tax, says Rob Shapiro, an economist who worked for him when he was in the Senate and who worked with From at the DLC. He wanted to raise the amount subject to the tax (capped this year at about $120,000), and make capital income (capital gains, interest, and dividends) subject to the tax as well as labor income. Wall Street and the business community would fiercely resist that.
The payroll tax is the second biggest base in the economy (after the personal income tax), and you’d have to find something with a comparably big base to replace it, says Shapiro—either a VAT (value added tax) or an energy tax. A substantial carbon tax could cut the payroll tax 1.5 points, he says, but eliminating it would be a much greater challenge.
“I love Al, but he’s not coming up with anything that will stand 30 seconds of scrutiny,” he says.
Yet Shapiro agrees with From that Democrats need a bolder economic message. He was an adviser to the Clinton campaign and was sending Hillary memos every 10 days that she needed a “big economic development program to raise incomes.”
He had done research at the Center for American Progress tracking people’s incomes as they aged. Everybody was making steady progress in the ’80s and ’90s. “Then it stops in 2001. The only people making progress were the college-educated. Households without college degrees were making less at age 40 than age 30. And they’re two-thirds of the country,” Shapiro says, his voice rising for emphasis. “Two-thirds! This is the central economic development of this whole era.”
Clinton used the rhetoric Shapiro suggested about how everybody’s incomes would rise under her policies, but she didn’t take it far enough in his view. He wondered whether she thought it would imply criticism of President Obama, whom she was campaigning with in lockstep.
“I think they were mesmerized by the demographics,” says Shapiro. They (Clinton campaign) had a policy for every part of the coalition, for young people, for African Americans, for Hispanics, for single women, but they didn’t have an economic program, and that’s what he (Trump) had. “A stupid one,” he says, “but he had one.”