American Prospect: Beware Rubinomics

As we predicted might happen in the upcoming election cycle, longstanding tensions within the Democratic party over economic policy are simmering over into outright dissension and public debate. Evidence for this assertion can be found in The American Prospect’s current cover story, ‘Friendly Takeover’, which bemoans the Democratic party’s longstanding infatuation with Wall Street economist and former Treasury Secretary Robert Rubin. While it’s a rather mild hatchet job on the man himself, it’s something of an all out assault on certain policy principles that he’s helped the party articulate and embrace since at least 1992. In addition to warning that Rubinomics will not inspire political support among voters because it “will do next to nothing for the average American”, author Robert Kuttner launches a pointed shot across the bow of the party’s Wall Street supporters and leaders:

A blind spot in the usual story of the Democratic party’s capture by “interest groups” is the failure to notice Wall Street as an interest group…[Democratic politicians] are said to show political courage by resisting “politically correct” politics and entrenched interest groups. But taking on the most powerful Democratic Party interest group of them all — Wall Street — is viewed as a sign of recklessness, unsoundness, demagoguery, and political suicide. A mark of Wall Street’s ubiquitous power in defining the limits of the politically thinkable is that its power is hardly noticed. The personification of this power is Robert Rubin.

While the economic framework that Kuttner brings to bear is worthy of further discussion and debate, we’re linking to the story for its political implications. We agree with Kuttner that the Democrats are fielding a formidable group of presidential candidates going into 2008, and note that InTrade market participants currently place a 57% probability on a Democratic presidency. It will be interesting to watch how the party’s internal debate over competing economic platforms develops, and to assess what effect this has on their odds for success in 2008.