WASHINGTON –– Wall Street was hit hard in the latest draft of the Democratic Party's platform, which, in a nod to the influence of Bernie Sanders, took a sharp leftward turn from 2012 on issues like regulation, taxes and support for a $15 minimum wage.
The platform draft reflects a delicate and as yet untested balancing act by presumptive Democratic presidential nominee Hillary Clinton, as she seeks a unified position on contentious issues such as wages, oil drilling and the Trans-Pacific Partnership trade deal.
As U.S. senator who represented New York for eight years, Clinton cast herself as an ally of Wall Street, an important local industry. The platform, with its nod to "extreme levels of income and wealth inequality," suggests the extent to which that image has been a weakness –– exploited on the left by Sanders, her rival for the Democratic nomination, and on the right by Donald Trump, her presumptive Republican opponent.
Platforms are mostly symbolic, though, being nonbinding on a candidate, and often not corresponding closely with policy actions pursued by a new administration. This time may be different, though, given the upheaval over the direction of the party sparked by Sanders's campaign, said emocratic strategist Jim Manley, a senior director at QGA Public Affairs in Washington.
"History shows these things aren't worth the paper they are printed on," Manley said. "But this platform is indicative of a much more progressive party than we've seen in years past."
If provisions in the draft platform were to become government policy a transaction tax would be imposed on high frequency and speculative trading, while financial institutions could find themselves competing in the realm of basic banking services with the U.S. Postal Service.
Financial industry executives would be blocked from serving on boards of the 12 regional Federal Reserve banks, a nod to the "Fed Up" coalition pushing to make the central bank a more diverse and more public institution. The financial sector would face new restrictions on securities trading by commercial banks. The latter provisions are hailed in the document as a 21st century version of the Glass-Steagall Act, the Depression-era law that separated investment and commercial banking activities -- fighting words for Wall Street. Glass-Steagall was repealed in 1999.
Warren Gunnels, Sanders's senior policy aide, said he was pleasantly surprised at the concession the campaign was able to wrest from the Clinton camp. "It's been a very good working relationship," he said.
Gunnels noted several surprising wins on the financial sector –– the platform assails "the greed and recklessness of Wall Street" -- and other issues, including a call to abolish the death penalty. That was a shift from Clinton's insistence the punishment be available to judges and juries in some cases.
"While some in the Clinton camp resisted that proposal in the beginning, we were able to make the case that it was the right thing to do," Gunnels said of the death-penalty plank.
An indication of the challenge Clinton faces in attracting many of the left-leaning Sanders backers –– who cast about 12 million votes for their candidate, to about 15.8 million who voted for Clinton –– appeared in recent national polls suggesting support for Green Party candidate Jill Stein.
Those choosing Stein are thought to be potential lost Democratic votes that could tip the balance in a close election. At the same time, Trump has had some of his greatest fund raising support from hedge fund leaders who feel threatened by the Democrats' get-tough tone on Wall Street.
Gunnels declined to say whether the concessions would translate into a Sanders endorsement. He said, though, the Sanders camp would continue to push for additional changes, including a repudiation of the TPP, suggesting that concessions may have only whetted the Sanders camp's appetite for more.
The draft platform moves from the big sweep of cultural issues like protection of LGBT rights and the minutiae of American tax policy. U.S. corporations would no longer be allowed to defer paying taxes on their overseas earnings –– a major component of corporate tax-avoidance strategies –– under a provision in the draft platform that borrows heavily from Sanders's campaign.
Under current law, companies can postpone such taxes indefinitely by leaving their offshore earnings offshore; taxes are due only when the profits are "repatriated" to the U.S. As a consequence, major U.S companies have stockpiled more than $2.4 trillion in foreign profit. "We will end deferrals so that American corporations pay U.S. taxes immediately on foreign profits and can no longer escape paying their fair share of United States taxes by stashing profits abroad," says the draft platform.
Sanders proposed ending the deferral, and using the resulting additional tax revenue to repair and build roads, bridges, railways and airports, and to fund other infrastructure projects. The platform draft calls for using "the revenue raised from fixing the corporate tax code to reinvest in rebuilding America and ensuring economic growth that will lead to millions of good-paying jobs."
Sanders has said the current law impels large companies to shift as much of their profit as possible overseas, often to tax havens. Moreover, the deferral provides incentives for companies to establish factories in countries with low corporate tax rates. U.S. law sets a top corporate income tax rate of 35 percent -- the highest among the world's developed economies –– though few companies pay that much on their reported profit because of such benefits as foreign deferral.
Clinton's plans for international business tax reforms haven't gone as far as those of Sanders. One of her proposals, designed to prevent U.S. companies from shifting their tax addresses offshore via so-called inversions, is to impose an immediate "exit tax" on any offshore earnings held by companies that attempt that maneuver. In an inversion, a U.S. corporation merges with a foreign company, and then sets up a new tax address offshore. Clinton also proposes to take back certain tax breaks given to companies that subsequently send jobs overseas –– a notion that appears, in broad form, in the draft platform.
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