Wall Street uses the Third Way to lead its assault on Social Security
By William K. Black


Third Way, lobbyists for and from Wall Street who are leading the effort to enrich Wall Street by privatizing Social Security, was created by Wall Street to fool some of the people all of the time.  I have written previously to expose their fictional claims to be a moderate or liberal Democratic group.

Eric Laursen documented Wall Street’s effort to become even wealthier by privatizing Social Security in articles and his recent book (“The People’s Pension: The Struggle to Defend Social Security Since Reagan (AK Press)).

I showed that Third Way makes itself useful by providing a faux “liberal” or “moderate” “Democratic” quote machine that can be used to discredit Democrats and Democratic policies such as the safety net.  I gave examples of how Third Way gave aid and comfort to the effort to defeat Elizabeth Warren and the effort to unravel the safety net.  Third Way continues to prove that you can fool some of the people all of the time.

The National Journal ran an article on November 8, 2012 entitled “Left Divided over ‘Grand Bargain.’”

“Groups concerned with protecting entitlements such as Social Security and Medicare are finding themselves at odds over whether an overarching fiscal deal during Congress’s end-of-year session would help or hurt their cause.

The AFL-CIO organized a day of action on Thursday–part of a broader post-election campaign to protect entitlements–with dozens of events scheduled nationwide to urge lawmakers to avoid such a deal.

A ‘grand bargain’ to prevent the year-end onset of tax hikes and spending cuts ‘could cut Social Security, Medicare and Medicaid benefits, all to give tax cuts to the wealthiest Americans,’ the labor group argued on its organizing site. But the union campaign is being met with resistance from others on the left.

‘We, like you, are ecstatic about the reelection of President Barack Obama and what it means or American growth and prosperity,’ wrote Jim Kessler, senior vice president for policy for Third Way, a liberal think tank with a centrist approach, in an open letter to the groups involved with the day of action. ‘However, as fellow progressives, we were disappointed to learn that you will be leading an effort against the President to impede a balanced grand bargain.’

In order to protect safety-net programs, such as Social Security and Medicare, the left must embrace reform, Kessler writes.”

Let me attempt again to make the basic facts clear.  Third Way is not a “liberal think tank.”  It does not take “a centrist approach.”  It is not run by “fellow progressives.”  It is not concerned with “protecting entitlements.”  It is not even a “think tank.”  Third Way is a creature of Wall Street.  It’s version of “protecting” the safety net was made infamous during the Tet offensive in Viet Nam when the American officer explained that “it became necessary to destroy the village in order to save it.”  Third Way is the Wall Street wing of the Democratic Party, which seeks to defeat Democratic candidates like Elizabeth Warren running against Wall Street sycophants like Senator Scott Brown and seeks to unravel the safety net programs that are the crown jewels of the Democratic Party.  Wall Street’s “natural” party is certainly the Republican Party, but Wall Street has no permanent party or ideology, only permanent interests.  Third Way serves its financial interests and the personal interests of its senior executives.  Wall Street has always been the enemy of Social Security and its greatest dream is to privatize Social Security.  Wall Street’s senior executives live in terror of being held accountable under the criminal laws for their crimes.  They became wealthy by leading the “control frauds” that drove the financial crisis and the Great Recession.  This is why Wall Street made defeating Warren a top priority.

Third Way is run by a man who Laursen terms an “acolyte” of Pete Peterson.  Peterson is a Republican, Wall Street billionaire who has two priorities – imposing austerity on America and privatizing Social Security.  Privatizing Social Security is Wall Street’s unholy grail.  They would receive hundreds of billions of dollars in fees and ensure that their firms were not only “too big to fail,” but “too big to criticize” if they could profit from a privatized retirement system.   (We do not know who funds Third Way because it refuses to make its donors public.  Given who dominates its Board of Trustees, however, the donors must be overwhelmingly from Wall Street.)

Third Way’s self-description has some elements of honesty, admitting that it is “led by a prominent private sector Board of Trustees, drawn from finance, industry, academia, the non-profit sector and government.”  The order is revealing – the board is dominated by finance, with a thin veneer provided by industry, and with the barest patina of “academics” and “government.”

Here are key excerpts from their web site identifying their board.

·             John L. Vogelstein

Mr. Vogelstein is the Chairman of New Providence Asset Management, LLC and Senior Advisor to Warburg Pincus, LLC. [He co-managed that huge private equity firm.]

·             Bernard L. Schwartz

Mr. Schwartz is Chairman and CEO of BLS Investments, LLC.

·             David Heller

Mr. Heller … was … the Global Head of Equity Trading for Goldman Sachs.

·             Georgette Bennett

Dr. Bennett—an award-winning sociologist, criminologist, and journalist…. [Yeah criminologists!]

·             William D. Budinger

William D. “Bill” Budinger is the founder of Rodel, Inc., where he served for 33 years as its chairman and CEO.  [Rodel manufactured semi-conductors.]

·             David A. Coulter

Mr. Coulter serves as Managing Director and Senior Advisor at Warburg Pincus, focusing on the firm’s financial services practice.

Mr. Coulter retired in September 2005 as vice chairman of J.P. Morgan & Chase Co. He previously served as Executive Chairman of its investment bank, asset and wealth management, and private equity business.

·             Jonathan Cowan

Prior to co-founding Third Way, Mr. Cowan founded and ran Americans for Gun Safety….  In 1992, he co-founded Lead…or Leave, which became the nation’s leading Generation X advocacy group.  [He lobbied to protect “second amendment rights” to bear arms and led a Pete Peterson inspired group urging “Gen X” members to unravel the safety net.]

·             Lewis Cullman

Mr. Cullman was the Founder and President of Cullman Ventures, Inc., a diversified corporation that included the At-A-Glance group, which manufactures and markets diaries….

·             William M. Daley

William Daley served as President Obama’s Chief of Staff from January 2011 until January 2012.

Prior to his Chief of Staff role, he was Vice Chairman … of … JPMorgan Chase, from 2004 until 2011.

As Special Counsel to President Clinton in 1993, Daley coordinated the successful campaign to pass the North American Free Trade Agreement (NAFTA).

He was co-chair of the US Chamber of Commerce Center for Capital Markets Competitiveness.  [This is code for deregulation of finance.]

·             John Dyson

Mr. Dyson is Chairman of Millbrook Capital Management, Inc. (MCM), a private investment firm.

·             Robert Dyson

Mr. Dyson … is Chairman and CEO of the Dyson-Kissner-Moran Corp., a privately owned, diversified investment holding company….

·             Andrew Feldstein

Andrew Feldstein is the CEO and Chief Investment Officer of BlueMountain Capital Management….

Prior to co-founding BlueMountain in 2003, Mr. Feldstein spent over a decade at JPMorgan where he was a Managing Director and served as Head of Structured Credit; Head of High Yield Sales, Trading and Research; and Head of Global Credit Portfolio. [“High yield” is a euphemism for junk bonds.]

·             Brian Frank

Mr. Frank is a Director and Portfolio Manager at MSD Capital, L.P., the private investment firm founded by Michael Dell.

·             Michael B. Goldberg

Mr. Goldberg joined Kelso & Company in 1991 as a Partner and Managing Director.  [Private equity.]

·             Peter A. Joseph

Mr. Joseph has been in the private equity investment business for over twenty years….

·             Derek Kaufman

Derek Kaufman is Head of Global Fixed Income at Citadel LLC. He is a member of Citadel’s Portfolio Committee.

Prior to joining Citadel in 2008, Mr. Kaufman was a Managing Director at JPMorgan Chase….

·             Derek Kirkland

Mr. Kirkland is a Managing Director and Co-Head of the Global Financial Institutions Group at Morgan Stanley’s Financial Institutions Group in Investment Banking.

·             Ronald A. Klain

Ronald A. “Ron” Klain is President of Case Holdings, and General Counsel of Revolution LLC.  [Case is an investment fund for the holdings of AOL’s founder.]

·             Thurgood Marshall, Jr.

Mr. Marshall is a partner at Bingham McCutchen LLP, and a Principal of Bingham Consulting Group. Mr. Marshall counsels and devises strategies for advancing clients’ interests before Congress, the executive branch and independent regulatory agencies. [He is a lobbyist for a firm best known for representing financial firms.]

·             Susan McCue

Ms. McCue is President of Message-Global, LLC, a strategic communications and public affairs firm she founded in January 2008 to advance progressive campaigns, activism and issue advocacy in the U.S. and globally.

·             Herbert Miller

Mr. Miller, former CEO and Chairman of The Mills Corporation, one of America’s most innovative and successful mall developers and managers, founded Western Development Corporation (WDC) in 1967 and serves as its Chairman, Chief Executive Officer and Principal Stockholder.

·             Michael Novogratz

Mr. Novogratz has been President and Director of Fortress Investment Group LLC….. Prior to joining Fortress, Mr. Novogratz spent 11 years at Goldman Sachs….

·             Andrew Parmentier

Mr. Parmentier is a Founding and Managing Partner of Height Analytics. He and fellow Managing Partner John Akridge formed the company in January 2009. He has worked in the financial services industry since 1997….

·             Kirk Radke

Recognized internationally as one of the top private equity attorneys during his 28 year career at Kirkland & Ellis….

Among professional activities, Mr. Radke is Co-Chair & Organizer of the International Bar Association Private Equity Symposium, Founder of the Private Equity General Counsel Network, Founder of Legal Series and Co-Founder of the Private Equity Law Firm Roundtable.

·             Howard Rossman

Dr. Rossman is a President and Founder of Mesirow Advanced Strategies, Inc. and a Vice Chairman of its parent, Mesirow Financial Holdings Inc. He is responsible for all aspects of fund management, including manager due diligence, strategy analysis and asset allocation.

·             Tim Sweeney

Mr. Sweeney has been President and CEO of the Denver-based Gill Foundation since October 2007. For more than 30 years, he has worked to advance equality for all people regardless of sexual orientation or gender expression.

·             Ted Trimpa

Mr. Trimpa is a partner with the international law firm, Hogan Lovells LLP.

·             Barbara Manfrey Vogelstein

She has over 24 years of experience in venture capital and specialized equity investing. [S]he was a Partner of Warburg Pincus, one of the world’s largest private equity firms.

·             Joseph Zimlich

Mr. Zimlich is the Chief Executive Officer of Bohemian Companies, a group of family-owned real estate and private equity holdings.


Twenty of the twenty-nine trustees come from finance (counting the lawyer whose specialty is representing private equity firms).  Their most common background is Mitt Romney’s – private equity – and hedge funds.  The nine non-finance members include:

  • A Pete Peterson acolyte who previously created supposedly centrist front groups for gun rights and an effort to enlist “Gen X” in Wall Street’s assault on the safety net
  • A developer of giant malls
  • A semi-conductor manufacturer
  • A manufacturer of diaries
  • A criminologist/journalist
  • A PR specialist
  • A gay rights activist
  • A lobbyist at a firm best known for representing finance
  • A lawyer

The board includes three representatives of “main street” (malls, semi-conductors, and diaries).  They are not heavy hitters compared to the finance representatives.  On finance issues, Third Way is Wall Street.  It is run by Wall Street for Wall Street.  It is liberal only on social issues such as gay rights – and Wall Street created Third Way to focus on finance.

I have explained in other articles the incoherence and ineptitude of the financial policies that Third Way (including Casey, who temporarily left Third Way’s board to serve as President Obama’s chief of staff, where he urged Obama to adopt austerity and the Great Betrayal.  I have explained how those policies would have thrown the nation back into recession and doomed Obama’s chance for re-election.  Third Way has learned nothing from their errors – they continue to push the Great Betrayal and austerity.  Their overriding goal is to begin the process of privatizing Social Security.  The fact that their policies would cause a gratuitous recession, immense misery, and terrible electoral losses to Democrats does not represent a policy failure to Wall Street.  Wall Street would be the grand winner if we began to privatize Social Security as Third Way proposes.

The “left” is not divided on the need to oppose austerity and the Great Betrayal.  Third Way is not left or center or even right.  It is Wall Street on the Potomac.  Opposition to austerity and the Great Betrayal is not a left v. center issue.   Wall Street’s proposed financial policies are terrible for virtually all Americans.

Category: Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “Wall Street uses the Third Way to lead its assault on Social Security”

  1. wcvarones says:

    What is Black’s solution for Social Security? Means-testing? Raising the retirement age? Increasing payroll taxes dramatically?

    Surely he recognizes that the math doesn’t work as the program is currently defined. Odd that he neglects to even mention that.


    BR: The math works okay at current, and a few modest tweaks its good for another 50 years:

    1. Retirement age creeps up 1 year per decade til it hits 70
    2. $107k cap on FICA is raised $5k per year until it hits $250k
    3. You means test people with a net worth of $2m or $500k per year

  2. Robespierre says:

    @BR: The math works okay at current, and a few modest tweaks its good for another 50 years:

    1. Retirement age creeps up 1 year per decade til it hits 70
    2. $107k cap on FICA is raised $5k per year until it hits $250k
    3. You means test people with a net worth of $2m or $500k per year

    Ah No.
    1) Retirement age creeps up 1 year per decade til it hits 70: This is no good. In an economy that is not adding jobs fast enough, what you want is to retire people faster so the next generation finds jobs at a faster rate. Leave the retirement age as is.
    2) $107K on FICA is raised $5k per year until it hits $250k: Nope. Add a SS tax of %1 to %2 to income derived from dividends, interest and capital gains. Income is income regardless of source. We tax drug money as income. Enough said
    3) No problem here

  3. DeDude says:

    Actually social security is likely to work just fine even without any tweaks. It turns out that longevity is not really increasing for the relevant age group and social class. The relevant longevity is how long you are likely to live after you begin taking social security (survival of newborns may affect “average” life-span but is not relevant for the trust fund). The actuarial predictions use current conditions as assumptions for the future so they have not taken into account that poor and lower middle class people who make it to social security retirement age don’t live as long as they used to, and continue to lose longevity. It is absurd for them to make “75 year predictions”, few agencies have had luck with predicting anything past a decade. The only reason they make these predictions is so that they can scare the 99% into taking benefit cuts to fund cuts in taxes for the 1%.

  4. ilsm says:

    $400B a year too much for war, while the US senate destroys the intelligence apparatus!

    “I am not willing to pay for rich men’s war profits with entitlements.”

  5. Robespierre says:


    “The latest estimate shows life expectancy for white women without a high school diploma was 73.5 years, compared with 83.9 years for white women with a college degree or more. For white men, the gap was even bigger: 67.5 years for the least educated white men compared with 80.4 for those with a college degree or better.”

    Since education correlates with wealth, it is fair to tax wealthier people more (lift the cap) since after all, they will collect more after retirement.

    Also increasing the retirement age is an equivalent of the very poor subsidizing the rich since whatever money they put in will be collected by the rich that live longer.

  6. @BR: The math works okay at current, and a few modest tweaks its good for another 50 years:

    1. Retirement age creeps up 1 year per decade til it hits 70
    2. $107k cap on FICA is raised $5k per year until it hits $250k
    3. You means test people with a net worth of $2m or $500k per year

    Those are assumptions which at this point remain only in the realm of the possible. I believe that they are only remotely possible and that any attempt to raise the retirement age will be met with stiff resistance. I would be interested in seeing in numbers if only items 2&3 are put in place. The carry away message is SS is OK and the math works.

    The fundamental structure of SS can work if the economy is growing and the demographics do not become even more skewed to an elderly, retired population. Neither of those trends look favorable. We are left with the statement that SS looks OK if……

    We accept that SS looks OK and forget all the of the ifs.

  7. dougc says:

    I asked my son if he preferred to pay higher social security taxes or allow the systems to end and I and his drug addicted mother move in with him and he could support us. He said he would go to 25% and maybe higher.

  8. eideard says:

    You only need 3 words to assure SSA as it stands into the 22nd Century – no age change, nada:

    Remove the cap!

    Last time the NY TIMEZ asked the question, 76% of readers responded in the affirmative. The rest can stuff it – or vote for Romney, again.

  9. bmz says:

    The Social Security trust fund, together with payroll taxes, is sufficient to cover program benefits for more than the next 20 years. Moreover, assuming no additional funding, currently scheduled payroll taxes can provide benefits equal to those now provided, even adjusted for inflation, for the indefinite future. Given all the real economic problems we truly must address now, there is no legitimate argument for even considering Social Security modifications until the economy is fully back on its feet and long-term costs and revenues can be more accurately projected.

    The Medicare trust fund was actually “going broke” when Pres. Obama took office, due in large to changes pushed through by the Bush administration. At that time, the trust fund was projected to be exhausted by 2016. However, the ACA (“Obamacare”), rather than taking the much vaunted $716 billion out of Medicare, actually added that amount to the Medicare trust fund; which is now projected to last until 2024. In one fell swoop, two thirds of the Medicare shortfall was eliminated. Eliminating the remaining one third could be even easier; for example, now that the ACA will protect older working Americans, we can in good conscience synchronize Medicare eligibility dates with those for Social Security. The relative ease of these Medicare fixes, and the fact that the small Social Security issues remaining are far beyond our legitimate planning horizon, why then all the hysteria about entitlements eating our children and grandchildren? In a word—TAXES.

    Everyone knows that Ronald Reagan reduced income taxes (more than one half for the wealthy); what is less commonly understood is that he extensively offset this by raising payroll taxes(more than double for most self-employed). Today, most American families pay more in payroll taxes than they do in income taxes. Between 1946 and 1981, income taxes averaged 12(+/-1)% of normalized GDP. Reagan reduced income taxes to near 9%. Clinton increased them back to 12%; and Bush/Obama reduced them again to 9 %( and below). However, on budget expenses (which exclude Medicare and Social Security) have remained 12(+/-1)% of normalized GDP throughout. The deficit in income taxes has been financed by borrowing, largely from the Social Security and Medicare trust funds. When Clinton raised income taxes back to 12%, this eliminated the on budget deficit. The CBO projected that this, plus the Social Security and Medicare surpluses, was enough to pay off the entire US debt before the Social Security/Medicare trust funds would have to be amortized for beneficiary payments, all without having to raise any taxes to pay for the amortization of those trust funds. Like Reagan before him, Bush took those excess payroll tax receipts and gave them “back” as income tax reductions, heavily weighted to the wealthy–who didn’t create those surpluses in the first place. By doing this, Bush guaranteed that income taxes would have to be raised in order to amortize the trust funds. Although the Republicans like to talk about those “47%” who in large part pay only payroll taxes as being supported and subsidized by those who pay income taxes, the truth is the opposite; ever since Reagan, income taxes have been subsidized by payroll taxes; and the failure to raise income taxes to pay back that subsidy, is to steal the money that middle-class workers have had taken out of their income to pay for their retirement.

    Hence, the only problem we have with entitlements is paying back the money that we borrowed from the Social Security and Medicare trust funds. This requires that we raise income taxes in the short term to 12% to cover normal on budget expenses. And, as soon as the economy recovers, we must raise taxes above 12% to pay back the trust funds. This is why the Republicans refuse to discuss raising income taxes; they would much prefer to steal workers retirement funds, and reduce the entitlements paid for by them. We do not have an entitlement problem, we have a Republican problem.

  10. victor says:

    Milton Friedman criticized the payroll tax system as lopsided and grossly favoring the well off. But even fixing this may not be enough. The graying of the population is a problem that wont go away by ignoring it. We cannot rely on the Hispanic forever, the only growing segment of our population. In fact 2010 was the first year when net migration from Mexico was ZERO and when Asiatics immigration exceeded Hispanics´overall. Nor ca we assume that the $5T or so the US Treasury owes the SS Trust Fund will be ever repaid, certainly not in full (punishingly low/negative interest rates, a devalued $ and inflation). The reasonable solution would be to address M. Friedman´s complaint but without killing the goose AND grow the economy 5% plus? But a condition sine qua non for this is population growth. I have no idea how this one will turn out 25 years out (one generation). Obviously there will be fierce opposition for tax increases and equally fierce ones for the unintended consequences of a vigurouly growing economy.