By Rana Foroohar
January 15, 2015

Hillary Clinton’s allies appear to be taking their first shot at framing an economic policy agenda for her presumptive 2016 presidential campaign, with a new report out Thursday from the Clinton-friendly liberal think tank Center for American Progress.

This report is very significant for many reasons. For starters, as I mentioned in my TIME column this week about how progressive Elizabeth Warren is pushing Clinton further left, the CAP report was spearheaded by former Clinton economic adviser and former Treasury Secretary Larry Summers. Like his predecessor Robert Rubin, this is a guy much better known for deregulating financial markets than worrying about the working classes. I think the report is a sign not only that Summers is trying to reinvent himself, but that wage stagnation and the plight of the middle class is going to be the key economic issue in the 2016 presidential race.

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So, how does Hilary stack up on this front? The CAP report, which is quite extensive, has some very good ideas. Among my favorites are ideas for tax reform befitting an era in which so much of the world’s income comes from assets (stocks, capital gains, etc.) rather than from wages. See my article on Thomas Piketty, the author of the bestseller “Capital in the 21st Century,” which explains why that’s important.

There’s also a lot on educational reform and vocational training, both good ideas. Most important, the report lays out how other developed countries—like Canada and Australia, for example—do a better job keeping wages up than we do (it has a lot on international best practices that the U.S. might adopt).

But on that score, the report is also quite telling about Clinton’s potential Achilles heel in this election: the legacy of Clintonian market deregulation that was carried out by her husband, along with both Rubin and Summers. These are the guys that got rid of Glass-Steagall banking regulations that had kept the system safe for years (Rubin went to work for Citibank, which pushed that move, shortly after rolling back the regulation that allowed it to become the original Too Big To Fail bank). Yes, we’d still have financial crises with that regulation in place, but it would help stem some of them, and most important, the rollback is symbolic of how the Clintonian wing of the Democratic Party completely capitulated to the financial community—a battle that is still taking place today as Jamie Dimon rails against regulators and a Republican Congress attempts to roll back Dodd-Frank.

The CAP report has a few interesting ideas about helping change corporate governance to make companies think longer-term, but it goes very light on the key reason behind short-termism in the market: the financialization of American business, and the fact that finance, an industry that takes over 30% of corporate profits while creating only 6% of American jobs, calls the shots in corporate American today

This is going to be the biggest challenge for Clinton in 2016: how to distance herself from the money culture, but also how to really address the deeper root-to-branch shifts in our financial system, and the market system at large, that must happen in order to truly fix the wage and middle class issue.

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