In March 2016, BlackRock CEO Larry Fink began hiring a “shadow government” of Democratic operatives and economic policy wonks. The reasoning was transparent: this coterie of revolvers would safeguard BlackRock’s interests in Washington whether or not Larry Fink was ultimately named Treasury Secretary, a role to which he long aspired and for which Barack Obama had already considered him.
BlackRock is the world’s largest asset manager, managing just under $8 trillion of assets as of September 2020, much of which is invested passively in the world’s largest companies in everything from oil to green energy to cybersecurity to infrastructure development.
Though Clinton ultimately lost the election, Fink continued hiring Democratic operatives and remained personally involved in party politics. Now, as Joe Biden prepares to enter the White House, members of the BlackRock “shadow government” are queued up for major policy roles. They include Brian Deese, who will be the next National Economic Council director, and Wally Adeyemo, who will be a top aide to Treasury Secretary nominee Janet Yellen. Yet the BlackRock figure set to join the administration with the deepest ties to both the firm and the neoliberal economic policies it benefits from won’t be serving in the White House at all, but rather as the top economic aide to Biden’s potential successor.
The American Prospect reported on Wednesday that Mike Pyle, global chief investment strategist at BlackRock and one of the original members of Fink’s “shadow government,” will become Vice President Harris’ chief economist.
Pyle cut his teeth in the early Obama administration as an aide to Peter Orszag, Obama’s first budget chief and the single most vocal austerity advocate in the midst of the Great Recession. (Fink, for his part, was and remains a deficit scold.) Orszag left the Obama administration in 2010 and took a job at Citigroup, prompting a New York magazine profile literally titled “Revolver.”
Before leaving the White House for Wall Street, however, Orszag worked closely with Pyle to design “the fiscal and budgetary aspects of health reform,” according to a Pyle bio. What exactly Pyle contributed to the Affordable Care Act is unclear, but Orszag’s overall contributions to Obama’s signature health law are among its most baffling elements.
Orszag shaped the ACA’s heavy focus on cutting costs within the existing healthcare system via so-called “managed care.” This refers to a range of techniques for lowering costs for existing private health insurance holders, such as cost-sharing or preventive treatment, rather than expanding access to cover more patients. This follows Orszag’s overall obsession with budget deficits, according to contemporaneous reporting in the New Yorker. And yet, one year before Obama took office, Orszag had personally overseen a study debunking the very theory of managed-care cost savings he inserted into the ACA. According to one health policy expert, that massive report “said the managed care fads would at best save the federal government microscopic sums of money.” If, as seems likely, Pyle aided Orszag in framing the ACA around managed-care and cost saving, then he helped build large swaths of American healthcare infrastructure around a theory Orszag should have known wouldn’t work.
Biden’s own signature healthcare proposal — appending a public health insurance option to the Affordable Care Act — takes a different approach, namely making more coverage available overall, not just making existing options more efficient coverage. For his part, Pyle has unsurprisingly been tight-lipped about any flaws in the original ACA’s design over the years. A public option for health insurance would be a costly new government program — exactly what Pyle’s close associates Fink and Orszag both detest.
This isn’t the only area where Pyle’s government career has run counter to Biden’s public policy pronouncements. After working for Orszag, Pyle migrated to the Treasury Department under Lael Brainard, where he “helped to manage the full range of Treasury’s international economic efforts.” For Brainard, those “international economic efforts” turned out to be enough of a political liability to help tank her all-but-assured rise to Treasury Secretary.
At Treasury, Brainard “resisted all efforts” to label China a currency manipulator despite economists’ findings that doing so would increase U.S. GDP and employment, and could even help Chinese workers. When Congress eventually passed legislation in 2015 to toughen currency manipulation rules, some progressives in Congress joked that the bill should be called the Lael Brainard Memorial Act.
Brainard also helped shape the Trans-Pacific Partnership (TPP) during her time at Treasury, with one Treasury official telling HuffPost: “Structurally, a lot of this fell under her. The fact that she had influence and a serious imprint is pretty cut and dry.” A wide swath of progressive stakeholders from the environmental movement to labor leaders to political opponents of Big Pharma ultimately helped prevent Congress from ever certifying the TPP. Former Secretary of State Clinton was forced to disavow the deal she helped create, and President Trump campaigned on his opposition to the deal, criticizing its “handouts for insiders.”
Biden has already signaled a reversal from much of Brainard’s — and thus, Pyle’s — global economic policy legacy. Biden specifically chastised China’s past currency manipulation to the United Steelworkers union and plans to appoint the most progressive United States trade representatives of any modern Democrat in Katherine Tai. Public Citizen’s Lori Wallach, one of the most knowledgeable left-leaning trade watchers, praised Tai’s “encyclopedic knowledge of trade” and “top-notch political skills.”
Both of these policy shifts also run counter to Larry Fink’s perspectives. In 2017, Fink described China as “a currency manipulator, but the opposite. They have spent almost $1 trillion keeping the currency where it is, and by all measures, when you look relative to other currencies, China’s currency is actually pretty high.” Fink spent much of 2017 and 2018 hand-wringing about Trump’s trade wars with China, and as a truly global asset manager with multiple trillions invested worldwide, BlackRock has an obvious stake in the global trade regime.
By becoming Harris’ top economic adviser, Pyle is gaining stock with Biden’s most likely successor as leader of the Democratic Party, despite coming out of an economic legacy Biden seems to be moving away from. The public record has little information about Pyle’s own personal economic philosophies, but his experience working alongside Orszag and Brainard on some of their least successful initiatives raises questions — most especially, has Pyle learned from those failures and acknowledged them as such?
The fact that Pyle left government for BlackRock, and has remained there ever since, does not inspire confidence that the answer to this question is “yes.” Pyle will likely have to pledge to recuse himself from BlackRock-related policy matters, as other firm alums like Deese and Adeyemo have. But this only highlights the ridiculousness of hiring BlackRockers in the first place. To make such a pledge meaningful, these policymakers would need to recuse themselves from practically every avenue of economic policymaking. BlackRock, after all, is “one of the top owners of every industry,” in Deese’s own words.