Aaron Klein: Economic Policy and Politics
Aaron Klein, Class of '94, is a fellow in Economic Studies at the Brookings Institution and is the Policy Director of the Center on Regulation and Markets at Brookings. He served as the deputy assistant secretary for economic policy at the Treasury Department from 2009 to 2012, and before that as as Chief Economist of the Senate Banking, Housing and Urban Affairs Committee. Ted Jou, Class of '99, visited Klein at Brookings to talk about his political career, his policy work, and how it all started at Blair:
So I've tried to let life direct my research. You mentioned real-time payments - the importance of real-time payments as a tool to address income inequality came to my attention when I was waiting in line at the bank in downtown Silver Spring with my daughters after an ice skating lesson, and I saw the trouble that a woman was having in waiting the five days it would take for her paycheck to become available - the hundreds of dollars in fees she was facing because she was at a low balance on her bank account.
And there were three people the bank, the woman with the problem, another woman in line who helped her fix it, and me the so-called banking expert. So I started doing some more research, and I realized this was a giant problem hidden in plain sight, affecting millions of Americans who live paycheck to paycheck. But it had been widely missed by policy experts, like myself, who hadn't encountered the actual problem.
A lot of my research, I've tried to both study the impacts of sweeping laws like the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, but also newer issues that have arisen like the problem cannabis shops have found in maintaining basic banking accounts. I think my research kind of challenges standard political uni-axis left vs. right, and instead focuses on areas where the existing legal and regulatory framework often poorly serves society, with a particular focus on communities that have been historically disadvantaged.
So with an issue like real-time payments - after you encounter this problem, what do you actually do when you say you started to research the issue?
First you start by gathering the facts, the size and magnitude of the problem had been deeply misunderstood. The fact that Americans pay on the order of $60-$80 billion a year for services designed to let people access money or pay for access to money that they may already have in their account, but can't yet access. And then, once you see the magnitude of the problem, you describe the problem, and then you come up with potential policy solutions.
In this case, there's a legal solution and a regulatory solution. So I've been calling on regulators to implement new regulations in accordance with their existing authority. So you work with senior policymakers, you work with the media, and you work with regulatory officials. When I started working on real-time payments three-and-half years ago, it was not an issue most people thought about, but now it's become a more prominent issue.
I've written letters to the editor, and I've been published on real-time payments on NBC News. I've spoken live on CNBC about it, I've been in Politico and the Wall Street Journal. I've worked with members of Congress. In fact, Maryland's own Senator Van Hollen has introduced legislation largely in accordance with my research to help address this problem. He's quoted my work, and I think his legislation would really solve the problem.
I'm interested in knowing how you got yourself on this career path - when did you become interested in economic policy?
My career path changed directly as a result of my time at Blair. I experienced my call to public service while I was at Blair, in the fight for the new Blair and the Better Blair Movement. I had the unique experience of seeing my sister, having gone to Walt Whitman High School in Bethesda, and watching Whitman get the funding in the early 90s that was supposed to go to Blair. I had the experience of seeing the County Council in my junior year voting against building a new Blair at what was then called the Kay Tract. At Blair I ran for student government and served as senior class president, and at the county level I was vice president of MCR. We successfully lobbied the Council to change their minds and go from a 5-4 vote against Blair to a 6-3 vote to build the new Blair. That was the most rewarding experience of my life up until that point. And convinced me to dedicate my career to fighting for causes of justice and improvement in communities like Silver Spring. [Washington Post: Montgomery Council Bows to Demand for a New Blair High (May 4, 1994)]
Other than your student government experience, what else do you remember about Blair that still influences you today?
I'll tell you first of all, many of my closest friendships to this day are with my Blair classmates, so the students that I was with are really one of the most lasting legacies. The other thing was the incredible diversity of the school, and the challenges that came with making that diversity work, and the strength that was harnessed when we could work together. It was really amazing, and no one could stop us. But it was hard to unite us - we were factionalized by different programs we were in, by our different backgrounds we came from, from different family structures, different countries, different languages, and different geographies across the county.
Who are some teachers you remember that influenced you?
Mr. Bunday I think was particularly impactful not just in the physics that he taught me but the life outlook he shared; Ms. Verona working us to the bone; and Ms. Warner was an English teacher who was head of the SGA and was very helpful when I ran for office.
You still live in Silver Spring - have you followed any of the current student activism at Blair?
I'm pleased to see many Blair students remain deeply socially and politically active. It was something that I felt during my time at Blair - maybe there was an awakening - we had a walk out when I was there for the new Blair. I'm glad to see it's continued with their protests on climate change and gun violence. I really commend the students - that that type of activism for young people can make a difference not only in their community, but in their future lives.
After Blair, you went to Dartmouth for college and then to Princeton for graduate school?
I was a math and social science major at Dartmouth, which is a very small and unique program. I felt the math education I'd gotten from Blair prepared me fantastically for Dartmouth and for the study of economics, which is heavily quantitative. I felt extremely well prepared as a result of Blair magnet.
At Princeton for public policy, you could specialize in one of four fields and I specialized in economics. I was on the quantitative track, and I will say my first year in graduate school at Princeton was my hardest academic year of my life. My second hardest year was my junior year of Blair.
After Princeton, you went to work on the Hill?
Correct. My first job was with Senator Paul Sarbanes from Maryland who was the head Democrat on the Senate Banking Housing and Urban Affairs Committee. When I started, the Democrats were in the minority, and Sarbanes was the ranking member who became the Chairman when Democrats won the majority. I served as his economist and later as chief economist for his last term, from 2001 through 2006. There is a special joy and privilege in working for your home state senator, and I was able to stay very involved in the Silver Spring community, including working on the what today is known as the Paul Sarbanes Transit Center in Silver Spring.
What did you do after Senator Sarbanes retired?
After the Senator retired in 2006, I ran for the Maryland House of Delegates for Silver Spring and Takoma Park [Silver Chips]. I lost. After that, Senator Dodd became the new ranking Democrat and actually became the Chairman when the Democrats took back the Senate in the 2006 election. He asked me to be his chief economist, which I accepted and in 2007 and '08 I had a front row seat to the greatest financial crisis, hopefully, in my lifetime. But you know, it was an amazing professional experience. You felt as if the work that you did made the difference between whether our financial system and economy would collapse or hold firm. I mean, the suffering and catastrophe that resulted from the financial crisis is deep and real. But I think it would have been far worse had we not taken strong legislative action, creating the Troubled Asset Relief Program (TARP). And that was an all-consuming period of my life, where we worked on creating legislation that ultimately helped stabilize and save the American and global financial system.
After the 2008 election, you went into the administration - how did that happen?
I was very fortunate - the jobs in the new Obama administration were very sought after, but I had good experience and a professor from Princeton, the late great Alan Krueger, was going to the Treasury Department to be Secretary Geithner's chief economist, and he offered me a chance to be his deputy assistant secretary. I had also gotten to know President Obama and his team a little bit from his time in the Senate, and it was an amazing opportunity. The Treasury Department provided me an opportunity to really engage in implementing policies to try and stabilize our country and turn our economy around. We're talking now we're in the longest period of economic growth in American history after the worst recession since the Great Depression, and that didn't happen by accident - it took a lot of work and policy planning.
You seem to work on a variety of issues, from real-time payments to banking for the marijuana industry and taxing financial transactions - how do you come upon the topics that you pursue?
I served almost 13 years in public service. And after that, I went to work for a smaller think tank, the Bipartisan Policy Center, trying to think and engage with public policy actors and analyze the good and bad of decisions in public policy and economic policy. At Brookings, we serve as a resource for people in the government, for people in journalism, and for general citizens. Also, I've spent my time exploring new areas where I think new policies and new ideas are needed to make the world a better place.
What is the Brookings Institution, and what is your role here?
Brookings is actually the world's oldest think tank - it's just over 100 years old. Think of it as a university with faculty that do not teach students, but instead, try to engage with, inform, and advance research for the betterment of public policy and more efficient, effective and beneficial government.