Obama’s Economic Views, The Economic Crisis, And The New Liberalism

In the previous post I noted some of the free market influences on Obama’s views. The economic crisis has necessitated some changes in how Obama will approach economic issues. George Packer, writing in The New Yorker, has described some of the differences between the views of Obama and more traditional Democratic views such as those of Paul Krugman:

Cass Sunstein, the Harvard law professor and author, was Obama’s colleague for many years at the University of Chicago Law School. Sunstein’s most recent book, “Nudge,” co-written with the behavioral economist Richard Thaler, tries to find a new path between governmental control and the unfettered free market. “Nudge,” Sunstein said, is about “ways of helping people to make better choices without requiring anybody to do anything. It’s a conception of government that is reluctant to impose mandates and bans but is kind of shrewd about enlisting what we know about human behavior in good directions.” Sunstein added that the book is well known in Obama’s circle; Obama’s top economic adviser, Austan Goolsbee, also of the University of Chicago, has read it, and Sunstein has discussed its ideas with Obama. In “The Audacity of Hope,” Obama included a proposal from Sunstein and Thaler that would have employees automatically enrolled in retirement plans, with the option not to participate, because “evidence shows that by changing the default rule, employee participation rates go up dramatically”—a non-coercive “nudge” toward better decisions. “He knows an astonishing amount about cutting-edge economic thinking,” Sunstein said.

Sunstein’s Obama is the post-partisan one. He calls Obama a “visionary minimalist,” meaning someone who wants to pursue large goals in a way that offends the deepest values of as few people as possible. Governing in this way would make him distinctly un-Rooseveltian. F.D.R. entered office with broad good will and a platform that offered almost all things to all people, but by the time he ran for reëlection in 1936 his Presidency had become aggressively partisan: he attacked “economic royalists” and said of them, “They are unanimous in their hate for me—and I welcome their hatred.” In 2007, Paul Krugman, the Times columnist who recently won the Nobel Prize in Economics, commended these remarks to Obama, advising him to sharpen his ideological edge, and warning that his search for common ground with Republicans would be his undoing. But Sunstein said of Obama, “I think he believes—and this is his big split from Krugman—that if you take on board people’s deepest commitments, or bracket them, show respect for them, then you make possible larger steps than would otherwise be imagined.” It would not be Obama’s way to trumpet the arrival of a new era of liberalism—a word, Sunstein said, that is too laden with baggage, and too much of a fighting word, for Obama’s taste.

Instead, Sunstein suggested as the governing philosophy of an Obama Presidency the idea of “deliberative democracy.” The phrase appears in “The Audacity of Hope,” where it denotes a conversation among adults who listen to one another, who attempt to persuade one another by means of argument and evidence, and who remain open to the possibility that they could be wrong. Sunstein pointed out that “deliberative democracy” has certain “preconditions”: “It requires an educated citizenry, a virtuous and engaged citizenry that has sufficient resources—and Madison sometimes spoke in these terms—that they could actually be citizens, rather than subjects.” Obama links the concept with Lincoln, who was as consequential a President as Roosevelt but in ways that were less obviously partisan and ideological. In his first inaugural, just five weeks before Southern militiamen fired on Fort Sumter, Lincoln urged his countrymen, “Think calmly and well, upon this whole subject. Nothing valuable can be lost by taking time. If there be an object to hurry any of you, in hot haste, to a step which you would never take deliberately, that object will be frustrated by taking time; but no good object can be frustrated by it.”

The recent economic crisis has forced Obama, as well as the Republicans, to consider a more activist role for government in the economy than they would otherwise support. I’ve often argued that, despite their rhetoric, the Republicans are not true supporters of free market principles. In recent years, as has been described in the works of Kevin Phillips and others, Republicans have increasingly been using the power of government to transfer wealth to their ultra-wealthy supporters. Some of Obama’s views on the economy are directed at remedying this:

According to David Axelrod, among the books that Obama has read recently is “Unequal Democracy,” by the Princeton political scientist Larry M. Bartels. It attributes the steep economic inequality of our time not to blind technological and market forces but to specific Republican policies. Bartels writes, “On average, the real incomes of middle-class families have grown twice as fast under Democrats as they have under Republicans, while the real incomes of working poor families have grown six times as fast under Democrats as they have under Republicans.” For decades, rising inequality coincided with conservative electoral success, because voters were largely ignorant of the effects of tax-code changes and other economic policies, those in power were unresponsive to the concerns of working-class citizens, and broader income growth occurred in election years. In other words, the causes of inequality are essentially political—an insight that suggests that Obama might use economic policy to begin reversing a decades-long trend.

Packer describes Obama’s move to the left as a reaction to the economic crisis and seeing the failure of Republican economic policies, describing  this as a rejection to the “anti-government philosophy of the entire Age of Reagan.” The number of Reagan supporters, along with other conservatives and libertarians, who back Obama suggests that Packer might be over stating this argument to a certain degree, and he even moderates this view by the end of the article. Both Packer and Obama also realize that this is not the 1930’s. Obama cannot ignore the Reagan years and cannot respond to the current economic crisis in the same manner as Roosevelt responded to the great depression:

Reagan couldn’t cancel Roosevelt’s legacy; Obama won’t be able to obliterate Reagan’s. The past few decades have generated a great surge of private energy and private pursuits, and for some Americans they have been years of dizzying abundance and creativity. Laptop computers and microbrews are just as characteristic of the Age of Reagan as financial derivatives and outsourcing. Next January, legions of earnest, overworked, slightly underfed young men and women won’t flock to Washington to map out new government bureaucracies; instead, legions of healthy, casually ironic, extremely nice young men and women will flock to Washington to map out the green revolution. When it comes, it will look more like Google than like the Tennessee Valley Authority.

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