Sunday, August 31, 2008
Thursday, August 28, 2008
I've just finished reading this very long piece by David Leonhardt for the New York Times Magazine and it so elegantly illustrates some of the reasons why I am for Obama.
As anyone who has spent time with Obama knows, he likes experts, and his choice of advisers stems in part from his interest in empirical research. (James Heckman, a Nobel laureate who critiqued the campaign’s education plan at Goolsbee’s request, said, “I’ve never worked with a campaign that was more interested in what the research shows.”) By surrounding himself with economists, however, Obama was also making a decision with ideological consequences. Far more than many other policy advisers, economists believe in the power of markets. What tends to distinguish Democratic economists is that they set out to uncover imperfections of the market and then come up with incremental, market-based solutions to these imperfections. This helps explain the Obama campaign’s interest in behavioral economics, a relatively new field that has pointed out many ways in which people make irrational, short-term decisions. To deal with one example of such myopia, Obama would require companies to automatically set aside a portion of their workers’ salary in a 401(k) plan. Any worker could override the decision — and save nothing at all or save even more — but the default would be to save.
In his policies you can clearly see Obama's pragmatism and anticipate a departure from the age of ideology. Here is an example where he sees the end of not only encouraging but facilitating savings, a huge problem for the American people that has not been addressed during the Bush administration, and finds the most practical solution for it. You may not agree with his solution but in this example you can see his thinking. This particular solution may lean to the left but at least it's a real solution. In his energy policy his Chicago School economic principles and laissez faire influences come through more brightly. Obama's cap and trade system for regulating greenhouse gas emissions would actually auction off 100% of the permits to pollute allowing the market to set the value of those permits. This would force the competition required so that only the most efficient and profitable corporations purchase the permits. A perfect blend of free market economics and government regulation. Leonhardt does an excellent job explaining this.
He's not an ideologue and so he can borrow ideas from all sides and points of the political and economic spectrum. He's not confined to Reaganism, Clintonian Centrism, or any other -ism of the 20th century.
So I asked Obama whether he thought he had been able to tell an effective story about the economy during this campaign. Specifically, I wondered, did he think he had a message that compared with Reagan’s simple call for less government and lower taxes.
He paused for a few seconds and then said this:
“I think I can tell a pretty simple story. Ronald Reagan ushered in an era that reasserted the marketplace and freedom. He made people aware of the cost involved of government regulation or at least a command-and-control-style regulation regime. Bill Clinton to some extent continued that pattern, although he may have smoothed out the edges of it. And George Bush took Ronald Reagan’s insight and ran it over a cliff. And so I think the simple way of telling the story is that when Bill Clinton said the era of big government is over, he wasn’t arguing for an era of no government. So what we need to bring about is the end of the era of unresponsive and inefficient government and short-term thinking in government, so that the government is laying the groundwork, the framework, the foundation for the market to operate effectively and for every single individual to be able to be connected with that market and to succeed in that market. And it’s now a global marketplace.
“Now, that’s the story. Now, telling it elegantly — ‘low taxes, smaller government’ — the way the Republicans have, I think is more of a challenge.”
Obamanomics is about restoring the role of government in the market without getting in the way and I think he's prescribed a fairly effective method here. He's going to really challenge the idea that trickle-down economics works. It's been ingrained in the American psyche as a truism, but it hasn't really proven true in reality. It's also going to be about "balancing market sensibilities and moral sentiment" as Obama puts it. It seems that as a result of Reaganomics, economic prosperity has not translated into an increase in the standard of living like it was supposed to. And finally, it's going to be about creating sustainable economic growth for the future so we as a global economy don't hit a wall.