The editor’s opinion from Marketplace, Northeast Wisconsin’s business magazine. (Obligatory disclaimer: Most hyperlinks go to outside sites, and we’re not responsible for their content. And like fresh watermelon, peaches, pineapple, grapefruit, tomatoes and sweet corn, hyperlinks can go bad after a while.)

August 21, 2008

Analysis of the (Sun)day

Sunday's New York Times Magazine will include this in-depth exploration of Barack Obama's economic beliefs. Writer David Leonhardt has "spent much of this year trying to get a handle on what is sometimes called Obamanomics and have come away thinking that Obama does have an economic ideology. It’s just not a completely familiar one. Depending on how you look at it, he is both more left-wing and more right-wing than many people realize."

The piece begins with what it calls the Democratic Party's, and Bill Clinton's, "two Bobs" — Robert Rubin, Clinton's secretary of the treasury, who focused on reducing the budget deficit, and Robert Rubin, Clinton's secretary of labor, who "argued that the government should invest in roads, bridges, worker training and the like to stimulate the economy and help the middle class." Put the two together, and what do you come up with?
Obama’s agenda starts not with raising taxes to reduce the deficit, as Clinton’s ended up doing, but with changing the tax code so that families making more than $250,000 a year pay more taxes and nearly everyone else pays less. That would begin to address inequality. Then there would be Reich-like investments in alternative energy, physical infrastructure and such, meant both to create middle-class jobs and to address long-term problems like global warming.
Nothing about that paragraph will assuage those who believe the budget deficit is the biggest problem we face. And if that seems like a disjointed set of proposals to you, there's more:
Labor unions, in particular, would prefer more trade barriers than many other Democrats. During the primaries Obama nodded, and at times pandered, in this direction. Since then, he has disavowed that rhetoric, to almost no one’s surprise. Yet his zig-zagging on the issue did highlight the biggest weak spot in his, and his party’s, economic agenda. He still hasn’t quite figured out how to sell it. For all his skills as a storyteller and a speaker, he has not settled on a compelling message about how to put the economy on the right path.

The lack of such a message has contributed to several of his worst moments over the last year. Most recently, the campaign has come out with a series of small-bore, populist energy plans — a windfall-profits tax on oil companies, a crackdown on speculators, a partial opening of the strategic oil reserve — that seem more political than economic. The most glaring misstep on this score was his comment this spring about bitter rural voters clinging to guns and religion. It was, in effect, an admission that his own message about the economy hadn’t yet broken through.

Leonhardt claims that Obama's economic thinking has been influenced by the University of Chicago school of economic thinking, but there's not much evidence that Obama actually believes in free markets (he is, however, a veteran of the Chicago school of corrupt politics); he only seems more market-friendly compared with, for instance, his primary opponent Hillary Clinton:
“The market is the best mechanism ever invented for efficiently allocating resources to maximize production,” Obama told me. “And I also think that there is a connection between the freedom of the marketplace and freedom more generally.” But, he continued, “there are certain things the market doesn’t automatically do.” In other words, free-market policy isn’t likely to dominate his agenda; his project would be fixing the market.
No New Democrat there. And, by the way, Barack, markets generally resist getting "fixed" to meet political priorities; his "fixes," whatever they are (for instance, his desire to reduce the gap between "rich" and poor by sticking higher taxes on the right) are likely to lead to Obama's lesson number one in the Law of Unintended Consequences.

There's also another spot where Leonhardt is just plain wrong:
The Tax Policy Center, a research group run by the Brookings Institution and the Urban Institute, has done the most detailed analysis of the Obama and McCain tax plans, and it has published a series of fascinating tables. For the bottom 80 percent of the population — those households making $118,000 or less — McCain’s various tax cuts would mean a net savings of about $200 a year on average. Obama’s proposals would bring $900 a year in savings. So for most people, Obama is the tax cutter in this campaign. ...
All told, Obama would not only cut taxes for most people more than McCain would. He would cut them more than Bill Clinton did and more than Hillary Clinton proposed doing. These tax cuts are really the essence of his market-oriented redistributionist philosophy (though he made it clear that he doesn’t like the word “redistributionist”). They are an attempt to address the middle-class squeeze by giving people a chunk of money to spend as they see fit.
What's wrong with this analysis? How about this: Poor people do not own businesses, poor people do not employ other people, and poor people do not drive the economy. Business owners, most of whom live in households that bring in more than $118,000 a year because they are successful — do. And business owners will get a big fat tax increase out of Obamanomics, not because it will bring in more tax revenue (less than they think, of course), but because Obama and his minions believe in "fairness":
He would then pay for the cuts, at least in part, by raising taxes on the affluent to a point where they would eventually be slightly higher than they were under Clinton. For these upper-income families, the Tax Policy Center’s comparisons with McCain are even starker. McCain, by continuing the basic thrust of Bush’s tax policies and adding a few new wrinkles, would cut taxes for the top 0.1 percent of earners — those making an average of $9.1 million — by another $190,000 a year, on top of the Bush reductions. Obama would raise taxes on this top 0.1 percent by an average of $800,000 a year.
I don't believe that Obama actually will cut taxes on the non-"rich." You may recall that Clinton proposed a middle-class tax cut during his first campaign, only to throw it away when he let Rubin talk him into increasing everyone's taxes instead. The result was that taxes reached a record 20 percent of Gross Domestic Product by 2000, helping push the economy into the 2001 recession, even though no one noticed it at the time. Since most Democrats seem to believe that government can spend your money better than you can, Obama will have to convince congressional Democrats to do something they seem constitutionally incapable of doing.

There's a bigger issue here, and one that Leonhardt doesn't address. What exactly can you believe in what Obama says? His well publicized flip-flops on trade, capital gains taxes and other, smaller issues make you wonder what exactly he does believe in, other than getting elected. And this, remember, is someone who, as Leonhardt's otherwise fawning piece admits, has "never run any government entity — no state, no city, not even a municipal agency — and he may not prove to be good at doing so."

The fact that Obama's economic mishmash may sound good, and probably is in fact better than other Democrats of the tax-and-regulate-everything-that-moves school of politics, is not a compelling reason to vote for him.

1 comment:

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