Obama's social spending plans: the Reich stuff?

In the first months of the Clinton Administration, Robert Reich lost the argument over public investment vs. deficit reduction. Today, writing in the The New York Times, he's in with an early bid to convince Obama to go the other way -- that is, not to significantly slow his promised drives for universal healthcare and Federal investments in alternative energy and infrastructure (and, Obama would add, education).

To support further deficit spending at a time when the Federal debt is swelling, Reich argues that a) as a percentage of GDP, the current deficit is not out hand; b) the bank bailout should not materially swell the national debt; and c) while Clinton came into office as a recovery was gaining ground, Obama will take office as a recession is taking hold -- and deficit spending is widely recognized as an appropriate stimulus in recession. Reich adds:

Finally, not all deficits are equal. As every family knows, going into debt in order to send a child to college is fundamentally different from going into debt to take an ocean cruise. Deficits that finance investments in the nation’s future are not the same as deficits that maintain the current standard of living.

Obama has more or less promised to steer Reich's course. Acknowledging "there are a range of things that are probably going to have to be delayed," he insists that all his core proposed investments are essential to reviving the nation's economy and ensuring its future prosperity.

While I was wondering whether Obama would hold this course, a stray association came to mind: an account by Zack Ecksley (flagged by Marc Ambinder) of the Obama campaign's "counterintuitive" approach to field organization. The upshot is that the campaign invested time and energy in building volunteer teams when the pressure was intense to start wooing voters immediately:

It was a huge risk for the national field program to have paid staff take the time to methodically build volunteer teams instead of rushing directly to spend all their time running voter contact activities themselves...

Jeremy Bird, the Ohio general election director and one of the driving forces behind making teams a national strategy, said, "We decided in terms of timeline that [our organizers] would not be measured by the amount of voter contacts they made in the summer--but instead by the number of volunteers that they were recruiting, training and testing. It was much more an infrastructure focus. So there would be no calls from Chicago saying, 'Why haven't you made more calls?!' Instead there would be calls saying, 'Where are your neighborhood team volunteers?' Or, if the numbers seemed high, 'Are they real?' It was a whole shift in mentality that was really, really good."

It is impossible to overstate how counter intuitive this slow-build approach was for Democrats. Even Regional Field Director for Southwest Ohio, Christen Linke Young--who I witnessed in 2004 pushing independently for just this strategy as an Ohio FO in Franklin County--said it was scary to take this patient approach:

"We had a whole month where, on our nightly calls with headquarters, we did not report our voter contact numbers. We only reported our leadership building. I definitely stayed on top of what our voter contact numbers looked like. But headquarters wasn't paying attention to how many voters we registered or how many doors we knocked that day--they were paying attention to how many one-on-one meetings we had, house meetings, neighborhood team leaders recruited, how many people we had convinced to come to this wonderful training in Columbus that we had. Yes, it was definitely scary to see how big our persuasion universe was and know that our first priority was not to just be tearing through that."

This approach is like foregoing present profits for future returns -- or forging ahead with public investment while the deficit is ballooning. Which is not to say that for the government to massively invest on margin, so to speak, is not a large risk.

Unlike McCain, Obama is not a habitual craps shooter. He is, as he told The Wall Street Journal, fact-driven: "The thing I think people should feel confident in is that I'm going to make these judgments not based on some fierce ideological pre-disposition but based on what makes sense. I'm a big believer in evidence. I'm a big believer in fact." If that's true, though, such an approach demands taking calculated risks. And so far, Obama seems to have calculated that Reich is right.

Obamanomics II: a corporate tax cut?

The Wall Street Journal Online has a terrific interview with Obama on economics up today - wide-ranging, confrontational, moving freely between theory and policy specifics.

Unfortunately, the front-page print writeup by Bob Davis and Amy Chozicki fails to do the discussion justice. Curiously, it's only two-thirds as long as the print writeup of a March 3 economics interview with McCain -- early fruits, perhaps, of Murdoch's stated desire to make WSJ features shorter. Douglas Holtz-Eakin, McCain's chief economic advisor, gets almost half again as much ink as Obama, and much of the article is devoted to dubious parallels between Obama's plan for Federal venture capital-style investment in alternative energy and past failed Federal attempts at alternative energy investment.

The print article does not convey the subtlety, pragmatism, balance and strategic reach of the economic vision Obama expressed in the interview.*

The full discussion is a prime example of how Obama casts liberal spending and tax proposals as a restoration of balance, a return to the historical center after years of rising inequality, and a set of investments essential to competing in a global economy. Obama's bid to build a working majority for these policies consists in part of acknowledging the validity of certain conservative principles and (for a Democrat) inconvenient truths:

• "the combination of globalization and technology and automation all weaken the position of workers" (listening, David Brooks?).
  
• "You might undoubtedly get to a point where the capital gain and dividend taxes are so high that they distort investment decisions and you're weaker economically."
• "if somebody shows me we can do something better through a market mechanism, I'm happy to do it. I have no vested interest in expanding government or setting up a program just for the sake of setting one up."
  

Acknowledging these points enables Obama to present his redistributionist tax proposals and proposed investments in education, health care, infrastructure and alternative energy as pragmatic and essentially centrist. He uses history -- references to previous periods of successful public investment, and to the last thirty years' rise in income inequality -- to move the center to the left. Particularly revealing is his response to a question about taxes. Challenged as a redistributionist, Obama talks first about fairness, but then about efficiency:

Here's what I would say: I do believe the tax policies over the last eight years have been badly skewed towards the winners of the global economy. And I do think there is a function for tax policy in making sure that everybody benefits from globalization or at least the benefits and burdens are shared a little more easily. If, as some talk about, we've got a winner-take-all economy where the highly skilled, highly educated are reaping huge rewards and the unskilled or even semi-skilled are getting a much smaller share of the economy, then our tax policies can help cushion some of the blow through providing health care. So if people lose their jobs they're not losing their health care as well. That actually makes a more flexible work force that makes workers more mobile and less resistant to change.

If we've got investments in education, that will make us more competitive in the long run. We've got to pay for that like anything else. But it would be a mistake to say I view our tax code only as a distribution question. I also think that our tax code has come to distort a lot of economic decision making so I'd like to see simplification as part of an overall tax agenda. On the corporate side, for example, one of the things I've asked my folks to look at is: Are there ways we can close existing loopholes in tax havens at the same time as we're lowering overall rates? We've got this new problem: The biggest problem with our tax code when it comes to the business side is that we have one of the highest tax rates -- corporate tax rates -- on paper but our effective tax rate is one of the lowest … You know, how much you pay in taxes as a corporation a lot of times is going to depend on how good your lobbyist is, as opposed to any sound economic theories. So those distorting effects I'd like to actually remove and eliminate from our tax system, but obviously that's a complicated and difficult task. The last time we did it was in 1986. We're going to have to, I think, revisit that.

A less skilled politician, and a less subtle thinker, would use McCain's proposed cut in the corporate tax rate as a populist bludgeon -- a powerful one, at a time of heavy economic stress. Obama, instead, acknowledges that a high corporate tax rate can hurt U.S. competitiveness -- or would if it were not offset by a thousand loopholes. Obama argues fairness and efficiency and good economic outcomes are interdependent. And fairer, more rational and efficient policies depend on lobbying reform.

The discussion is shadowed by a different kind of centrism: Clinton's. Obama is asked explicitly whether budget pressures would not force him, as they did Clinton, to put deficit reduction ahead of investment - specifically in infrastructure, but implicitly in a range of social programs. The reporters also cast this question as a choice between Clinton's Treasury Secretary Robert Rubin (deficit reduction) and Clinton's Labor Secretary Robert Reich (investment in infrastructure). Obama says explicitly that he would draw on both. But he also makes it quite clear that he expects to reverse Clinton's emphasis, and put investment first -- and that the historical moment would allow him to do so:

Well, look, the difference I would suggest is that there is a strong recognition in the public mind that we can't continue on our current energy path. It's not sustainable. Which means there's a bigger opening to bring about change....

Finally, you've got a war in Iraq that is deeply unpopular, where we've been spending billions of dollars. We're going to have to catch up on deficit reduction but I think people also recognize that if we can spend that much money rebuilding Iraq, surely we can find some money to rebuild America.

It's interesting that Obama "leans Reich" on this question, because on a different plane he's deeply influenced by Reich's thinking. That is, he's absorbed Reich's argument in Supercapitalism that widening income inequality, a large risk shift from the community to the individual, and the corruption of our political process by lobbying are all due more to the rise of global hyper-competition among businesses than to the policies of either party. Obama's position is that Republican policies -- anti-unionism, radical deregulation, tax breaks for the wealthy --have exacerbated and failed to address these problems -- but not caused them. His response to a question about the historical underpinnings of "the question of redistribution" is almost pure Reich:

...the combination of globalization and technology and automation all weaken the position of workers. I would add an anti-union climate to that list. But all weakens the position of workers, particularly blue-collar workers, in the economy, and some of it is just historical. You know after World War II, we were in this unique position where Europe was decimated, Japan was decimated. China was off the grid because of Mao. And so we didn't have a lot of competition out there, and now other countries are rising and automation has supplanted a lot of work that used to be done by middle-class workers.

We have drastically increased productivity since 1995, and there was the theory that if you increase productivity enough some of these problems of living standards would solve themselves. But what we've seen is rising productivity, rising corporate profits but flat-lining or even declining wages and incomes for the average family.

What that says is that it's going to be important for us to pay attention to not only growing the pie, which is always critical, but also some attention to how it is sliced. I do not believe that those two things -- fair distribution and robust economic growth -- are mutually exclusive.

Having argued at length that re-emphasizing shared prosperity is the deepest pragmatism, Obama is able at the end of the interview to effectively cast himself as the anti-Bush (and implictly, an anti-McCain)-- a card-carrying member of the reality-based community:

I tend to be eclectic. I do think we're in a different time in 2008 than we were in 1992. The thing I think people should feel confident in is that I'm going to make these judgments not based on some fierce ideological pre-disposition but based on what makes sense. I'm a big believer in evidence. I'm a big believer in fact. You know, if somebody shows me we can do something better through a market mechanism, I'm happy to do it. I have no vested interest in expanding government or setting up a program just for the sake of setting one up. It's too much work.

On the health-care front, for example, if I actually believed that just providing a tax cut to everybody would solve the problem of lack of health insurance and cure health-care inflation, I'd say great, that's a nice way to do it. It prevents a lot of headaches. But I've seen no evidence that the kinds of policies John McCain puts forward would actually work.

If I saw strong evidence that an additional $300 billion in tax cuts that John has proposed -- without a clear way of paying for it -- would actually boost economic growth and productivity, I'd be happy to take a look at that evidence. But I haven't seen that. It's all conjecture.

Obama is telling the country that Colbert was right. Reality has a liberal bias. Not everywhere, not at every time. But here in the U.S., after eight years of Bush.

*In fairness, it should be noted that while Davis and Chozicki seem deeply skeptical about Obama's spending and tax plans, Davis at least is an equal-opportunity skeptic. Reporting the McCain interview, he pretty much let McCain hang himself - making it clear without editorializing that McCain's proposed tax cuts would cost about $400 billion per year, to be offset only by trivial savings gained by clamping down on earmarks. Davis also reported deadpan as McCain disowned, as it were in real time, the social security plan posted on his own website.

Related posts:
Obamanomics: rebalancing the national portfolio
Obama gets down to tax brass
Obama brings it back to earth in Virginia

58 minutes later: the good part of Hillary's SD interview

An irony of Hillary's assassination gaffe is that she was at her very best (notwithstanding that on the tape she looks ready to drop) throughout the rest of a substantive, wide-ranging discussion with the Argus Leader. From Native American policy to the varieties of potential ethanol sources to western water policy, she was Clintonian in her mastery of policy detail. You can understand why she thinks she's 'ready' to be President. If it weren't for her long sequence of duplicitous, predatory, Rovian tactics and comments, I would agree.

In fact the interview contained a Clintonian answer to Obama's metapolitics - his pitch that we've got to change the way our political system functions before we can enact good policy. Obama's argument is that the U.S. government can't put the common good first as long as lobbyists control legislation, and that we can't have serious policy debates until we break through the Rovian politics of personal destruction and distorting attacks. In this debate, Hillary said that we can't engage in serious long-range planning and policy-making until we change the mindset bequeathed us by Ronald Reagan -- that government can't solve anything, that the business of government is to shrink and undermine itself.

The two diagnoses are related. The anti-government stance goes with a messianic faith in the marketplace, a belief that business unleashed and unregulated will create the wealth that government only inhibits. Those holding that belief system naturally enough opened the lobbying floodgates. Not that there wasn't plenty of corruption and interest-driven legislation in the long era of Democratic control of Congress -- but it metastasized with the advent of the Gingrich-Delay crowd and their K Street Project, and it took over the executive branch in the Bush era. So Obama and Clinton are both right. The antigov mindset created a system in which legislation is for sale and political 'debate' becomes a cover for positions essentially dictated by lobbyists.

Robert Reich, in Supercapitalism, suggests that it's the hyper-competition of global capitalism that created the pressures that brought this system into being. Reaganite antigovernment ideology, from that point of view, is more result than cause. Reich has few answers as to how citizens and politicians can take the government back. Hillary's answer is reverse engineering: get a mandate for the right policies, and the attitude toward government will change. Obama's approach is a frontal assault: remain personally free from lobbyist money, get a mandate to write legislation to reign in lobbyist influence, change political discourse by personal example. Will either (or any of their successors) get anywhere? It may seem naive to say yes. But there have been periods, as both like to say, in which the U.S. government has risen to enormous challenges and successfully engaged in long-range planning. Democracy's saving grace, as long as there's a critical mass of power remaining with voters to throw one crowd out and bring new people in, is self-correction. We're in the midst of an attempted course correction. We'd better get there.

The Lipitor Election

For a moment this morning, I stepped back from thinking about the individual candidates and let a surge of hope for the country as a whole wash over me. Like most Americans, I've felt that the country has gone off the rails in recent years -- in preemptive aggression, massive tax cuts and deficits, a tenfold increase in lobbying, and, most importantly, in the Bush Administration's shredding of the Bill of Rights and assault on the separation of powers. I thought, 'the great virtue of a democracy is that it can self-correct -- as long as it's still a democracy. But are we?'

Doors were slamming on multiple avenues of choice and change. Start with the K Street Project, an enterprise corrupt to its core and breathtaking in its arrogance. Think about the premise - to coerce lobbying firms into hiring agents of one party only and to contribute to one party only. That's not only pay-to-play, pure and simple, but a move toward a one-party state. Couple that with ever more radical gerrymandering techniques, a national Rove-led attempt to disenfranchise as many poor voters as possible in the name of stopping imaginary 'election fraud', the selective prosecution of Democratic elected officials, the stacking of the judiciary with right wing ideologues who would support the power of the state at every turn. Then pile on the Bush Administration's assertions of unchecked executive power - in signing statements that negate key parts of laws passed by Congress, in twisted legal documents that assert the President's right to abrogate any law in the name of national security, and in the assumed power to deem anyone the executive branch chooses an "illegal combatant" who can be detained indefinitely and tortured at will.

You had to wonder: could restrictions on media freedom and assertions that Administration critics were security risks and ultimately "illegal combatants" be far behind? (Bill Kristol, who called for the NYT to be prosecuted for breaking the warrantless wiretapping story, was fired up, ready to go.) The path to step-by-step demolition of democracy was nicely marked out by Vladimir Putin, embraced as a soulmate by Bush.

Those dangers are still real. Elect a Giuliani or a Romney, and who knows what new executive powers they would seize in the wake of a major terrorist attack? But in the interim, democracy has struck back. A self-correction is in mid-course. Political choice remained real enough, and the media free and robust enough, to make it clear to two-thirds of the country that we were led to war on false premises; that the war was disastrous to our national interests; that the nation was being bankrupted to fund tax cuts for the wealthy; and that the environment was being terminally neglected. And so, in 2006, despite all the gerrymandering, the imbalance (over many years prior at least) in campaign funds, the 95% incumbency return rates, we had enough of a turnover to change the balance of power. On a state level, changeovers in legislatures and governorships reduced the overall power of Republican assaults on voter eligibility and equal access to polls.

Now, say what you like about this primary season, the choices are real and manifold; the debates have their moments of lucidity amid all the idiocy; money has been proved already not be decisive, and there is no way anyone claim that the results are not in the hands of voters. In the general election, there's still a danger that the electoral college or faulty voting equipment will skew the results. But those dangers (substituting old-style ballot box fraud for dicey electronic equipment) are as old as the Republic.

The electorate is smarter than all of us. That dawned on me about a dozen years ago, while I was reading a biography of Eisenhower; it occurred to me that I probably would have voted for Stevenson as my parents did, and I would have been wrong. Later I came to feel the same way about Reagan - who did not 'cause' the Soviet Union's breakup but certainly midwifed it, smoothed the glide path, gave Gorbachev the running room to do the job. So the electorate is at least smarter than I am, and I'm no dumber than the average voter.

That's not to say that the electorate doesn't make mistakes (sometimes pushed over the edge by our creaky Constitutional machinery) , just that it always eventually corrects them -- as long as the arteries of choice remain unclogged enough for information to flow.

Plaque builds slowly; our hearts can function with up to 95% blockage (as Bill Clinton's did just prior to his quintuple bypass). Democracy is resilient (if ultimately killable) like that. Sweeping statements that we're not a democracy because of lobbying, or incumbency, or widening income gaps are false as long as there's enough 'democratic function' to change course. I can see a descent past that line. But we're not there yet.

Short of a terror-induced executive power grab, the greatest threat to democratic functioning is the proliferation of lobbying. The most important chord in Obama's aria melody might be his promise to change the rules of the game so that lobbying is held in check. Edwards of course also promises to "take on" "lobbyists", but the weakness there is personalizing the battle, as if the problem will go away if an evil coterie of individuals is smitten. On this question Robert Reich's Supercapitalism is helpful. According to Reich, the escalation in lobbying is a function of supercapitalism, i.e. the hypercompetition in which each company and industry strives for competitive advantage on the legislative front (as in every other arena). Companies lobby not because they're conspiring to squeeze out the public interest, but to fend off rivals' attempts to gain advantageous legislation. The result is near-complete corruption of the legislative process as companies compete to buy legislation. The good news is that corporations are not reveling in this relentless arms race. Changing the rules of the game may be in everyone's interest.

Obama and McCain may both have the will and the skills to do this. Both have had more than one success on this front. Another day, another post for that one.