Thursday, October 09, 2008

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.

1 comment:

  1. That's great. Reich is my favorite economist by far. Actually, he's the only one I've found myself agreeing with fully and without fail. Others seem to politicize things as well as make assertions that they just assume rather than prove. Or I just flat out think they are wrong.

    And Reich is right again, in my opinion. Debt as a percentage of GDP is what matters. Look at public debt as a percentage of GDP over time:,+figure+1,+debt+as+a+percentage+of+GDP,+line+graph.jpg

    It has only recently grown under Reagan and both Bushes (and a bit under Ford):,+figure+3,+annualized+change+in+debt+as+a+percentage+of+GDP,+bar+graph.jpg

    The view people have about the budget is that it will continue to explode into further debt, that we are in an unsustainable position where we can't afford to pay for spending, and that the only solution is massive cuts in spending (which many just assume is largely made up of obscenely inappropriate and wasteful items). But this is exaggerations of cynics and the disillusioned. The sky isn't falling.

    Deficit spending needs to be looked at as an investment. The gains of spending now need to be compared to the cost of the debt and alternatives.

    First of all, with unemployment going through the roof and consumers with little buying power, creating jobs in the areas where we need investment is a win-win-win. We make the valuable investment for the future that we need, people get the income and jobs they need to survive without assistance, and private business sees more consumers with income to support them and help them grow. Letting the unemployed stay unemployed is just lost potential labor output and additional suffering.

    Anyway, as the spending provides real, effective stimulus to the economy, both short term and long term, businesses grow and opportunities for new business and private investment also grow. Spending on temporary investments like infrastructure can be cut back as the labor supply begins to tighten. As the economy heats up, interest rates can be raised to keep inflation in check. And if the economy even still continues to risk overheating or starts creating bubbles, we can start paying down the debt.

    At least this is what I believe is the right economy policy.

    BTW, you've got some really insightful posts around here.