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Sunday, February 17, 2008

Obamanomics

Clive Crook on Barack Obama's economics:

Fine words and the economic reality, by Clive Crook, Commenary, Financial Times: ...Barack Obama is for the first time the clear favourite to win the Democratic nomination. ... It is too soon to count Mrs Clinton out. She is nothing if not tenacious. But for the moment, she and her team are scrambling.

As I argued last week, this is good news for the Democrats. Mr Obama is so much the better candidate... But I made the case for Mr Obama in terms of vision, temperament and appeal to uncommitted voters, not policy – where his differences from Mrs Clinton are slight. A fair comment, lodged by many readers, is that, as president, he would be judged by results, not speeches. The greater his appeal at the start, the bigger the disillusionment to come. ...

My perspective as a pro-market egalitarian condemns me to be perpetually disappointed by politicians. Mr Obama may prove no exception. Last week, in a speech at a General Motors plant in Wisconsin, he unveiled an economic plan. It mainly gathered previously announced ideas, spun to appeal to the “working Americans” in Mrs Clinton’s base. Indeed, the Clinton campaign accused him of plagiarism. Costed (conservatively) at more than $140bn a year, it includes comprehensive reform of healthcare, subsidies for alternative energy, investment in infrastructure and tax cuts aimed at the low paid. Unwinding some of the Bush tax cuts, together with unspecified increases in other taxes on companies and the higher-paid, would pay for it all, he said.

The goals are worthy. The US healthcare system is long overdue for reform. The country’s infrastructure has suffered years of increasingly apparent neglect. The Bush administration’s tax cuts worsened inequality at a time when economic forces were already pushing strongly in that direction.

But..., Mr Obama’s proposal to restore top rates to the levels of the 1990s, and then lift the cap on social security taxes as well, constitutes a swingeing rise in the highest rates. Very high rates applied to a narrow base is bad tax policy. A more broadly based and (above all) far simpler tax system with a moderately progressive structure of rates is the way to combine increased revenues, a more equal distribution of post-tax incomes, and tolerably efficient incentives. No sign of this in Mr Obama’s proposals. It is also a great shame that Mr Obama, like Mrs Clinton, has adopted a populist stance on trade. He attacks her for having once supported the North American Free Trade Agreement, which he blames for “exporting jobs”.

Perhaps, for a Democrat, this position is a political necessity. It is a badge of economic ignorance, nonetheless.

Elsewhere, though, one sees flashes of an independent intelligence in Mr Obama’s economic pronouncements. He is no knee-jerk anti-capitalist: he lauds the “free market that has been the engine of America’s great progress”. He is cautious about mandates and other forms of dirigisme – which is why some party liberals still view him with suspicion.

Mr Obama is a paradox, as yet unresolved. His plan and his votes in the Senate show that he is a liberal, not a centrist. And he is no wavering or accidental liberal. His ideas are of a piece. He sees – or convinces people that he sees – a bigger picture. And yet this leftist visionary is pragmatic, non-ideological and accommodating of dissent. More than that, in fact, he seems keen to listen to and learn from those who disagree with him. What a strange and beguiling combination this is.

It makes him an electrifying candidate ... but also, to be sure, a gamble. If Mr Obama is elected, it might turn out that there is no “there” there. Indecision, drift and effete triangulation are one possibility. Equally disappointing would be if the office wore away the pragmatism and open-mindedness, to reveal an inner dogmatist. Perhaps, though, Mr Obama really can transcend Washington’s partisan paralysis and build support for one or two big important reforms – starting with healthcare. Voters (and commentators) have the better part of a year to decide whether this pushes the audacity of hope too far.

Yes, that is the question. There's a lot of focus on minor policy differences among the Democratic candidates, but for the most part the candidates ought to agree if they are representing the Party's interests on major issues (unless, of course, there is a big split in the Party on an issue). Sometimes those differences are important, but for me the main question in this election is which candidate will be most effective at getting policies in place should they be elected, and the degree of dedication they exhibit to the issues I care the most about.

    Posted by on Sunday, February 17, 2008 at 12:56 PM in Economics, Politics | Permalink  TrackBack (0)  Comments (56)

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