Barack Obama's economic philosophy has been a mystery to me for most of this campaign. Most people on the liberal blogs assume he is anti-DLC because he is running against Hillary Clinton. But any serious look at his policy prescriptions show them to be similar to DLC proposals and to the right of John Edwards's and Hillary Clinton's progressive populism, as documented in numerous Paul Krugman columns. Obama himself has been pretty cagey and non-committal about his views on economics, sticking to Democratic boilerplate. An article published next month in the New York Review of Books, Economics: Which Way for Obama?, sheds some light on the intellectual underpinnings of an Obama economics.
The article describes Obama's advisers (such as Austan Goolsbee and Cass Sunstein) and plans as out of the University of Chicago, but not of Milton Friedman's "Chicago School". Sunstein describes their approach, in the book reviewed, as a Third Way libertarian paternalism:
Libertarian paternalism is a relatively weak, soft, and nonintrusive type of paternalism because choices are not blocked, fenced off, or significantly burdened. If people want to smoke cigarettes, to eat a lot of candy, to choose an unsuitable health care plan, or to fail to save for retirement, libertarian paternalists will not force them to do otherwise--or even make things hard for them. Still, the approach we recommend does count as paternalistic, because private and public choice architects are not merely trying to track or to implement people's anticipated choices. Rather, they are self-consciously attempting to move people in directions that will make their lives better. They nudge.
But to the degree that their approach is "libertarian", it is not progressive:
Once you concentrate on the reality that people often make poor choices, and that their actions can harm others as well as themselves, the obvious thing to do is restrict their set of choices and prohibit destructive behavior. Thaler and Sunstein, showing off their roots in the Chicago School, rule out this option a priori: "We libertarian paternalists do not favor bans," they state blankly. During a discussion of environmental regulations, they criticize the Clean Air Acts that banned some sources of air pollution and helped to make the air more breathable in many cities. "The air is much cleaner than it was in 1970," they concede, "Philosophically, however, such limitations look uncomfortably similar to Soviet-style five-year plans, in which bureaucrats in Washington announce that millions of people have to change their conduct in the next five years."
Their theory justifies many of Obama's economic ideas that have been controversial to progressives. Such as not mandating health care coverage, restricting his public insurance plan from competing in the most profitable insurance markets, avoiding direct government intervention into the mortgage crisis, describing Social Security as "in crisis", and Obama's recent attacks, in an appearance on Fox News, on the Clean Air Acts:
OBAMA: Well, I think there are a whole host of areas where Republicans in some cases may have a better idea.WALLACE: Such as.
OBAMA: Well, on issues of regulation, I think that back in the `60s and `70s, a lot of the way we regulated industry was top down command and control. We're going to tell businesses exactly how to do things.
And I think that the Republican party and people who thought about the margins came with the notion that you know what, if you simply set some guidelines, some rules and incentives for businesses, let them figure out how they're going to for example reduce pollution. And a cap and trade system, for example, is a smarter way of doing it, controlling pollution, than dictating every single rule that a company has to abide by, which creates a lot of bureaucracy and red tape and oftentimes is less efficient.
This background helps me understand where Obama is coming from when he says these things, and to have a better grasp of how he is likely to govern. It helps me put some of his off key (for a progressive) statements in his Cooper Union economic speech into context. He is a moderate, small government believer in market based solutions, not an economic progressive. The approach may also explain Obama's appeal to "Libertarian Democrats" like Markos Moulitsas Zúniga of DailyKos, and Obama's problems appealing to working class voters.
For comparison, I wrote a diary back in January describing Hillary Clinton's economic philosophy. She has moved on from her husband's centrist policies and embraced Keynesian government intervention to solve the health care crisis and widening income inequality:
Senator Hillary Rodham Clinton said that if she became president, the federal government would take a more active role in the economy to address what she called the excesses of the market and of the Bush administration.
Thanks to Anglachel for drawing my attention to the NYRBooks article.
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