(Photo: Obama speaking in Europe, where his views are well received and highly regarded)
Contrary to all the talk of disenchantment with the state of the nation, there is reason to be optimistic that President Obama is leading the government in exactly the right direction. While his critics voice disappointment and outrage, calling on Mr. Obama to govern to the left and to the right, President Obama governs by judgment, not ideology. This will always disappoint ideologues who see the world through conservative or liberal glasses, but do critics have credible political ideas behind them?
At the outset, a few things need to be set straight. First, the biggest thing President Obama has done since taking office is not health care reform. Big as that is, as much as it begins to solve our long-term fiscal problems with excessive public and private spending on health care, it does not compare with the importance of the 2009 stimulus legislation and bailouts that staved off a depression. We have come to take saving the economy for granted. But it only came about through sound economic analysis and courageous leadership. Marshaling a trillion dollars to fix an urgent international crisis was not inevitable — or for that matter, without a price.
Many who understand the depth of the financial crisis we faced — whether longtime philosophical conservatives, such as Washington Times columnist Tony Blankley, or liberal economists, such as Nobel Laureate New York Times Columnist Paul Krugman — do not hesitate to say that they thought such public spending was necessary at that crucial moment in history.
Not so the public. On the left, the argument goes that the fat cats were bailed out at the expense of Main Street. Progressives want to see more aggressive anti-capitalist legislation — hence calls to remove the profit motive from medicine and strictly regulate the banks. The conservative side of the body politic fears their money has been wasted by government. Their solution: stop the spigot of public spending — stop the government.
To the Right of Obama, A False Choice
While it is only natural that economic decline and follow-on government spending aroused concern, the Republicans have fanned the fears in an attempt to ride anti-government feelings to victory in the next congressional elections. Good politicking maybe, but this is where the substantive logic breaks down.
When Conservatives clamor for smaller government, less taxes and less spending, who among them is openly calling for an end of Social Security and Medicare? That position would at least have integrity, as these popular programs are a substantial part of where our taxes go.
President Bush proposed privatizing Social Security but failed to get public support. The recent dramatic drop in stock market values put the nail in the coffin on privatization, but Republicans still call for cutting taxes. In fact, Republicans have cut taxes or blocked raising taxes in states across the nation without cutting spending. Many states are in dire fiscal trouble as a result. How do Republican efforts at fiscal starvation and anti-tax politics help balance the budget or control spending?
President Bush also lowered taxes on the wealthy and raised the deficit. Now, it is only politically possible to raise these income taxes again because the original tax-cutting legislation had a sunset clause, ending the tax cut this year. This type of tax is pure political pandering. It is easy and irresponsible to lower taxes, but far more difficult to campaign for cutting entitlement benefits.
It is also a political slight-of-hand to say that President Obama wants to tax and spend without acknowledging that his actions have to balance a strong economic plan with adequate funding for social programs, such as Medicare and Social Security, that are valued by most Americans. The President wont play the “cut-taxes, increase spending” game. Nor should anyone else.
If Republicans are going to criticize tax and spend, let them own up to de-funding Social Security and Medicare and make this an overt part of their 2010 congressional campaign. Some Americans will support this authentic small-government position, but most will not.
To the Left of Obama, a Fantasy
While many Conservatives say that the President’s economic plans go too far, Progressives say that the President does not go far enough. Arianna Huffington and many on the left are calling for protections against the ravages of unrestrained free-market capitalism. They criticize the President’s efforts to raise taxes on wealth, provide subsidies for health care and reform financial regulations to control irresponsible greed, as not enough. However, if the President were more against the financial industry and capitalist excess, he would be for nationalization, or severe restriction of the financial industry. This would mean heavy regulation aimed to control profits, operations and the negative effects of private industry. This is what Socialists do when they take over. They take industries that seemed too profitable and corrupt, and they nationalize them, taking the profit for the public and regulating every aspect of the business so that it serves public, rather than private purposes.
Similarly, facing the foreclosure crisis, many on the left have called for more dramatic action to help underwater and delinquent mortgage homeowners avoid their dire situations. A Socialist maneuver here might be a moratorium on all foreclosures or making government loans available to all desperate homeowners.
President Obama has not gone in this direction because the philosophical battle between Socialism and capitalism was won, or should I say lost (depending on the reader), the generation before President Obama started his political career. The Soviet Union collapsed, Communist China quickly became State-Capitalist China (literally capitalism under heavy, but gradually reforming, regulation of the state), and more moderate experiments with Socialism in France and Venezuela demonstrated that utopian predictions give way to quite substantial economic costs that must be balanced against the socio-economic-justice benefits gained.
So what is a 21st century reformer to do?
This does not mean that government intervention has been discredited. Recently, experts at the International Monetary Fund noted that nations that restricted capital flows into their economy fared better in this financial crisis than those that did not. But intervention has its price and must be used sparingly. Targeted interventions can be good policy, but ideological, across-the-board interventions don’t have a good track record.
Successful interventions show a public-private partnership. Germany has kept its unemployment rate relatively low through the current downturn by subsidizing retention of workers by private companies. Canada and European nations offer health care to all their citizens, paid for largely by higher tax rates. Also significant is that Canadian banks suffered no collapse in the recent crisis, owing at least in part to more comprehensive regulatory authority, as is now proposed by the Obama administration. These nations believe in strong regulation and the use of tax dollars to provide a social safety net, but they also promote and rely on private industry for economic backbone and prosperity. We may call European nations social democracies, but they have chosen to avoid Socialist state takeover of business in all but rare instances. It’s worth noting that they have significantly stronger environmental protections, but they have used Cap and Trade as well.
Following the latest in economic thinking — that is post-Socialist — President Obama is looking for solutions that respect market forces. Do not expect an FDR-style nationwide jobs program or nationalization of the banks. Rather than bypass the private economy, the President is supporting the private economy through better regulation of the financial system, incentives for businesses that hire laid-off workers, and small business subsidies for providing health care coverage. Mr. Obama aims to spur a more economical health care system, a better-educated work force, and an internationally competitive export businesses.
But make no mistake, the President is willing to raise taxes on wealthy Americans to support social programs because he recognizes that you cannot have these programs unless you pay for them. He has already increased the social safety net in the area of health care, but he promotes free markets and private enterprise at the same time. Beyond the political conversation between the Right and the Left, this is where the real action is, and this is the President’s focus.
Hear Care2 bloggers Marc Seltzer and Jessica Pieklo discuss the political outlook for the November congressional elections: Redefining America: Constitution and Leadership 2010, Podcast April 12, 2010