It’s Your Moment, Obama. Don’t Blow It.
My favorite presidential sentence in quite some time was uttered over the weekend by Barack Obama, or whenever exactly he sat down and told The New York Times what it quoted him as saying Sunday: “I want to make sure that all of us in Washington are investing as much time, as much energy, as much debate on how we grow the economy and grow the middle class as we’ve spent over the last two to three years arguing about how we reduce the deficits.”
Now of course that’s not going to happen, not with this Congress. But if Obama keeps up with the aggressive progressive posture on the economy that he debuted last week, he can start to reframe the way we’ve talked about economic issues, like austerity and inequality, for the past 30 years.
For a long time, President Obama was throwing plenty of his own chips into the austerity pot. Liberal economists (Paul Krugman, James Galbraith, Dean Baker) and liberal economics writers (Bob Kuttner, notably) were irate. I was a little more sympathetic to the political realities—contra my friend Kuttner, I never thought, for example, that there was a “Rooseveltian moment” in the wake of the 2008 crash. Indeed the vicious irony of the crash, and the resultant havoc, was that it was exactly large enough to piss off the top 5 percent (who lost large amounts of wealth) but not large enough to piss off the top 40 percent (most of whom, even with the high jobless rates of 2010, did keep their jobs and held on through the storm). Structurally speaking, this is why we got the revolution—the counter-revolution—we got, in the form of the Tea Party. If we’d had 24 percent unemployment in 2009, as FDR did in 1933, Obama would have had a much freer hand to attempt more radical experimentation.
So I think his options on the left were limited. However, no one forced him to embrace deficit reduction as a priority or pay lip service to striking a “grand bargain” with a bunch of hostage-takers. And certainly no one made him give voice to absurd and counter-productive sloganeering about how governments were like families and had to tighten their belts during tough times. He should have been gutsy enough to have been out there in the teeth of this crisis, in 2009 and 2010, saying to the American people that in fact, no, the government is not like a family, and it is precisely when the private sector has no money to pump into the economy that the public sector should step in and play that role. I suppose he and Axelrod had polling showing that this was risky. But it was also true. Taking risks to tell the truth is what we theoretically pay these people to do.
Anyway, events have made saying it less risky, because now we are in the age of sequestration and severe cuts, and there is broad recognition that austerity has hurt the economy. Don’t take it from me. Take it from Ben Bernanke, who keeps begging Congress (in that euphemistic Fed-speak way) to do something to help the economy. “Fiscal policy,” said a recent Fed press release, “is restraining government growth.” “Fiscal policy” is the other side of “monetary policy,” and it means government spending, passing bills, all those sorts of thing that we’re not doing.
So now, in this new context, Obama has finally decided to start saying some things he should have been saying all along. Grand-bargain talk is dead, and he’s pushing not only an agenda, but an alternate theory of economic growth. Obama may not get any bills passed, but he can at least spend the next three years hammering home two key points that will help him in the legacy department, help shift the debate in ways that will be beneficial to President Hillary Clinton, should that come to pass, and, who knows, with any luck, maybe win one or two of these upcoming fights with the House Republicans.
The first point, he is making: you grow an economy not by investing in the top 1 percent, but by creating as large a goods-consuming middle-class as you can possibly build. This is the “middle-out” idea, with which the journal I edit (Democracy) is closely identified. The White House should not drop this idea. “Supply-side” didn’t catch on overnight. It had to be explained. It took a long time.
Second: Obama also spoke in the Times interview about inequality. Now, when you hear a liberal columnist praise a liberal president for talking about inequality, I know that you figure you are about to get a sermon on compassion. But this is where I throw you a curve ball.
Liberals should stop talking about compassion. Oh, maybe not entirely. Some of the things Republicans are doing are just Dickensian mean, like cutting food stamps out of the farm bill, and Democrats should say that. But they should banish the word “compassion” from the broad, meta-economic dialogue.
What should they do instead? They should talk about how inequality is bad for the economy, bad for growth…Bad. For. Capitalism. Again, don’t take it from me. Take it from Bloomberg Business Week, among about a kajillion other sources I could link to. With wages in the middle basically flat (adjusted for inflation), as they have been since the late 1970s, while wealth accumulated by not even the top 1 percent, but the top .1 percent has skyrocketed, you have an economy rife with inefficiencies.
Obama more or less said this in the Times interview: “If we don’t do anything, then growth will be slower than it should be. Unemployment will not go down as fast as it should. Income inequality will continue to rise.” Those sentences at least link inequality to growth, but I hope he is far more explicit about this in the coming speeches, starting tomorrow in Chattanooga.
Here’s the main thing. Despite the failures of trickle-down in practice, our economic conversations in Washington still proceed from a set of assumptions that favor conservatives, because they were assumptions that conservatives ingrained in the public starting back in the 1980s: that spending less is by definition the responsible course, and that inequality isn’t an issue that serious empiricists need to care about. These two assumptions, or versions of them, have governed policymaking for ages. If Obama can get Americans—and official Washington, a group that takes a long, long time to change its mind—to rethink those assumptions, he’ll have done plenty of economic good.