In his new op-ed for The Economist, Barack Obama finds some space for patting his own back. The president spends a few paragraphs reminding readers of how he averted a “second Great Depression,” expanded health-insurance access, and presided over the largest single-year income gains America had seen since the 1960s.
But Obama devotes the bulk of his column to defining — and defending — the center left’s vision for what is (still) to be done. He opens by taking stock of this year’s populist challenges to liberal technocracy.
“Why have some on the far left and even more on the far right embraced a crude populism that promises a return to a past that is not possible to restore — and that, for most Americans, never existed at all?” Obama asks, rhetorically.
On first glance, this question seems to posit a rather bizarre equivalence between the campaigns of Bernie Sanders and Donald Trump. In the American context, there is no other far-left populist whom Obama could be referencing. And yet, while Trump’s pitch was quite clearly an appeal to nostalgia (Make America Great Again), Sanders’s was just as explicitly an appeal to unrealized progress (A Future to Believe In).
There is a past in which America was whiter, our military avoided foreign entanglements, and the coal industry was thriving. And Trump has, implicitly, promised to take us there. But there is no past in which America was a social democracy that provided its citizens with single-payer health care, a $15 minimum wage, universal early-childhood education, and paid family leave. To say that Sanders promised to return America to an unrestorable past is a rather grandiose way of characterizing opposition to the Trans-Pacific Partnership, the repeal of Glass-Steagall, and Ronald Reagan’s revisions to top-marginal tax rates.
But Obama draws this false equivalence between a backward left and right to give his own brand of moderate progressivism a claim to the center.
While arguing that much of Trump’s appeal derives from the same xenophobic instincts that propelled various “nativist lurches” in our nation’s past, the president acknowledges that some “discontent is rooted in legitimate concerns about long-term economic forces.”
Decades of declining productivity growth and rising inequality have resulted in slower income growth for low- and middle-income families. Globalization and automation have weakened the position of workers and their ability to secure a decent wage. Too many potential physicists and engineers spend their careers shifting money around in the financial sector, instead of applying their talents to innovating in the real economy. And the financial crisis of 2008 only seemed to increase the isolation of corporations and elites, who often seem to live by a different set of rules to ordinary citizens.
The president’s proposals for overcoming these forces reflect both a leftward turn in his own economic thinking and an apparent desire to police the far-left boundary of his party’s economic debate.
Obama attributes the slowdown in productivity to shortfalls in both public and private investment. In arguing for an increase to the former, the president decries Washington’s “fixation on deficits at the expense of the deferred maintenance bills we are passing to our children.” Later, he lambasts Congress for forcing “austerity on the economy prematurely by threatening a historic debt default.” This is a far more dovish view of fiscal deficits than that which the president used to espouse. His evolution is both the product of obvious political forces — his concern for the deficit reached its apex after Republicans reclaimed Congress on an anti-debt message — and the fact that low interest rates and falling deficits have eroded the debt hawks’ (already weak) intellectual case.
Obama goes on to call for expansionary fiscal policy, even when the nation is not in recession, emphasizing the need to invest more in infrastructure and basic research.
While Obama notes that “the tendency towards monopoly and rent-seeking” is a major obstacle to productive private investment and economic growth, aggressive antitrust action is not among his prescriptions for increasing productivity. Instead, he calls for lowering corporate tax rates and closing loopholes. And, when it comes to the financial sector’s largest monopolies, the president implies that calls to break them up are based in ideology and ignorance:
As appealing as some more radical reforms can sound in the abstract—breaking up all the biggest banks or erecting prohibitively steep tariffs on imports—the economy is not an abstraction. It cannot simply be redesigned wholesale and put back together again without real consequences for real people.
Similarly, Obama suggests that the myriad critiques of the Trans-Pacific Partnership all derive from an irrational “anti-innovation protectionism.”
In assessing the impact of growing inequality, the president pivots left, decrying the one percent’s outsize share of income as a challenge to “the very essence of who Americans are as a people.” He describes vast inequality as not merely a moral problem, but an economic one.
Once even Democratic economists accepted the supply-side premise that policymakers could either prioritize inequality reduction or economic growth — but not both. But since the financial crisis, that view has lost purchase outside of the right. Now center-left economists broadly agree that inequality stymies growth by sapping demand: Billionaires stash away their wage gains in the Cayman Islands, or else use them to bid up the prices of high-end real estate; middle-class families spend wage gains on new products and services.
“Research shows that growth is more fragile and recessions more frequent in countries with greater inequality,” Obama writes. “Concentrated wealth at the top means less of the broad-based consumer spending that drives market economies.”
The combination of this left turn among the liberal intellectual class and Sanders’s insurgent candidacy has allowed this year’s Democratic nominee to campaign on a platform far more progressive than Obama ever championed.
And yet, even as the president argues that inequality is eroding our nation’s democratic character and prosperity, the solutions he proposes are conspicuously small-bore:
Unions should play a critical role. They help workers get a bigger slice of the pie but they need to be flexible enough to adapt to global competition. Raising the Federal minimum wage, expanding the Earned Income Tax Credit for workers without dependent children, limiting tax breaks for high-income households, preventing colleges from pricing out hardworking students, and ensuring men and women get equal pay for equal work would help to move us in the right direction too.
We need unions — but ones that don’t ask for too much. We should limit tax breaks for the wealthy — but not, necessarily, impose very large tax increases on them. And we need affordable higher education, but not free public college.
Obama goes on to say that policymakers must ensure “that everyone who wants a job can get one,” and eloquently summarizes the human costs of involuntary unemployment:
Involuntary joblessness takes a toll on life satisfaction, self-esteem, physical health and mortality. It is related to a devastating rise of opioid abuse and an associated increase in overdose deaths and suicides among non-college-educated Americans—the group where labour-force participation has fallen most precipitously.
But whereas liberal Democrats of the late 1970s called for fighting involuntary joblessness through a public job guarantee, Obama suggests that providing “wage insurance for workers who cannot get a new job that pays as much as their old one” and “increasing access to high-quality community colleges, proven job-training models and help finding new jobs” can reverse decades of declining workforce participation among prime-age men.
All of this is not to assert that the president’s prescriptions are not, necessarily, the best medicine for what ails the American economy. Incremental reforms can produce significant changes, particularly when stacked on top of each other. And while radical reforms may appear more commensurate with the problems they seek to solve, they carry a greater risk of generating unintended economic consequences and/or political backlash.
But there is a tension between Obama’s analysis of the challenges facing the American economy and his proposals for meeting them. The president has integrated populist critiques into his description of the status quo’s shortcomings. In his column, inequality looms as a radical, almost existential threat — but not one that requires any major change in the structure of the economy or ideology of the Democratic Party.
Obamaism works. There may be an alternative, but not a better one. We need hope and change. Just not too much.
