Barack Obama – Page 30

I’ve heard from a few people that there is a growing concern that Obama is anti-free-trade.

This concern has a basis in Obama’s record – mainly from his rhetoric in Ohio during the primary fight with Hillary Clinton and to some extent the fact that he is a Democrat and needed the support of the labor unions. But to a large degree the exaggerated fears of many businessmen comes from comments made by the Republicans during the campaign – as John McCain’s campaign was first (ridiculously) calling Obama “the most protectionist candidate that the Democratic Party has ever fielded” before his campaign went on to call Obama a supporter of comprehensive sex education for kindergartner, a Marxist, a socialist, and a friend to terrorists.

This has led to a series of conflicting impressions of Obama and his position on trade – from statements during the Ohio campaign that “we can’t keep passing unfair trade deals like NAFTA that put special interests over workers’ interests” to his later point – when asked about his rhetoric about NAFTA during the Ohio campaign that, “Sometimes during campaigns the rhetoric gets overheated and amplified.” Indeed – despite the appeal of populist protectionist rhetoric (some 60% of Americans think free trade and NAFTA have been bad for people like them), Obama chose to attack protectionism in the general campaign: “[n]ot only is it impossible to turn back the tide of globalization, but efforts to do so can make us worse off.” At least in part, Obama’s friendlier stance towards free trade has to be understood as a tactical move on his part as he was certain to be to the left of McCain on this issue. McCain has never even made an issue out of any labor or environmental protections relating to the issue and would have had serious problems with economic conservatives if he moved to the left on this issue as they never trusted him to begin with.

Even aside from the change in rhetoric, there is considerable evidence that has led numerous reasonable observers to believe Obama is, in fact, in favor of trade even as he is concerned with some of free trade’s side effects on American workers and the economy. Obama, for one, described himself as a “pro-growth, free-market guy.” Even the arch-conservative Weekly Standard was forced to concede in the midst of the general election campaign that Obama’s two main economic advisors Jason Furman and Austan Goolsbee, while liberals, were “centrist, pro-free traders.” George F. Will, my favorite columnist and a paleo-conservative – described Goolsbee as the best sort of liberal economist his conservative leanings could imagine:

Goolsbee no doubt has lots of dubious ideas – he is, after all, a Democrat – about how government can creatively fiddle with the market’s allocation of wealth and opportunity. But he seems to be the sort of person – amiable, empirical and reasonable – you would want at the elbow of a Democratic president, if such there must be.

Naomi Klein attacked these two herself as ideologically impure in a piece in The Nation magazine – and while I find Klein to be provactive, I think a pro-free trader could hardly have a better endorsement than an attack by Klein.

Obama’s official position on trade has remained consistent – even as his focus has changed over the course of the campaign. What has struck me about all of Obama’s positions is the extent to which they begin with an appreciation of conservative ideas – as his health care plan works within the market rather than by goverment fiat; as his stance on affirmative action reflects traditional concerns about whether we are trying to ensure the equality of oppurtunity or equality of the ends. His views on trade seem similar – as he embraces free markets and free trade – but wants to mitigate the negative side effects.

The Council on Foreign Relations, a group with a considerable interest in free trade, vouched for Obama’s support:

Sen. Obama (D-IL) generally supports free trade policies, though he has expressed concern about free trade agreements that do not include labor and environmental protections.

Tim Hanson and Nate Weisshaar of the Motley Fool probably best described the most reasonable concerns about Obama’s record on trade in their piece asking “Will Obama End Global Trade?” (the answer was, “Nope.”):

While Obama’s campaign literature will tell you that his goals are fairer trade, more assistance for displaced American workers, and greater global environmental protections, there is some global worry that an Obama administration might impose and sustain protectionist policies in order to reward labor union support for his campaign and get our economy back on its feet.

As private sector labor unions have been decimated in the global economy, and as Obama and the liberal consensus views them as part of the solution rather than a major problem, it’s hard to see exactly what steps Obama can take to rejuvenate unions.

In the end, the best way to understand and predict Obama’s trade policies is as part of his view of economics in general. Obama’s economic positions are consistent with a broad Democratic consensus that has emerged in the past decade – bringing together the two warring sides of the Clintonian era, short-handed as Robert Rubin versus Robert Reich for Clinton’s Labor and Treasury Secretaries. The Rubin school believed in expanding free trade, reducing deficits, encouraging overall growth without regard to it’s distribution, and deregulation. The Reich school believed in protecting labor unions, mitigating the effects of globalization through an expanded safety net and job-retraining programs, environmentalism, and was concerned with inequality. Over the past decade, many figures on both sides of this ideological divide have found worth in the ideas of their one-time competitors – as David Leonhardt’s New York Times Magazine piece called “Obamanomics” explained.

This Democratic consensus views free trade as a positive force in the world – but one that has numerous side effects that are negative. The role of government in this picture is to try to mitigate the negative effects of free trade – especially those temporary effects of the transition to a more globalized economy. Most of Obama’s domestic agenda is designed to accomplish these purposes – from the investment in a green energy industry to investment in infrastructure to health care reform to financial reforms. His nuanced position on trade reflects this same desire – to mitigate the destabilizing effects of globalization while acknowledging it’s benefits.

Not being an economist, I find it a lot harder to argue with Paul Krugman now that he has been awarded the Nobel Prize for Economics. That makes him a certified top expect – and I am a mere amateur. And while the other Nobel prizes have made some real boners (Yassir Arafat and the Nobel Peace Prize?), the economics prize doesn’t have the same reputation. (Although the award given to Myron Scholes and Robert Merton, the inventors of the “financial weapons of mass destruction” – derivatives – in 1997, the same year the hedge fund they had helped create went spectacularly bankrupt – seems quite the bad decision today.)

Regardless of prizes though, Krugman’s piece today makes some important counter-points I had not heard regarding the lack of efficacy of FDR’s New Deal. Certainly, my reading of history made it clear that the New Deal had not lifted America out of the Great Depression – but I had never found convincing the traditional conservative explanation that the problem was FDR’s expansion of government. After all, Hoover’s refusal to expand the government had not reigned in the Depression – and it was the massive government expansion called World War II that finally broke America out of the Depression. I’m willing to concede the conservative point that some of FDR’s government interventions may have backfired – such as interference in wages and prices – but as Krugman points out in his column, many of FDR’s reforms have lasted to this day and helped mitigate the effects of the current financial crisis – from Social Security to federal deposit insurance.

Krugman posits that FDR failed to get us out of the Depression because he did too little rather than too much. He points out that overall government spending did not increase as much as is commonly understood:

The effects of federal public works spending were largely offset by other factors, notably a large tax increase, enacted by Herbert Hoover, whose full effects weren’t felt until his successor took office. Also, expansionary policy at the federal level was undercut by spending cuts and tax increases at the state and local level.

Which leads Krugman to the conclusion that:

The economic lesson is the importance of doing enough. F.D.R. thought he was being prudent by reining in his spending plans; in reality, he was taking big risks with the economy and with his legacy. My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent. It’s much better, in a depressed economy, to err on the side of too much stimulus than on the side of too little.

Krugman has me convinced of his thesis for now. It certainly makes more sense than the alternative explanations I have heard about the New Deal and the Great Depression. But the last word – and the final prescription – should come from Franklin Delano Roosevelt himself:

It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something.

This is my hope for an Obama presidency – one that I saw as far back as December when I posted this quote – and one that his campaign has born out.