Barack Obama Criticism Economics Health care The Opinionsphere

Defending Obama’s First Year in Office

[digg-reddit-me]When the press mentions the online hordes who gathered on the tubes of the internets to push Obama to victory, they are talking about people like me. I started a blog because (along with my unhealthy compulsion to write) I decided to support Obama in 2007; I raised several thousand dollars from dozens of my friends and online contacts; I sent out emails making the case for Obama to my family; I bought a sign to place in my front yard and attended rallies in Brooklyn and Manhattan; I fought against smears in emails and in the social media (on reddit, on digg, on Stumbleupon, on Facebook, and on discussion boards); and on November 4, 2008, for the first time in my life, I walked out of the polling center proud of who I had cast my vote for.

A year on, there has been much commentary about what people like me think now – the young, the wired, the inspired. Were we were just naive and now feel fooled by Obama’s promise of “Hope, change, blah, blah, blah,” as speechwriter Jon Favreau referred to the Obama’s magic formula? Do we think that Obama sold-out to the banks and health insurance industry? Has he disappointed us with his escalation in Afghanistan? Certainly, a good portion of the left has turned against Obama with the passion of scorned lovers – as demonstrated by the histrionic pronouncements of Howard Dean (who denounced the health care bill as a “bigger bailout for the insurance industry than AIG“) and the Village Voice (which labeled the president, “George W. Obama.”)

I cannot speak for all of my fellow liberal bloggers, my fellow redditors, my fellow Obama supporters – but I, for one, am not disappointed. During the campaign, I saw Obama as – and exhorted others to support him because – he was an idealistic tinkerer. He inspired with his grand rhetoric but his policy proposals and instincts were epistemologically modest. He understood that the status quo was difficult to change, and that change brought with it its own perils. His proposals sought to pragmatically improve our society a bit at a time – creating processes that would allow for organic change rather than imposing radical top-down measures. For anyone who took the time to investigate his policy proposals, this was clear – that Obama had learned deeply the lessons of Ronald Reagan and the conservative movement – that centralized government action always had unanticipated consequences; yet at the same time, Obama had not rejected the lessons of Franklin Roosevelt and Bill Clinton – that government could also do much good, that collective action was needed to shape our society, and that times of crisis called for, “bold, persistent experimentation.”

Obama has met my high expectations; he has governed seriously and with bipartisan substance. His Congressionalist approach has led to a string of legislative accomplishments rarely seen in Washington and a stronger record of spending cuts than George W. Bush. (Though his predecessor admittedly did not set the highest standard.) He passed a massive stimulus bill supported by policy wonks on the left and right, composed of more than a third tax cuts, but including much needed funding for education, infrastructure, and technological innovation. He pulled the nation back from the brink of a financial crisis and recession without nationalizing the banks or bailing them out yet again. He moved America back from the panicked emergency measures adopted by George W. Bush in the aftermath of September 11. He salvaged some deal from Copenhagen despite the Chinese attempts to undercut America’s position. He appointed a moderate, liberal pragmatist to the Supreme Court. He has made many long-term bets in domestic and foreign policy which we have yet to see play out. And of course, there is his attempt at health care reform – combining the most significant attempt at cost control in a generation with the most significant expansion of access to medical insurance. (The two goals being surprisingly compatible as Milton Friedman acknowledged.) Though this last bill still has not had its fate decided, these are serious and substantial accomplishments that form the basis of a solid legacy. Yet Obama hasn’t been able to achieve his core promise: to overcome the Freak Show that has dominated our political discourse for a generation.

This is the one profound disappointment I have with Obama’s presidency to date. His core promise (which helped him defeat Senator Clinton) was that he would be better able to move past the rabid partisanship and petty squabbles of the Baby Boomers – that he could surmount the influence of the “idiocrats” on our political conversations, as they jumped from petty scandal to scandal, from one moment of faux outrage to another. This Freak Show that dominated our political conversation forced politicians to treat their constituents as children incapable of understanding either why their leaders might be less than perfect or that they could not both lower taxes and increase spending forever. As Obama addressed the issue of Reverend Wright in his campaign, he proved he was capable – at least for a moment – of surmounting this Freak Show mentality, treating the American people as if they were adults capable to wrestling with the difficult issues of race and religion. But since this moment, Obama has seemed unable to fully rise above this Freak Show. With the Tea Party demonstrations in August 2009 rallying against “death panels,” handouts to illegal immigrants, “government mandated abortion” and other myths that were useful in rallying the Republican base (if not in describing the bill), he seemed finally to have lost the conversation. Those with legitimate and conservative concerns, as well as those with progressive ones, were overshadowed by the inchoate anger of the hysterical.

Now that Scott Brown has replaced Ted Kennedy – and with the pundits and media figures and Republicans circling – the Freak Show has declared health care reform dead. Again. For Obama to resurrect this bill, to restore the momentum in his presidency, and prove he is capable of governing and dealing with long-term issues (rather than the political posturing which have marked the past 15 years), he will need to break the hold that the idiocrats have over our political discourse and reconnect with his grassroots supporters instead of playing the inside Washington game. While Obama spent his first year focused on governing and policy, with his State of the Union last night, Obama began to focus on the political task of getting the American people behind him as he attempts to tackle the difficult, long-term issues that have been festering for so long unaddressed by our dysfunctional politics.

We should remember one thing as Tea Party supporters jubilantly support their momentum and energy with Scott Brown’s election: 14 months is a very long time in this political age. Interpreting political movements in light of the Feiler Faster thesis, it’s not surprising that it was just 14 months ago that the Obama grass roots which seemed ascendant now seem dormant; and 14 months from the August birth of the Tea Party movement happens to be November 2010.

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Are We Entering Another Great Depression?

[digg-reddit-me]Question: Are we entering another Great Depression?

Answer: I don’t think so, but I’m not an economist. (Though I did write a very popular piece on 11 Things I Learned While Trying to Figure Out the Financial Crisis a few weeks ago – which makes me a certified internet expert.)

Here’s why I don’t think we’re entering another Great Depression.

First, my understanding of the Great Depression is that it was – in essence – a crisis in the financial markets caused widespread fear and panic unchecked by the government. And as people lost faith in the financial system, it led to a paralysis of the entire economic system. The problem was not as much in the “real economy” – the economy whose primary purpose is to create products and services for uses other than creating profit – but in the financial economy – the part of the economy whose primary purpose is to redistribute excess wealth to create profits. The Great Depression was also worsed by the physical calamaties that hit America at the same time – most especially the Dust Bowl which devestated America’s farming belt – but at it’s core, the Great Depression was a matter of a broken financial system.

Since that time, a few factors have changed financial markets:

  • there has been a dramatic increase in liquidity, as money is able to be transferred almost instantaneously anywhere in the world;
  • the entire financial system has become remarkably interdependent and interconnected – so much so that the failure of one relatively small company directly effects most of the world’s financial institutions;
  • enormous amounts of data are collected and analyzed about the economies of the world and each particular company – including often by the companies themselves;
  • an implicit government guarantee backs large portions of the financial system.

The first three items on that list seem to demand a corollary to the Feiler Faster Thesis – promoted by Mickey Kaus – which explained how “political trends that used to last for weeks now last for hours.” This thesis was used recently to explain in part why Barack Obama’s and Hillary Clinton’s big moments in the campaign never seemed to give them any momentum – or more precisely why their momentum in the press and in public polls lasted for days rather than weeks as political reporters had come to expect. The corollary related to the current financial situation would be that as players in financial markets are bombarded with increasing amounts of data and are able to make trades and move money faster, the markets themselves speed up. This helps explain the dramatic ups and downs of Wall Street in the past few months – as the indices swung from positive to negative and back to positive in an unprecedented manner. The Feiler Faster thesis also could be said to have speeded up the real economy – as computerized inventory, logistical innovations, and more precise estimates of needed supplies have made many retailers and suppliers more responsive to economic conditions. But it seems clear that though these effects have speeded up the real economy at the margins, the financial markets have begun to move exponentially faster. The Great Depression – which lasted for over a decade – could be considerably shortened by this speeding up of the financial markets relative to the real economy – and to the extent that the effect of this volatility in the financial markets on the real economy could be mitigated, the results of this crisis would be minimized. The crisis will and already has effected the real economy – but so far, while the financial markets have fallen almost 30% from their relatively stable position in August, the real economy has only marginally slowed down.

The final item on the list should also give hope to those who fear we are entering another Great Depression. Unlike in 1929, we have a government willing to act and experiment in order to jumpstart the economy. And we will soon have a government led by Barack Obama that is more pragmatic and less ideological in proposing solutions. At the same time, various national and internationals reforms instituted by governments to protect against the kind of instability that caused the Great Depression have proved their worth in the past few months – as deposit insurance, regulation, coordination between central banks, a social safety net, and prompt government action have all contributed to mitigate the crisis.

Right now, the various governments’ decisions to act as a backstop against financial instability have helped begin to rationalize the markets – and prevented fear from entirely dominating. It has been argued that if Lehman Brothers had not been allowed to fail, this fear and sense of distrust pervading the financial markets could have been contained. Of course, few would have predicted the collapse of Lehman Brothers would have such a cascading effect – except now, after the fact, as it seems obvious.

It seems likely to me that the next Great Depression will likely be catalyzed not by a market collapse – but by the collapse of a nation, especially America. As long as governments are willing to place themselves as backstops against financial instability, the markets will go up and down – but the system will hold. It may be reformed. It may evolve. But the key characteristic of the Great Depression was the hoarding of financial resources caused by a lack of trust in the market. As long as the market is able to be backed by the government, it cannot truly fail – unless the government goes first. The paradox is that a government is only as strong as it’s economy is – which brings us back to trust.

Which is why – as Paul Krugman argues – Obama must act dramatically and quickly, while he still can.

Of course, as an alternative to all this – one might propose an effective tax on hoarding, inspired by the Austrian town of Worgl’s actions during the Great Depression – perhaps with exemptions for the first $100,000 of savings per person so as not to discourage saving.