The economics of Barack Obama

Left-libertarian? Republican-lite? And what does his choice of economic advisors tell us?

Topics: 2008 Elections, U.S. Economy, Globalization, Barack Obama, How the World Works, Economics,

Writing in the Guardian, Daniel Koffler offers a provocative analysis of the economics of Barack Obama, arguing that the senator and his chief economic advisor, Austan Goolsbee, have put together a platform that is “orthogonal to the traditional liberal-conservative axis.” (Thanks to Trade Diversion for the link.)

If this approach needs a name, call it left-libertarianism. Advancements in behavioral economics, public and rational choice theory, and game theory provide us with an opportunity to attend to inequality without crippling the economy, enhancing the coercive power of the state, or infringing on personal liberty (at least not to any extent greater than the welfare state already does; and as much as my libertarian friends might wish otherwise, the welfare state isn’t going anywhere). The cost — higher marginal tax rates — is real, but eminently justified by the benefits.

On healthcare and on trade, argues Koffler, Obama is “moving more and more in the direction of economic freedom, competition and individual choice.” This reflects the influence of Goolsbee, “who agrees with the liberal consensus on the need to address concerns such as income inequality, disparate educational opportunities and, of course, disparate access to healthcare, but breaks sharply from liberal orthodoxy on both the causes of these social ills and the optimal strategy for ameliorating them.”

Instead of recommending traditional welfare-state liberalism as a solvent for socioeconomic inequalities and dislocations, Goolsbee promotes programs to essentially democratize the market, protecting and where possible expanding freedom of choice, while simultaneously creating rational, self-interested incentives for individuals to participate in solving collective problems.

In a recent forum for candidate economic advisors sponsored by the New American Foundation, Goolsbee offered an example of what he called Obama’s “sleek and easy to use iPod version of government.” Suppose the goal is to get Americans to save more by diverting some portion of their income into investment accounts. “The research is very clear,” said Goolsbee. The way to get people to start doing that is to “default them into automatic enrollment.” So, a worker starts a new job, and 3 percent of his or her paycheck is automatically deposited into an investment account. But if the workers wanted to opt out of such a program, said Goolsbee, they could easily do so.

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The proposal manages to include elements of the “nanny-state” approach (we’ll pass a law that automatically forces citizens to save more) and yet at the same time tells people that they don’t have to participate if they don’t want to. Technocratic: yes. Inspiring: maybe not.

Buzzwords like “economic freedom” and “individual choice” make it easy for strategists for other campaigns to attempt to portray Obama as Republican-lite, not to mention open up room for attacks from the left such as those relentlessly delivered by Paul Krugman. But when Goolsbee spoke at the NAF forum, he noted that the critical problem at the heart of the American economy is the growing disparity in income distribution between the richest Americans and the poor and middle class. Over the last six years, said Goolsbee, “the typical worker had not seen income grow hardly at all, while the cost of education, health care and energy have all gone up.”

It hardly needs stressing that concerns about income inequality do not generally fall into the category “Republican-lite.” But it is also true that Obama appears to be pushing a relatively market-friendly agenda that does not map neatly onto liberal Democratic traditions.

Of course, no one on the left ever accused Bill or Hillary Clinton of being raving liberals. It is one of the many peculiarities of this campaign season that Hillary Clinton’s campaign strategists have decided that there is an advantage to be gained in attempting to position her as the progressive candidate, in comparison to Obama. Both candidates are much closer to the center than they are to, say, Ralph Nader. So as California and 20-odd other states get ready for, as Keith Olbermann likes to say, the biggest day of primaries in the history of the universe, should the decisive factor in choosing one or the other be the differences in the tactics they espouse, or how one estimates their chances of winning a general election, and getting the opportunity to execute their plans.

Andrew Leonard
Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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