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It's a long article so I'm only going to post bits and pieces of interest to me.
Spoiler:
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As Barack Obama prepares to accept the Democratic nomination this week, it is clear that the economic policies of the next president are going to be hugely important. Ever since Wall Street bankers were called back from their vacations last summer to deal with the convulsions in the mortgage market, the economy has been lurching from one crisis to the next. The International Monetary Fund has described the situation as “the largest financial shock since the Great Depression.” The details are too technical for most of us to understand.
(They’re too technical for many bankers to understand, which is part of the problem.) But the root cause is simple enough. In some fundamental ways, the American economy has stopped working.
The fact that the economy grows — that it produces more goods and services one year than it did in the previous one — no longer ensures that most families will benefit from its growth. For the first time on record, an economic expansion seems to have ended without family income having risen substantially. Most families are still making less, after accounting for inflation, than they were in 2000. For these workers, roughly the bottom 60 percent of the income ladder, economic growth has become a theoretical concept rather than the wellspring of better medical care, a new car, a nicer house — a better life than their parents had. ...
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...Some of the confusion stems from Obama’s own strategy of presenting himself as a postpartisan figure. A few weeks ago, I joined him on a flight from Orlando to Chicago and began our conversation by asking about his economic approach. He started to answer, but then interrupted himself. “My core economic theory is pragmatism,” he said, “figuring out what works.”
This, of course, is not the whole story. Invoking pragmatism doesn’t help the average voter much; ideology, though it often gets a bad name, matters, because it offers insight into how a candidate might actually behave as president. I have spent much of this year trying to get a handle on what is sometimes called Obamanomics and have come away thinking that Obama does have an economic ideology. It’s just not a completely familiar one. Depending on how you look at it, he is both more left-wing and more right-wing than many people realize...
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In practical terms, the new consensus means that the policies of an Obama administration would differ from those of the Clinton administration, but not primarily because of differences between the two men. “The economy has changed in the last 15 years, and our understanding of economic policy has changed as well,” Furman says. “And that means that what was appropriate in 1993 is no longer appropriate.” Obama’s agenda starts not with raising taxes to reduce the deficit, as Clinton’s ended up doing, but with changing the tax code so that families making more than $250,000 a year pay more taxes and nearly everyone else pays less. That would begin to address inequality. Then there would be Reich-like investments in alternative energy, physical infrastructure and such, meant both to create middle-class jobs and to address long-term problems like global warming.
All of this raises the question of what will happen to the deficit.
Obama’s aides optimistically insist he will reduce it, thanks to his tax increases on the affluent and his plan to wind down the Iraq war. Relative to McCain, whose promised spending cuts are extremely vague, Obama does indeed look like a fiscal conservative. But the larger point is that the immediate deficit isn’t as big as it was in 1992. Then, it was equal to 4.7 percent of gross domestic product. Right now it’s about 2.5 percent.
During our conversation, Obama made it clear that he considered the deficit to be only one of the long-term problems requiring immediate attention, and he sounded more worried about the others, like global warming, health care and the economic hangover that could follow the housing bust. Tellingly, he said that while he admired what Clinton did, he might have been more open to Reich’s argument — even in 1993. “I still would have probably made a slightly different choice than Clinton did,” Obama said. “I probably wouldn’t have been as obsessed with deficit reduction.”
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Obama, when I asked him, agreed that his years surrounded by Chicago School thinking affected him. He tends to assign his motives to more intimate narratives, though, and he said that his grandmother, a high-school graduate who rose to become the vice president of a bank and was the family’s main breadwinner, had the biggest impact. “She had to think very practically about, How do you make money?” he told me. “How does the system work? That led me to have an orientation to ask hardheaded questions. During my formative years, there was still ideological competition between a social-democratic or even socialist agenda and a free-market, Milton Friedman agenda. I think it was natural for me to ask questions of both sides and maybe try to synthesize approaches.”
There is plenty of evidence that this synthesis isn’t merely a part of a candidate’s inevitable tack to the center for a general election. In Obama’s memoir, “Dreams From My Father,” he sympathetically recounts a conversation he had with a Kenyan farmer, in which the man complains both about rich people who won’t pay their fair share of taxes and about burdensome government regulations on coffee growing. In Obama’s second book, “The Audacity of Hope,” he goes further: “Reagan’s central insight — that the liberal welfare state had grown complacent and overly bureaucratic, with Democratic policy makers more obsessed with slicing the economic pie than with growing that pie — contained a good deal of truth.”
The partial embrace of Reaganomics is a typical bit of Obama’s postpartisan veneer. In a single artful sentence, he dismissed the old liberals, aligned himself with the Bill Clinton centrists and did so by reaching back to a conservative icon who remains widely popular. But the words have significance at face value too. Compared with many other Democrats, Obama simply is more comfortable with the apparent successes of laissez-faire economics...
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From the beginning, Obama has sought out academic economists, rather than lawyers or former White House aides. His first economic adviser, Austan Goolsbee, is a young University of Chicago professor who shares Obama’s market-oriented Democratic views. This summer, Obama added Furman, who has a more traditional background, having worked for both the Clinton administration and the Kerry campaign. But he, too, has a Ph.D. in economics, from Harvard.
As anyone who has spent time with Obama knows, he likes experts, and his choice of advisers stems in part from his interest in empirical research. (James Heckman, a Nobel laureate who critiqued the campaign’s education plan at Goolsbee’s request, said, “I’ve never worked with a campaign that was more interested in what the research shows.”) By surrounding himself with economists, however, Obama was also making a decision with ideological consequences. Far more than many other policy advisers, economists believe in the power of markets. What tends to distinguish Democratic economists is that they set out to uncover imperfections of the market and then come up with incremental, market-based solutions to these imperfections. This helps explain the Obama campaign’s interest in behavioral economics, a relatively new field that has pointed out many ways in which people make irrational, short-term decisions. To deal with one example of such myopia, Obama would require companies to automatically set aside a portion of their workers’ salary in a 401(k) plan. Any worker could override the decision — and save nothing at all or save even more — but the default would be to save...
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The closest thing to an Obama doctrine on market regulation was a speech he gave in March at Cooper Union in New York, called “Renewing the American Economy.” It included his usual praise of market forces, and his prescriptions for regulating the financial system were mostly mainstream Democratic fare, like tougher penalties for loan fraud, tighter rules and closer oversight for Wall Street. These steps might or might not prevent the next crisis, but they would certainly place a bigger emphasis on trying to do so. And the speech, if anything, probably placed Obama on the more aggressively liberal side of the Democratic platform. Afterward, Robert Kuttner, an unabashedly left-leaning Democrat, praised Obama for going “well beyond the current Democratic Party consensus.”
Shortly before Obama’s speech, the Federal Reserve made emergency loans to investment banks that hadn’t officially been under its supervision. Obama argued that, going forward, the Fed had to be given permanent oversight of any such institutions, because their executives would henceforth assume that the government would come to their rescue. If taxpayers were going to be on the hook for those banks when they failed, he suggested, the government should have the chance to minimize the risk of failure. (Since March, Fed officials themselves have inched toward a similar position.)..
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The Tax Policy Center, a research group run by the Brookings Institution and the Urban Institute, has done the most detailed analysis of the Obama and McCain tax plans, and it has published a series of fascinating tables. For the bottom 80 percent of the population — those households making $118,000 or less — McCain’s various tax cuts would mean a net savings of about $200 a year on average. Obama’s proposals would bring $900 a year in savings. So for most people, Obama is the tax cutter in this campaign.
If there is a theme to the Obama tax philosophy, it’s that the tax code is not quite as progressive as you think it is. Most of the public discussion about taxes tends to focus on the income tax, which taxes the affluent at a considerably higher rate than anyone else. But the income tax doesn’t take the biggest bite out of most families’ annual tax bill. The payroll tax does. And even as the federal government has been reducing income taxes over the last few decades, it has allowed the payroll tax, which finances Social Security and Medicare, to creep up. That’s a big reason that overall tax rates for the bottom 80 percent of earners have not fallen as much as rates for the affluent.
Obama’s second-most-expensive proposal, after his health-care plan, is the equivalent of a $500 cut in the payroll tax for most workers. (It is actually a credit that is applied toward income taxes based on payroll taxes paid.) In a speech this month in Florida, he proposed that the cut take effect immediately, in the form of a rebate, to stimulate the economy. For most workers, it would be the first significant cut in the payroll tax in decades, if not ever.
The other way that he would cut taxes involves a series of technicalities. But since the campaign began, Goolsbee has been arguing that those technicalities offer one of the best glimpses of how Obama thinks about the tax code. Right now, several big tax breaks that sound broad-based — like those for child care and mortgage interest — don’t always benefit middle-income and lower-income families. Another example is the Hope Credit for college tuition, a creation of the Clinton administration. Obama wants to more than double the credit, to $4,000. More to the point, he would make it “fully refundable.” As a result, a family with an income-tax bill of $3,000 wouldn’t merely have that bill eliminated; it would also receive a $1,000 check. Increasingly, the income-tax system becomes a way to transfer money to poor families.
All told, Obama would not only cut taxes for most people more than McCain would. He would cut them more than Bill Clinton did and more than Hillary Clinton proposed doing. These tax cuts are really the essence of his market-oriented redistributionist philosophy (though he made it clear that he doesn’t like the word “redistributionist”). They are an attempt to address the middle-class squeeze by giving people a chunk of money to spend as they see fit.
He would then pay for the cuts, at least in part, by raising taxes on the affluent to a point where they would eventually be slightly higher than they were under Clinton. For these upper-income families, the Tax Policy Center’s comparisons with McCain are even starker. McCain, by continuing the basic thrust of Bush’s tax policies and adding a few new wrinkles, would cut taxes for the top 0.1 percent of earners — those making an average of $9.1 million — by another $190,000 a year, on top of the Bush reductions. Obama would raise taxes on this top 0.1 percent by an average of $800,000 a year.
It’s hard not to look at that figure and be a little stunned. It would represent a huge tax increase on the wealthy families. But it’s also worth putting the number in some context. The bulk of Obama’s tax increases on the wealthy — about $500,000 of that $800,000 — would simply take away Bush’s tax cuts. The remaining $300,000 wouldn’t nearly reverse their pretax income gains in recent years. Since the mid-1990s, their inflation-adjusted pretax income has roughly doubled.
To put it another way, the wealthy have done so well over the past few decades, with their incomes soaring and tax rates plummeting, that Obama’s plan would not come close to erasing their gains. The same would be true of households making a few hundred thousand dollars a year (who have gotten smaller raises than the very rich but would also face smaller tax increases). As ambitious as Obama’s proposals might be, they would still leave the gap between the rich and everyone else far wider than it was 15 or 30 years ago. It just wouldn’t be quite as wide as it is now...
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“I think I can tell a pretty simple story. Ronald Reagan ushered in an era that reasserted the marketplace and freedom. He made people aware of the cost involved of government regulation or at least a command-and-control-style regulation regime. Bill Clinton to some extent continued that pattern, although he may have smoothed out the edges of it. And George Bush took Ronald Reagan’s insight and ran it over a cliff. And so I think the simple way of telling the story is that when Bill Clinton said the era of big government is over, he wasn’t arguing for an era of no government. So what we need to bring about is the end of the era of unresponsive and inefficient government and short-term thinking in government, so that the government is laying the groundwork, the framework, the foundation for the market to operate effectively and for every single individual to be able to be connected with that market and to succeed in that market. And it’s now a global marketplace.
“Now, that’s the story. Now, telling it elegantly — ‘low taxes, smaller government’ — the way the Republicans have, I think is more of a challenge.”
Even if Obama does figure out how to meet the challenge well enough to get elected, there are any number of ways in which his plans could fail. He has never run any government entity — no state, no city, not even a municipal agency — and he may not prove to be good at doing so. The economy could deteriorate further, leaving him with a Clinton-like choice between manageable deficits and direct help for the middle class. Or maybe the many economists who like his agenda are simply wrong. Maybe his health-care program won’t bring down costs. Maybe the Virginia model won’t work for the rest of the country.
But it’s not entirely clear what the alternative is, at least in the broad sense and at least for the time being. A much more left-wing agenda than Obama’s would consist of erecting new trade barriers, reregulating various industries and otherwise getting the government even more involved in the economy than Obama would. This program has the dubious distinction of being disliked by both voters and experts alike. Populism hasn’t won a national election, or even the Democratic nomination, in decades, and economists can point to any number of ways why it wouldn’t work anyway.
Republicans, on the other hand, have an economic strategy that may still sell politically. But is there much reason to think that it would lead to a very different result from Bush’s? There have now been two presidents in the last 30 years — Bush and Reagan — who cut taxes and promised that deficits would not follow. But the deficits did come, and they went away only after two other presidents — George H. W. Bush and Bill Clinton — raised taxes. It also seems fairly clear by now that tax cuts for the affluent do not necessarily trickle down to everyone else...
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Stupid people will never read it nor understand it. You'll never hear McCain go into any detail about his economic ideas or plans, yet somehow that recent poll indicated that McCain was better on the economic front.
This goes back to the idea that people really are stupid. McCain's chant that Obama is an elitist speaks to stupid people, because they'd rather have a candidate that is just like them - someone they can identify with. Clinton came off as the life of the party and Bush was like your down home drinking buddy. Personality matters more.
Obama is simply too smart for the average person to identify with. And that's sad that the average American doesn't want someone running the country who is smarter than they are.
One more thought: I'm tired of people saying that we don't know who Obama is. The information on Obama is actually more detailed than McCain's. But stupid people won't read it or research it. They'll just continue to buy into whatever the pundits or McCain's 30 second sounds bytes blurt out.
Stupid people will never read it nor understand it. You'll never hear McCain go into any detail about his economic ideas or plans, yet somehow that recent poll indicated that McCain was better on the economic front.
This goes back to the idea that people really are stupid. McCain's chant that Obama is an elitist speaks to stupid people, because they'd rather have a candidate that is just like them - someone they can identify with. Clinton came off as the life of the party and Bush was like your down home drinking buddy. Personality matters more.
Obama is simply too smart for the average person to identify with. And that's sad that the average American doesn't want someone running the country who is smarter than they are.
One more thought: I'm tired of people saying that we don't know who Obama is. The information on Obama is actually more detailed than McCain's. But stupid people won't read it or research it. They'll just continue to buy into whatever the pundits or McCain's 30 second sounds bytes blurt out.
Okay now the calling people who disagree with you stupid is getting out of hand.
Okay now the calling people who disagree with you stupid is getting out of hand.
Your misquote and incorrect assumption is out of hand... Seriously, do you really think the average American today on either side of the aisle would ever take the time to read and understand an in-depth article such as this?
Stop being offended and start admitting that the average American is too stupid to not only do their research but even comprehend the issues or policies intelligent candidates take the time to present. Honestly, McCain would never provide details like this on any issue because he knows it would fall on deaf ears (and he doesn’t have a real plan or policy on economics)
Last edited by se7en; August 22nd, 2008 at 01:02 PM.
Your misquote and incorrect assumption is out of hand... Seriously, do you really think the average American today on either side of the aisle would ever take the time to read and understand an in-depth article such as this?
Stop being offended and start admitting that the average American is too stupid to not only do their research but even comprehend the issues or policies intelligent candidate take the time to present. Honestly, McCain would never provide details like this on any issue because he knows it would fall on deaf ears (and he doesn’t have a real plan or policy on economics)
I am not offended, and I don't see how it is a misquote or an incorrent assumption.
I am not offended, and I don't see how it is a misquote or an incorrent assumption.
You should be.
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Originally Posted by se7en
Stupid people will never read it nor understand it. You'll never hear McCain go into any detail about his economic ideas or plans, yet somehow that recent poll indicated that McCain was better on the economic front.
This goes back to the idea that people really are stupid. McCain's chant that Obama is an elitist speaks to stupid people, because they'd rather have a candidate that is just like them - someone they can identify with. Clinton came off as the life of the party and Bush was like your down home drinking buddy. Personality matters more.
Obama is simply too smart for the average person to identify with. And that's sad that the average American doesn't want someone running the country who is smarter than they are.
One more thought: I'm tired of people saying that we don't know who Obama is. The information on Obama is actually more detailed than McCain's. But stupid people won't read it or research it. They'll just continue to buy into whatever the pundits or McCain's 30 second sounds bytes blurt out.
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Originally Posted by Mulli
I was feeling bad about being to lazy to read it. Now I don't have to. thanks.
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