fiat luxemburg

It’s something I’ve been fond of saying for a while, but now there’s a collected body of evidence regarding Obama’s pretty much correct perspective on the economy. The Times magazine has a big piece on his economic position, focused largely on the fact that it’s difficult to place on the established ideological spectrum. The author approves “‘University of Chicago’ Democrat” as a term that captures his (sadly, apparently unique) enthusiasm for markets and concern about wealth distribution. I think there’s a better word. Note these small excerpts:

• “The market is the best mechanism ever invented for efficiently allocating resources to maximize production,” Obama told me. “And I also think that there is a connection between the freedom of the marketplace and freedom more generally.” But, he continued, “there are certain things the market doesn’t automatically do.”
  
• 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.”) […] 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.
  
• But in Obama’s view, the risks to market-based capitalism now have more to do with too little regulation than too much. He can sound almost righteous on this point. He talked to me about the need for a moral element to capitalism and said that the crony capitalism of recent years should be the nightmare of any market-loving economist. At times, this part of his message can seem to overwhelm his respect for the market.
  
• Dating back to Reagan, Republicans have packaged tax cuts on high earners with more modest middle-class tax cuts and then maneuvered the Democrats into an unwinnable choice: are you for tax cuts or against them? Obama, however, argues that this is the moment when the politics of taxes can be changed. To do this, he is proposing tax cuts for most families that are significantly larger than those McCain is offering, along with major tax increases for families making more than $250,000 a year. “That’s essentially a major part of our economic plan,” Obama said. “But it’s also a political message.” Economically, he is trying to use the tax code to spread the bounty from the market-based American economy to a far wider group of families. Politically, he is trying to drive a wedge through the great Reagan tax gambit.

So, he understands that “markets” are “good.” The language he uses is vaguely world-historical, even if the caveat is in the typical language of intervention. He also really likes…um, facts. In particular he’s concerned about the propensity market actors have to do dumb things (especially individual worker/consumers forced to navigate financial planning complexities, though of course there’s the trade off of the time and energy they’d need to get it “right”…). To the extent that he’s worried about those people, or people in general, it’s not in simply populist terms. It’s probably not a matter of a failure to keep “respecting the market”—he’s explicit on the point that current economic arrangements should repulse anyone with more than an ideological commitment to capitalism.

But where it gets interesting is the bit about the political realignment implied by his position on taxes—the driving of the wedge. It would be a breathlessly unnuanced exaggeration to characterize this as an effort to promote class consciousness. That said, it’s clearly an effort to promote class consciousness. At least, it is to the same extent to which What’s the Matter with Kansas? Is about ideology. Frank argued (among other things) that the GOP used social issues to “trick” folks into voting against their economic interest. Especially because the consensus on a lot of those issues has shifted in the past quarter century, Obama wants to undo that arrangement.

What’s most interesting though isn’t the social issues vs. economic interests version of this story. The low taxes, less government ethos that the republicans rely on draws a lot of its appeal from non-economic value judgements: “People should have to work, not get free handouts. What is this communism? They’ll just spend those taxes on silly government programs. Free enterprise is what makes this country great!” etc.

Obama isn’t directly refuting this. He’s all for markets. After all, it’s private sector growth that ultimately finances government. State spending should be about making the economy work better. If that means some bureaucracy because people are too stupid to handle their own affairs, so be it. If there needs to be redistribution for everyone to be productive, that’s just how it is.

When asked for an economic ideology, he apparently just calls himself a pragmatist. But he’s an economic pragmatist with a special attention towards epirical observation and historical lessons. In other words, a Marxist.