Thursday, April 25, 2013

A Non-Progressive Budget from the President, and the Answer to the Chicken-Egg Question

-- Posted by Neil H. Buchanan

In my new Verdict column today, I discuss the budget proposal that President Obama announced two weeks ago.  Regular readers of Dorf on Law know that I have long since given up on the idea that the President is progressive economically, and this budget offers strong evidence to reinforce that conclusion.

Readers who think that I have been unfair to Obama-the-liberal for lo these many years will be pleased to see that I explicitly distinguish Obama's economic views from his other policy views.  I begin the column with a comment about his views on gun control, which have moved from standard-for-Obama cautious noncommitment (parroting right-wing talking points regarding the Second Amendment, but passively favoring some controls) to full-throated support for as much regulation as could be hoped for.  (If anything, he surprised me by being willing to support liberal outcomes that were politically difficult.)  Sandy Hook obviously changed him.

I did not mention other domestic non-economic issues, but one can see similar patterns across the board: Obama appears to believe in liberal goals (or, at least, is openly skeptical of conservative dogma), but his degree of commitment to any particular issue is limited by his extremely cautious brand of politics.  He was supportive, but passive, about gay rights during his first term, putting very little effort into major issues until the late push to eliminate don't-ask-don't-tell; but then he evolved quickly (although clearly as a follower, not a leader) on gay marriage.  On the environment, his mixed record is reasonably progressive.  He is probably the worst on labor issues, putting virtually no emphasis on organized labor's most important priorities (card check), although he did propose an increase in the minimum wage (with no follow-up thus far).

So, on noneconomic domestic issues, Obama has to be viewed as a B or B+ student, often falling short, but trying in varying degrees to follow paths that his supporters would have expected.  On foreign policy, of course, it is an entirely different story.  That, however, is too far afield for this post.

It is on domestic economic issues that I have been most critical of the President, and the budget proposal really does validate that criticism.  Naturally, however, the President has backers among the supposedly-liberal commentariat.  Those pundits' reaction to the budget proposal was rather striking, in two ways.

The first reaction goes like this: "This is not a serious budget proposal, because everyone knows the Republicans will never agree to anything.  So, Obama did himself a world of good by showing that he is willing to withstand the anger of his liberal base, by proposing an austerity budget that takes a big hack at Social Security.  Everyone will now understand that Obama is seriously interested in governing, and Republicans aren't."  What this really boils down to is captured best by a turn of phrase coined several years ago by Rachel Maddow: Obama is adopting "the kick-a-hippie strategy."  To look good in the eyes of self-styled centrist pundits, Obama deliberately goes after those out-of-touch lefties who can't be trusted, anyway.  Who cares that they elected him (twice)?  What matters now is showing that he is serious!

Paul Krugman probably puts it best when he asks what, exactly, is the point of appealing to those tut-tutting centrists.  There is nothing ultimately to be gained for Obama, because the self-styled reasonable pundits will always figure out a way to blame Obama in equal measure, no matter what his opponents do.  (And the pundits will add insult to injury, by saying that Obama bears extra blame for failing to be "a leader."  Whatever that means.)

As I suggest in my column, the most frustrating aspect of this is that Obama -- if he actually were a liberal -- could have used the budget proposal to lay out exactly what a progressive government would look like.  Republicans, year after year, have gladly signed onto the dystopian nightmare budgets that come out of Paul Ryan's overrated brain.  We have a very good idea what they want -- and they enthusiastically tell us, even though they know they are voting for "unrealistic" budgets -- but we have very little idea what Obama-the-supposed-liberal really wants.

And that leads us to the second reaction from the liberal-ish pundits.  Rather than concluding, as I have, that Obama fails to propose progressive economic policies because he is really not a progressive, some liberal pundits have decided to define liberalism down to whatever Obama proposes.  That is, they reject the premise that he is failing to propose liberal policies in the first place.

As I point out in the latter part of today's Verdict column, this is just an old trick that could make almost any politician look progressive.  For example, the very conservative politicians who have been proposing flat taxes almost always include in their proposals a large exemption, whereby a family can exclude the first $X of wage income from tax.  (All investment income would, of course, be exempt from tax.  That is one of the most important conservative goals!)  These politicians then tell us that the system is progressive, because the poorest people would pay no taxes, and average tax rates would rise as wage income rises (even though the marginal tax rate is flat).

It is a neat rhetorical trick, but it only works if one uses an absolute definition of "progressive," rather than a relative one.  Compared to the current tax system, every flat tax system proposal that I have seen would be a profoundly regressive move.  Similarly, even though there are items in Obama's budget that can be called progressive -- and even setting aside just how hard he would fight for those items, when push comes to shove -- that does not make the budget progressive in a meaningful sense.  (And he also makes gratuitiously regressive proposals as well.  Several years ago, he proposed -- not just agreed to under duress, but proposed -- the elimination of low-income heating assistance, to show that he is willing to make "tough choices.")  This year, his overall proposal amounts to an austerity budget.  It is better than they are doing in the U.K. and most of Europe, but that is hardly a defense.

But, one may argue, what choice does Obama have?  His economists have been telling him that there is no alternative to austerity.  Obama could not have known that the Reinhart-Rogoff paper, for example, was flawed (although, as I pointed out last week, it was obvious long before the coding errors were discovered in that paper that its methodology was deeply problematic).  He might not be proposing the budget that LBJ -- or even Richard Nixon -- would have proposed, but times have changed, and economists really do not support a progressive economic policy.

Support for that argument was apparent in a column in yesterday's New York Times, in which economic columnist Eduardo Porter reported on a recent conference of big-name economists, who all seemed to be saying that the profession has no clue what to do now.  And he certainly has some quotes to that effect from highly respected economists.  As the column proceeded, however, it became almost poignant to notice how hard Porter and his interviewees were trying to avoid mentioning the elephant in the room -- simple, short-term Keynesian economics.  It was as if everyone was saying, "We don't have any policies to propose.  Well, except for the policies that everyone knows about, but we have all decided not to talk about them.  Because, you know, we have all decided not to talk about them."

Why would everyone agree not to talk about a policy agenda that they all know is out there, and that has been overwhelmingly validated by events of the past few years?  Because they know that politicians do not want to hear about that.  As much as we think that politicians listen to economists, the fact is that economists trim their sails and change their emphases in anticipation of the perceived desires of their political patrons.

I recall having a conversation in 1993 with a prominent economist whose closest colleagues regularly passed through the revolving door to Democratic policy circles in D.C.  At the time, the big stupid policy obsession was a proposed balanced budget amendment.  (Nothing ever changes.)  I said to this economist, "That is a terrible idea, and everyone knows it.  Why don't your colleagues say so?"  His reply: "Well, Democrats need a response to the Ross Perot phenomenon.  Left-leaning economists don't want to say things that make life politically difficult for Democrats."  (Note for younger readers: Perot's 1992 independent presidential candidacy was a proto-Tea Party uprising that scared the political establishment to its core.)

I guarantee you that, if President Obama wanted to take a different tack on economic policy -- an actually progressive tack -- he would have prominent economists lined up behind him.  I am not just talking about the few true lefties who have not been driven out of economics departments.  The same economists who are now hedging and saying that Obama is wise to be cautious could -- and would -- easily adjust their message, not just lauding him for being willing to propose a real alternative to austerity, but pointing out that the extant economic research overwhelmingly supports that alternative.

Therefore, even though Obama's defenders would have us believe that the problem is that economists are not willing to back expansionary policies, the problem is really that everyone knows that Obama does not want to hear any of that.  He signaled his true intentions from the word go in 2008, when he went with the Clinton-era Rubin-Summers economics team that gave us Tim Geithner as Treasury Secretary.  Obama occasionally talks about economics in ways that sound progressive, but the reality is that he is willingly moving the country in the wrong direction.  I give him credit for doing so more slowly than Republicans would have preferred, but that is faint praise indeed.


Shag from Brookline said...

Appealing to voters to vote their pocketbooks is problematic for the many voters who understand family kitchen table economics but do not recognize or understand that a nation in the position of America in an interdependent world cannot operate on the basis of family kitchen table economics. I give Krugman much credit for his efforts but his messages are filtered (including lies, deceptions) by elected officials whose long range planning is determined by their elections. Yes, Obama cannot run for a third term and should perhaps take a more progressive economic position. But with Senate filibusters/holds and the House in lockdown on anything Obama from the beginning of his first term, the progressive message is subjected to the goals of political preservation by those out of power, who could care less about recovering from the Bush/Cheney 2008 Great Recession. For many reasons, Obama's political arsenal doesn't have the necessary firepower to convince voters to vote their pocketbooks based on realistic economics rather than family kitchen table economics.

Shag from Brookline said...

Neil, while perhaps somewhat off topic of this post but relative to your earlier post on R&R, I just read Krugman's new blog post at the NYTimes website that addresses a new R&R effort via the NYTimes to absolve themselves for which Krugman provides a link. R&R are overly defensive and there are a number of comments that challenge R&R's efforts - and motives - at rehabilitation. It seems that R&R have dug an even deeper hole for themselves.

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