Uh … Life is weird, man. David Leonhardt flagged a passage in Grand New Party that made one of our friends nervous when it was still in galleys:
There is, however, a more philosophical critique of Obama’s tax policies. It’s one that Douthat and Salam make in “Grand New Party.” The book doesn’t mention Obama by name, but it contains one of the best summaries of his economic policy that I have read. The authors describe a new-model liberal consensus that weds “the free-market centrism of the Clinton years to a revived push for European-style social democracy.” This neoliberalism, as they call it, wouldn’t involve the big-government programs of the postwar years, but the government would come to play a larger role in the economy and would redistribute much more income from the rich to everyone else. “This is, in many respects, a deeply un-American solution to the problems facing our country,” the authors write, “one that would emphasize dependence over self-sufficiency and bureaucratic condescension over self-help.”
Our friend felt that “un-American” was dangerous language to use in light of its ugly historical associations, and that we should reword. We both felt that he was being overcautious, though I did have a twinge of panic about it. My own view is that there is an American tradition regarding the role of work and wages in defining citizenship, one that evolved since the panic over the threat of “wage slavery.” And I think it makes sense to build our social welfare programs in a way that reflects our broadly shared sense of the obligations of citizenship. That’s pretty anodyne, I realize, but the idea does have some teeth regarding the structure of tax benefits and work supports. So I was struck by the fact that Leonhardt picked up on this passage in particular. More nerve-racking still, he read it to … Barack Obama!
During my recent conversation with Obama, he mentioned Sam’s Club Republicanism in a different context [which is cool!], and I asked him if he had read “Grand New Party.” He hadn’t, he said, so I read him the line about dependence and condescension and asked for his reaction.
Whoa. First of all, this is a little terrifying — the line certainly sounds damning, and you might think Obama would respond in blistering fashion. But it didn’t.
He said it made him think of Warren Buffett, an Obama supporter, who, if anything, might argue that he wasn’t going far enough to change the tax code. “If you talk to Warren, he’ll tell you his preference is not to meddle in the economy at all — let the market work, however way it’s going to work, and then just tax the heck out of people at the end and just redistribute it,” Obama said. “That way you’re not impeding efficiency, and you’re achieving equity on the back end.” He continued by saying that he thought there was some merit in Buffett’s argument. But, he said: “I do think that what the argument may miss is the sense of control that we want individuals to have in determining their own career paths, making their own life choices and so forth. And I also think you want to instill that sense of self-reliance and that what you do will help determine outcomes.”
This strikes me as a very, very interesting response. At New America, Michael Lind and Sherle Schwenninger and Phil Longman have been, in different ways, advancing a highly distinctive argument about U.S. political economy — their contention is that the social-democratic left wants a low-wage/high-subsidy society, the laissez-faire right wants a low-wage/low-subsidy society, and that they want a high-wage/low-subsidy society. That is, they want to structure the labor market in such a way that labor is advantaged at the expense of capital. Immigration restrictions are a classic, if imperfect, example of how to go about this. I don’t share this broad view, but I do find it interesting, and it certainly informs the way I think about these issues. I guess I’m very wary of serious labor market interventions. I see wage subsidies as something that doesn’t heavy-handedly interfere with the workings of freedom of contract, etc. I also don’t think that industrial policy, no matter how well-designed, will ever give us a 1950s economy.
So what exactly is the problem with Buffett’s argument? I actually agree with him to a point — better to have laissez-faire and skim off the proceeds to achieve social goals. But how do we go about achieving those social goals? The goal of an enabling state is to sharpen the incentives (oh man, I really miss having older TAS archives): make participation in the mainstream economy more attractive, reward thrift, draw on the lessons of Bolsa Familia. Plenty of people on the center-left embrace much the same view — except for the laissez-faire part, or the neutral approach to childcare part, or the competition in providing public services part, or the abolishing tenure part, or the … Yes, we can all have a rhetorical commitment to same broad reformist agenda. The center-left is more inclined to dedicate the resources necessary (and unnecessary, for sweetening purposes) to achieving the relevant goals, though Goolsbee-Furman tell us the Obama tax plan represents a net tax cut, and the center-right is more inclined to make the necessary institutional reforms.
But really, I think it’s pretty cool and impressive that Obama gave such a thoughtful answer to the question. Rest assured, I understand the Kool-Aid consumption.
I’m really proud of the fact that Leonhardt, a journalist I admire very much, read and enjoyed our book. I do wish that Ross and I had spent more time focusing on cost-of-living issues, and that’s something I hope to think about and write about more going forward.
A side note: Furman is the great defender of Wal-Mart. Obama was a critic. Here’s hoping that Furman has the upper hand. Earlier this month, Cesar Conda profiled Furman and Goolsbee for the Weekly Standard, and the piece, which characterized both economists pretty fairly, seemed to struggle to find something objectionable about them. That’s encouraging.