Two Takes on Obanomics

As the Democratic Party Convention gets underway in Denver, The New York Times Magazine makes an attempt to unpack Obamanomics. In a lengthy, thoughtful analysis that is well worth reading, David Leonhardt finds that Senator Barack Obama’s economic ideas are complex and nuanced. Whether you agree with Obama’s policies or not, it is clear from the article that he has given the subject a great deal of thought. Obamanomics seeks to incorporate lessons from the successes and failures of previous presidents of both parties, albeit from a Democratic perspective. However, the economic world is increasingly complex, presenting Obama with a significant challenge in communicating a nuanced economic policy in campaign-style soundbites.

Leonhardt contrasts Obamanomics with Senator John Mccain’s plan to largely continue with the Bush strategy, which he thinks is too bad:

For the time being, only one party is applying the lessons of history to the country’s biggest economic problems. There is no great battle of new ideas, and that can’t make it more likely that those problems will be solved.

Leonhardt is far from certain that Obama’s plan will succeed, citing his lack of administrative experience and other factors. “But it’s not entirely clear what the alternative is, at least in the broad sense and at least for the time being.”

But writing in Barron’s, Jim McTague is convinced that Obamanomics would be bad for the economy. He notes that while most in the business world “would be more comfortable with the Republican candidate, the vast majority don’t think that either man would affect the economy much differently than the other. The vast majority, however, are wrong.”

The top 1% of taxpayers targeted for tax increases by Obama account for more than 20% of all adjusted gross income, McTague writes. “And these folks tend to plow a lot of their money into businesses — from family operations to blue-chip stocks — to say nothing of shopping trips and travel.”

In other words, cutting their after-tax income could deal another blow to an already-hobbled economy.

In contrast, “McCain’s plan is more growth-oriented than Obama’s because it punishes no one group and, by lowering corporate tax rates, makes U.S. businesses more attractive to American and foreign investors.”

Still, McTague holds out hope that “Obama, who’s no dummy, might think twice about raising taxes during the worst financial crisis in 78 years.”

Comments

[AlexS:]

Complex and nuanced = Dazed and confused

2008 Aug 25 11:26 AM

[whidbey:]

This is old hash and not too well reviewed at that. Why get involved if you can not sort out the offerings so even you can talk about them. We know there is a diversity of opinion and you did nothing to clear up things.

2008 Aug 25 03:23 PM

[Just Askin:]

Obama is a closet communist, period. His "redistributivist" policies call for soaking the "top 1%" by an average increase of $800,000 in taxes per year. What the hell is "fair" about that? The NYT's article's author, Leonhardt, complains that "the rich have been getting much richer before taxes [and] their tax rates have also been falling far faster than the rates of any other income group," but so what? The 35% tax bracket for "the rich" is STILL 25% to 200% HIGHER than lowe to middle inclome classes, who are the ones who glom onto the lion's share of all the b.s. government credits and deductions and givebacks etc. etc. etc. I rent, and I pay FULL taxes. I don't get "child care credits" or "home interest mortgage deductions" or "property tax deductions" or any of the other consumption-encouragin... social-engineering, government tax-tweaking class warfare BULLSHIT that's part of the sacred cow of tax "FAIRNESS." There is NOTHING fair about "redistributive" tax policies in any way shape or form. "The rich" earned their money, they are the ones who create most of the jobs in this country, and their earnings are, or ought to be, their own.

2008 Aug 25 03:59 PM

[David Martin:]

The 'investments' that this marvellous group of top earners have been making have largely been in inflating the property market and other ponzi schemes, not to mention the efforts of the crown in the banks and top industrialists who have paid themselves huge bonuses and scarpered after wrecking their companies.
Does US industry significantly out-perform German industry in the 60's, when executive pay was on average 20 times worker's salary, not the present 400?
This talk of the marvellous job the elite do and why taxing them would be so bad is self-serving nonsense.
Many of them should be prosecuted for dereliction of duty, and their vast bonus payment confiscated, together with interest.
All this chat about the 'market rate' for these top executives could be short circuited.
Employ Indian executives to telecommute and run things at a fraction of the cost.
There is little relationship between executive renumeration and performance.
If they had the same troubles as the rest of the population as their incomes were more similar, then their actions might actually begin to benefit the people, instead of impoverishing the middle classes for the benefit of an elite.

2008 Aug 26 09:00 AM

[adan:]

neither candidate offers to truly balance the budget

addressing some of the issues in the film, i.o.u.s.a. would be a good start

re tax cuts, i'm all for them, as long as there's corresponding spending cuts

hey, and what about campaign & lobbying reform ? isn't a lot of the monies spent beyond what's available going to special projects few benefit from?

it hurts, but balance the budget

2008 Aug 26 09:09 AM

[Tim Miles:]

The bottomline is that the "trickledown" economics that McTague and others support has done very little to improve the lot of the middle class and the poor in our society over the past 8 years, despite all of the promises and paranoia that the wealthy have used to justify their existence.

2008 Aug 26 10:03 AM

[ksmithdc:]

You can't tax & spend your way to prosperity. Obama is all about wealth redistribution. EOM.

2008 Aug 26 11:09 AM

[wpdragon:]

Great points David Martin and Tim Miles.

I especially liked Tim's quote "despite all of the promises and paranoia that the wealthy have used to justify their existence. "

You hit the nail right on the head, that one percent controls the national news media and all one has to do is watch the recent hard -right turn at CNBC (Steve Forbes seems to be a new employee there, based on the frequency of his appearances there, and the right wing leanings of the great majority of its "anchors"), the Murdoch based bias at the WSJ/Barrons, and IBD's hate-filled "editorial" intolerance of the so-called American "intelligensia", marxists/communists and "dems" to know they are terrified and pulling out all the stops to try to control public opinion.

I left the Republican party 4 years ago, never to return, as have many of my friends and colleagues, when it became infinitely apparent that the vast majority of Republicans were being hoodwinked by those very elite few at the top of their own party, and were blindly supporting an economic/trade/politic... affairs agenda that went against all of the best interests of the rank and file 99% of the party.

2008 Aug 26 11:52 AM

[yellowroadbike:]

The other point made in Barron's that most folks are missing, is that the spending is the more important point. Spending WILL be paid for by taxes, fees, printing money, and / or inflation. Listen to the spending proposals very carefully. I am very disappointed by the past eight years example of fiscal discipline.

2008 Aug 26 11:58 AM

[secmaven:]

The top 1% greatly benefit the economy by investing in hedge funds that buy profitable businesses, load them up with debt and sell them to the public or invest funds in commodities so that winter wheat in Minneapolis goes up 25% in one day or send the money into the stock markets of the "emerging" countries where pump and dump is the first order of business. We should cut the taxes further for the 1% to revive the hedge fund industry. There are only 200 new hedge funds starting up each year. There should be 1,000.

2008 Aug 26 12:54 PM

[Rokjok777:]

Two choices it seems: tax and spend, or continue the current policy of borrow & spend.
The real issue is the spending side: America's $700 billion *per year* to fund military fantasies around the globe. (Number 2 military spender is China, about $60 billion). All of the US spend is borrowed, mostly from the Chinese, ha-ha, that's really smart. USA is the largest debtor nation on earth, that's how to make our country strong? To defend against what, again? Islamo-terrorists with anthrax WMD? Oops, turned out to be a white Roman Cathloic guy with the top US military clearance, who "committed suicide" by taking Advil... puh-lease. Eisenhower was right: Beware the military-industrial complex...Imagine what $700 billion per year could do for GM or schools or energy or infrastructure or health care or mortgage reform etc etc etc. If you are even dimly aware of these facts then you have to hold your nose and vote Obama...because the other guy is as military as they get. Four years of McCain and our enemies won't even have to invade...they'll already own the place.

2008 Aug 26 05:11 PM

[Igorsky:]

Obama reminds me of the disastrous Jimmy Carter era - disastrous economy, high interest rates (today, still a record), failed foreign policies and a nation filling hopeless.

Jimmy Carter had a good team that beat a very respectable President Ford and got him elected to the Presidency. But his team had smarts only in winning elections but little smarts required in running a country. Georgia at that time was a relatively simple state to run and no exposure to international events. His team had no experience in running a large entity, let alone a country. Carter was a narrow visioned micromanager who got tied up in the multitude of problems landing on his desk daily.

In contrast, when Reagan became President, he took his highly experienced and competent team with him. The same team he had when he was Governor of California for 8 years. California was already a large State with plenty of International exposures. Reagan was a delegator and a visionary. He was very successful in his first term. However, some of his old reliables left after 4 years and his second term was not as good.

George Bush Sr was a successful President. He was Vice President for 8 years, had learned the job well and was well qualified when he took over. He had in place a good team who had worked well together for years under Reagan. He managed to complete bringing down the Soviet empire and beat back Saddam Hussain with little loss of American life. He lost to Clinton only because his campaign manager for his first election died during his second run for President.

Obama, should he become President, would be worse than Carter. Obama has never managed a State, City or an enterprise. Consequently, he has not built up a cadre of people who have proven competence and expertise that is needed in running the US government. He does not have a team of people who have worked together for years, with a proven record of making good decisions that affect millions of people. With him being very light in managing experience and global experience, a highly cohesive and competent team is essential. It will be very difficult for him to form such a team for the people who have the needed qualities will not want to be part of a team bound to fail. It is not worth their time and reputation. His only resource will be a team formed from his campaign organization. Just like Carter's, a team good at winning an election but terrible in running a government. Would we want for this to happen...make the US government as Obama's training grounds? We should reject this kind of change.

McCain is a seasoned veteran. He knows the issues and has the correct solutions. He is Maverick enough to do what is right for our country regardless of what his party thinks. He has people who are of proven competence and honesty around him that will form his team. Add to this his nominating Romney as his VP. Now, Romney has a proven successful track record of running a big State (MA) and big businesses that requires vision. He will bring his cadre of people to run the US government. McCain and Romney is the team our country needs during this hard times to bring order and sanity once more.

In 2002 and 2004 Olympics and in-between, we have seen the USA Basketball Team loaded with superstars fall to other countries. Great players individually, but did not play as a team. In 2008 we had an Olympic team of great players who have 3 years playing together and we won the gold! The US needs a Team of competent people running our government or we wind up losing to China, Russia and even Iran and North Korea.

2008 Aug 26 05:43 PM

[henarl:]

Rokjok is right - The Republicans choose to borrow and spend while the Democrats choose to tax and spend. The problem is not only the amount of government spending, but what the money is being spent on. The jingoist Republican neo-cons are spending on the military in order to maintain and increase their dreams of empire. The liberal Democrat do-gooders are spending on overly bureaucratic social programs to further their dreams of an idealistic, and unattainable, egalitarian society.
A solution would be to recall our military, not only from Iraq but from all over the world, and eliminate all foreign aid. The proper use of a military is to DEFEND a country from foreign attack, not to build empire. Sending money to other countries when we are going heavily into debt here is ridiculous. As to social programs, they should be aimed at giving people JOBS and paying them to work, not paying welfare queens and unemployment benefits.
Unfortunately, none of this will happen as there are too many vested interests in maintaining the status quo.

2008 Aug 26 11:33 PM