Banks may still be too big to fail, wages are still flat, and the income gap is still widening, but economist Paul Krugman nevertheless calls President Barack Obama's handling of the economy and Wall Street "successful."
In a nearly 4,400-word essay published in Rolling Stone, the Nobel laureate wrote that, when hindsight sharpens focus, the 44th president will be remembered for wrangling the big banks and reining in income inequality.
“I don’t care about the fact that Obama hasn’t lived up to the golden dreams of 2008, and I care even less about his approval rating,” Krugman wrote. “I do care that he has, when all is said and done, achieved a lot.”
Here are Krugman's key points:
1. Obamacare has already helped “tens of millions of Americans.”
With more than 8 million people enrolled in health-care plans through Obamacare's insurance exchanges, the law is “looking like a major policy success story,” Krugman wrote.
“This big improvement in American society is almost surely here to stay,” he wrote. “The conservative health care nightmare -- the one that led Republicans to go all-out against Bill Clinton’s health plans in 1993 and Obamacare more recently -- is that once health care for everyone, or almost everyone, has been put in place, it will be hard to undo, because too many voters have a stake in the system. That’s exactly what is happening.”
2. Obama has actually redistributed wealth.
Sure, billionaire investor Warren Buffett is still stumping for a minimum tax rate on all households earning $1 million or more a year. But the rich are paying more in taxes. As Krugman points out,Obama let some of his predecessor George W. Bush’s tax cuts for the wealthy expire, and there are provisions in the Affordable Care Act that tax the rich at higher rates to pay for health care.
“Meanwhile, the financial aid in Obamacare -- expanded Medicaid, subsidies to help lower-income households pay insurance premiums -- goes disproportionately to less-well-off Americans,” Krugman wrote. “When conservatives accuse Obama of redistributing income, they’re not completely wrong -- and liberals should give him credit.”
3. Wall Street reform, while incomplete, is a step up.
Passed in 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act is actually working, Krugman argued. The law designates some banks as “systemically important financial institutions” -- essentially labeling them too big to fail. While some would think Wall Street’s greediest risk-takers would revel in such a classification, as it would seem to create a safety net for failure, banks instead fight to avoid it. It turns out Wall Street types are not happy about the added scrutiny and regulation that follows a bank's being stamped SIFI. And the Obama administration claims that Dodd-Frank gives regulators the ability to close down a failing SIFI without either bailing out its shareholders or bringing down the whole financial system.
To boot, Dodd-Frank created the Consumer Financial Protection Bureau, which Krugman argued is “doing more to crack down on predatory practices than anything we used to see.”
“This may not be the full overhaul of finance we should have had, and it’s not as major as health reform,” Krugman admitted. “But it’s a lot better than nothing.”
At the core of his essay, Krugman asked two questions: Has Obama changed the country for better? And will his achievements endure?
“The answer to both questions,” he concluded, “is yes.”