Obama's America: What Is Economic Growth For?

Fed chairman Ben Bernake, along with other Obama economic team officials, tells us that economic growth is returning, and that it is "very likely" the recession has ended. With ten percent unemployment in many parts of the country, this might seem like less than great news. Certainly, in conventional political terms it is progress--but that's the problem. It's a conventional view--not the Change We Need.

The economic crisis from which we are slowly emerging is, at its base, a moral and an intellectual failure. As Robert Skidelsky, the award winning biographer of the great economist John Maynard Keynes, writes: "At the heart of the moral failure is the worship of economic growth for its own sake, rather than as a way to achieve the 'good life'. As a result, economic efficiency--the means to economic growth--has been given absolute priority in our thinking and policy." (Check out Skidelsky"s new book, Keynes-The Return of the Master, which explains Keynes' relevance for today's economic crisis, as well as the failure of almost the entire economics profession.)

Keynes understood in the 1930s that capitalism needed to be stabilized through government action--primarily government spending--and most importantly, reformed to reduce systemic weaknesses that caused the Depression (and the current global economic crisis). The New Deal in the US and social democratic governments in Europe, both before and after World War II, took measures to stabilize their economies and to reform them. Efforts were also made to do this at the international level through the Bretton Woods agreements of which Keynes was a prime thinker and mover.

These policies of stabilization followed by significant structural reform and ongoing programs of government spending (in the US, the GI Bill, national education and transportation acts, etc.--and similar programs in Europe, Australia and Japan, including the creation of national health systems), laid the foundations for the economic growth of the post-war period in the 50s and 60s when real improvements in living standards, reduction in poverty and inequality, and the wide spread provision of health and welfare benefits created a thriving middle class in most non-communist nations.

In speeches earlier this year, most notably at Georgetown University, President Obama said that he wants to lay the foundation for new economic growth--growth that improves citizens' lives and does less damage to the environment. Unfortunately, while his words are bold, he acts cautiously when it comes to actual reforms that are necessary to create this new foundation for economic growth, and he runs the risk of returning to the same old "money values" that underpin Reaganomics, which brought us the recent economic crisis.

His proposals, and his economic team, seem at variance with his rhetoric. Whether this is a function of his true beliefs about what his goals really are, or simply his political calculus of what is possible, is difficult to know. On the evidence, we do know that his choice of economic advisers and appointees has not been reformist. Instead of Joe Stiglitz, James Galbraith, Paul Krugman or Barry Bluestone, he has selected Larry Summers, Tim Geithner and Christina Roemer. Even Laura Tyson and Robert Reich, both of whom endorsed and campaigned for Obama, would have been more progressive and reform-minded.

In Washington, personnel is, in large part, policy--and who you see in power is what you get. Obama picked stabilizers not reformers. His recent speech to Wall Street spoke more about responsibility than about reform, as if it were personal failings rather than an unbalanced system that caused the crisis. Obama's proposed reforms are moderate and in the analysis of many experts like Simon Johnson of MIT, insufficient to prevent a future meltdown. Wall Street seems to have returned to its old ways of doing business, only with even larger financial conglomerates like the new Bank of America which swallowed Countrywide and Merrill Lynch and is surely "too big to fail." The message seems to be that the Obama government will bail out the big companies to get back to stability and growth, but not significantly change the way the system operates to prevent future bailouts.

As with economic policy, so it is with health care. Obama's approach has been to move to the center even before the debate began. He could have said at the outset that a single payer system was, in fact, the most ideal, and then moved away from it towards the center as politics dictated. Sadly, thinking that he was avoiding all of the mistakes of the Clinton administration, he recreated Bill Clinton's approach of making too rationale a case for health care reform, instead of a moral one. There has been too much talk of "bending the cost curve" and not enough talk about how a decent country should treat all of its citizens.

As TR Reid writes, "The question facing Americans this fall is: what should be the ethical basis of America's health-care system?" (Reid's new book, The Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care, surveys the leading universal health care systems in such countries as Canada, Great Britain, Japan, France and New Zealand and finds lessons for the US).

In 1992, I advised President Clinton not to put Hillary Clinton in charge of health care inside the White House. I wanted her to lead the reform effort outside--to follow the model of Eleanor Roosevelt--to travel around the country visiting hospitals, community clinics, health coops, model health centers, to gather stories and build grass roots support for reform by creating a compelling narrative based on peoples lives. At the same time, I counseled that a key Senator like Jay Rockefeller who represents a white-working class state, West Virginia, should hold hearings on the experience of other countries in covering all of their citizens-- telling the story that Reid reports in his new book. The facts about alternative health care systems would then have been presented to the public without much distortion. Clinton chose not to follow this advice, and Obama has not followed this path either. Obama's team learned the wrong lessons form Clinton's experience with health care. It was not the content of Clinton's plan that doomed it to failure, but the political strategy that he adopted. I hope that will not be the case with Obama and his efforts.

Obama chose not to give Michelle a role, perhaps fearing a comparison with Hillary. She is not out collecting human stories of the failure of the health care system, and instead, is confining herself to the White House food garden and opening a farmers market near the White House. Worthy projects, but not the optimal use of her time nor her abilities. Hearings were not promoted by the White House on health care systems in other advanced democracies and Obama has not spoken about these other models in his speeches. This silence let opponents of reform offer false and politically damaging characterizations of how health care is delivered in Great Britain, Canada and France. Wild charges that Teddy Kennedy would not have been treated by the National Health Service in England or that physicist Stephen Hawkings would have been left to die have gone unanswered. Instead, the human narrative comes from the Right about Obama's death panels and letting Granny die.

All these miscues are enough to make a good Democrat doubt the political bona fides of Rahm Emmanuel, David Axelrod and Valerie Jarrett. What were they thinking?

Political mistakes in the Obama White House have been compounded by the misuse of an asset that Bill Clinton did not have--10 million or more names of activists on computer. Obama's campaign army for change could have been used as a real potent force for political change; instead, it is just an email list which the White House uses in support of whatever stands Obama is taking.

Had Obama turned the names over to a nonprofit group--one independent of the White House--perhaps run by someone like Marshall Ganz, the legendary organizer who helped train Obama's campaign staff, he could have created a political force outside of conventional Washington which would have organized grassroots support for strong reforms like single payer and put pressure on both the Congress and the White House for a truly ethical health care system. It was a missed opportunity, but it can be remedied, although not in time for the passage of a good health care bill this fall.

I'm afraid that letting Max Baucus take the lead on health care reform in the Senate and pushing aside tougher reformers like Jay Rockefeller is another political error with consequences for the shape of any health legislation this fall. I don't expect much. If my leader and hometown Congressman Henry Waxman (one of my few personal heroes) votes for a final bill, then I will support it. Some kind of reforming the health care system, if Henry supports it, will be better than nothing--but things could have been so much better. It's deja vu all over again.

I am reluctantly coming to the conclusion that President Obama's governing style is not going to produce the kind of reforms which his millions of supporters had hoped for. We know that he is a powerful speech maker, but he has the unfortunate habit (as Frank Rich pointed out in his Sunday New York Times commentary) of thinking it is a more powerful tool than it is--and he has a tendency to think so much of his own powers of persuasion that he is in serious danger of overexposure or creating a kind of cult of personality. After all, this weekend he is appearing on all five national talks shows on Sunday, followed by an appearance on Letterman on Monday night--all to argue for health care reform. Is there no one else of stature in this administration who can make the case for reform? Where is Obama's Frances Perkins or his Senator Wagner--just two of the great Americans who brought us the New Deal as part of FDR's team?

The power of rhetoric, even that of great presidential orators, is overrated in politics, and is, I believe, less effective the more that it is used. In any case, it doesn't substitute for a more aggressive and smarter political strategy and bolder policy initiatives that wake up supporters in the progressive camp--and it doesn't work if there is only one voice speaking for change. Obama is clearly the One, but he needs others too.

I don't want to be too pessimistic. Situations change, and personnel can be replaced. There are mid-course corrections in any presidential administration, and there will certainly be ones in the Obama administration.

As to the answer of what is economic growth for--the question posed in my title--for now, we have to look across the waters to France where President Sarkozy has just released the report of his commission on how to measure economic growth. Co-chaired by Nobel prize winner Joe Stiglitz, the report suggests new ways to measure a society's well being other than simply the growth of GNP. Sarkozy has indicated that the French statistics agency will be incorporating new indicators in its accounting of national income statistics. Perhaps, he will give President Obama and the other leaders at the G-20 meeting in Pittsburgh copies of the report.(the commission report is available online at: www.stiglitz-sen-fitoussi.fr) And perhaps, President Obama will give some serious thought to trading in Larry Summers for Joe Stiglitz , letting Jay Rockefeller take over for Max Baucus, or calling populist Democrats like Byron Dorgan and Sherrod Brown off the back benches and onto center court.