Thirteen months ago, Barack Obama took office with a sweeping electoral mandate. He inherited an economy in crisis, complete with a broken banking system, rising unemployment, and stagnant output. Instead of taking this opportunity to revitalize the American economy and tackle our myriad economic problems, Obama blinked. We are all suffering for his inaction today.
Financial reform is dead. Energy independence is a distant priority. And health care reform has been reduced to round table discussions between a recalcitrant minority party and a prostrate executive.
Over the past century, the United States has experienced two distinct episodes of drastic reformulations of its economic order. Indeed, both FDR and Ronald Reagan championed sweeping economic reforms. They were fueled by ideology and constrained by the comparative weakness of the US Presidency. Yet they persevered and left a lasting stamp on economic life that Americans felt for decades to come.
Both men understood the technical weaknesses of executive power. Constitutional separation of powers and a lack of direct control over their political parties impede the President's ability to shape legislation. But both also understood that the real source of presidential power did not rest in legislative majorities or wonky policy expertise, although these things certainly helped. Instead, presidential power derived from the ability of Presidents to appeal directly to voters through the media. Roosevelt and Reagan understood this nature of their office. Instead of trying to merely be reflections of popular sentiments, both men actively shaped it.
Ultimately, the ability of Reagan and FDR to remake the American economy came from two principle sources. First, both men had a coherent economic ideology; for FDR, it was Keynesianism, and for Ronald Reagan, it was the free market Chicago school. Second, these Presidents could narrate a sense of crisis that created space for radical change. It is clear that thus far, Obama lacks both of these qualities.
Obama's economic ideology is as idiosyncratic as the spectrum of all economic analysis. There is no such thing as Obamanomics. In a policy vacuum, this is a good thing, since ideological predispositions often undermine choosing optimal practices. But in a politicized policy-making environment, without providing the public heuristics and simple principles of governance, Obama has found it extraordinarily difficult to link the important issues in the economy together in voters' minds.
Moreover, recent economic literature suggests that the only way to create substantive policy change is through narrating crisis to the general public. Margaret Thatcher and Ronald Reagan showed how this could be done. By convincing the British and American public of the weaknesses of Keynesianism, they ushered in a new period of deregulation and neoliberal economic policy.
Formulating a coherent ideological framework could be a start to saving Obama's domestic agenda. He should frame the current discourse as not a choice between heavy-handed government and freewheeling deregulation, but as a third way, combining the benefits of Keynesianism and free market Chicago principles.
A remade, ideologically coherent platform of Obamanomics should focus on the following four principles:
First, Americans spend too much on consumption and do not save. During the last three decades, America's trade balance worsened, household saving rates fell, and the government ran unsustainable fiscal deficits. America needs a society-wide austerity program. This has implications on aspects of nearly every economic problem that face our country today. Second, the banking system is broken. He must deal with the problem of having too big to fail financial institutions. As of today, our economy is just as vulnerable to systemic collapse as we were in the fall of 2008. Third, dependence on foreign energy continues to weaken America's foreign policy bargaining power, fuel resentment in the Middle East, and sap disposable income from households. Energy independence should be a chief concern of Obama's economic ideology. Fourth, in the realm of health care, Obama should focus on controlling costs and ensuring the long-term financial viability of Medicare and Medicaid, instead of simply expanding coverage.
In either case, the list of economic priorities for the Obama administration is almost endless. Instead of dealing with these on an ad-hoc basis, Obama must come up with a coherent narrative that ties these issues together for voters. By conflating austerity, financial reform, energy independence, and cutting health care costs, Obama could convince voters that his view of the economy is the right one. Such an approach has obvious bipartisan appeal. Forging such an ideology would serve as an organizing principle for centrists in both parties.
Instead of formulating this narrative, however, Obama has until recently chosen to remain above the fray, devolving actual legislation to congressional Democrats and leaving Americans to divine at his true ideological preferences. This is a flawed strategy.
Unfortunately, best time for action was at the start of his presidency. But it is not too late. If he can convince Americans that long-term vitality depends on his unique economic vision through narration and clever use of the media, perhaps he can still salvage some elements of his domestic agenda. While I will continue to hope for this, I fear the likely outcome will be some version of the status quo, wherein real legislation will only come after this November's midterm elections, forcing Obama to triangulate between the parties and giving him the political space necessary to carve out his own ideological niche. Like George W. Bush a decade before him, Obama will likely squander an opportunity to drastically reformulate the American narrative for the better.
Regardless, it is time for Obama to roll up his sleeves and explain to Americans what we need to do to get our country out of our current economic mess. Figuring out where he stands for himself would be a useful place to start.
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Whats your take on how we should do this Neil? I am sure you have a word-limit in the article above but I would like to hear your opinions on what he could do to address this issue.