If you read only one article about Barack Obama this week — hell, this campaign season — make it “Obamanomics,” by David Leonhardt, in Sunday’s New York Times Magazine. Little I’ve read about Obama has provided more insight into the way he thinks, not only about economics, but also about public policy generally.
The framing here is the “battle of the Bobs” — Clinton Treasury Secretary Robert Rubin, who prioritizes bringing down the deficit and strengthening markets, and Clinton Labor Secretary Robert Reich, who prioritizes substantial public investment and wealth redistribution via the tax code. Clinton famously favored Rubin, to the chagrin of the left.
Developments since then, among them Bush’s disastrous tax policies, have moved the Bobs closer together. Where deficit reduction might legitimately have been a priority in the early ’90s, today’s historic inequality, crumbling infrastructure, and economic stagnation make Reich-style policy the more obvious need.
But Obama still heeds Rubinomics, still strives for fiscal responsibility, and still respects markets as fantastically efficient means of deploying capital. So the agenda is to combine some traditionally “leftist” policies like heavy infrastructure spending, job training, and higher income taxes on the rich with traditionally “conservative” policies like cutting taxes on the middle class and favoring market-based policies.
Interestingly, Leonhardt frames Obama’s climate policy as a balance of these two impulses:
Most Congressional bills envisioned giving away many of the [cap-and-trade] permits to power companies. Economists, by and large, considered this giveaway to be the worst part of the plan. It would require Congress to decide how many free permits each company should get and would set off a frenzy of corporate lobbying.
The alternative was to auction off the permits — to let the market set their value. "If you don’t auction 100 percent of the permits," [Obama advisor Austan] Goolsbee told me, "this could be one of the biggest pieces of corporate welfare ever." With Congress making the decisions, the power companies with the best political connections might get the permits. With a full auction, the permits would end up with companies willing to make the highest bids. Presumably, these would be the most efficient companies, the ones able to produce the most energy (and profits) for a given amount of greenhouse-gas pollution.
The auctions would have another big advantage too. They would raise billions of dollars for the government, money that could then be returned to taxpayers to offset the higher energy prices created by the emissions cap.
So it’s, in Leonhardt’s words, "pro-market," but it raises a ginormous amount of revenue for public spending.
That basically nails the appeal (to me) of a fully auctioned C&T system. Generally, Obama’s thinking, his struggle to reconcile or synthesize opposing economic impulses, turns out to mirror my own in a way that verges on creepy. It’s all about finding ways to use the power of markets whenever they can work while also attending to the dire need for public spending. I know it’s a cliche that everyone projects their own views on Obama, but Leonhardt says they’re actually his views!
I suspect Obama and I are well to the right of most of the folks who comment here, at least on this subject. I hope y’all will weigh in.