Obamanomics

TW: Certainly Obama's economic policies are receiving saturation coverage for obvious reasons. Of course, regardless of the coverage we will not whether they are effective for at least a couple of years and likely a decade or more. The hollowness of some of the Reagan policies are just now becoming apparent. Some continue to question FDR's policies 75 years later.

I believe one of the reasons the debate right now is so hot (the attacks from the right have not even completely revved up yet) is that Reaganism became the default dogma, Clinton attempted to soften its edges and tweak it but did not fundamentally challenge certain notions (i.e. "any government is bad", all regulation is bad, the capitalists are to be pampered). The dogma has lost coherence after the Bush years and the collapse of the American financial system.

The question is now what to do? Reich nicely frames the potential impact of Obama below.

From Robert Reich:
"...The basic idea of Reaganomics was that the economy grows from the top down. Lower taxes on the wealthy make them work harder and invest more, and the benefits trickle down to everyone else. Rarely in economic history has a theory been more tested in the real world and proven so wrong. In point of fact, nothing trickled down. After the Reagan tax cuts, increases in the median wage slowed, adjusted for inflation. After George W. Bush's tax cuts for the wealthy, the median wage actually dropped. Meanwhile, most of the income went to the top. In 1980, just before the Reagan revolution, the richest 1 percent took home 9 percent of total national income. But by 2007, the richest 1 percent was taking home 22 percent.

Obamanomics, by contrast, holds that an economy grows best from the bottom up. Obama's program increases taxes on the top, and uses the proceeds to raise the living standards of average Americans by giving them lower taxes, better schools, and more affordable health insurance. That may not seem very radical, but compared to the last quarter century it's revolutionary.

Reaganomics didn't believe in public investment, except perhaps when it came to the military. Everything else was considered government spending, which was assumed to be wasteful. Hence, the cuts (adjusted for inflation) during Reagan, Bush I and Bush II in education, job training, infrastructure, and basic research and development. And the reluctance to expand health insurance except when it came to corporate welfare for the pharmaceutical industry.

But Obamanomics is a commited to these forms of public investment. And there's good reason: In a global economy, capital moves to wherever it can get the best deal around the globe. That means capital and jobs go to nations that can promise high returns either because labor is cheap and taxes and regulations low, or because labor is highly productive -- well educated, healthy, and supported by modern infrastructure.

Which do we want? For the better part of the last quarter century our implicit economic strategy has tended toward the first. But that's a recipe for lower wages and lower living standards for most Americans, along with widening inequality. The only resource that's uniquely rooted in a national economy is its people -- their skills, insights, capacities to collaborate, and the transportation and communication systems that link them together. Everything else -- including capital, technology, designs, even plant and equipment -- can move around the globe with increasing ease.

Bill Clinton talked a lot about the importance of public investment but he failed to do much about it because he came to office during an economic expansion, and the major worry was excessive government spending leading to inflation. Obama comes to office during the biggest downturn since the Great Depression, and although he doesn't talk much about public investment his plan represents the largest commitment to it in forty years.

Reaganomics' third principle was that deregulated markets function better. They do, in many respects, but not always. And when they don't, all hell can break loose. Energy markets were deregulated and we wound up with Enron. Carbon emissions weren't controlled, and now we face global warming. Financial markets were deregulated and we have a global meltdown. Obamanomics, by contrast, accepts that government has an important role in setting the rules of the capitalist game: Setting an overall cap on carbon emissions, ensuring that products and foods are safe, maintaining the solvency and security of financial companies.

Under Reaganomics, government was the problem. It can still be a problem. But Obamanomics recognizes there are even bigger problems out there that can't be solved without government. By building the economy from the bottom up, recognizing the central importance of public investment, and understanding that markets cannot function without regulation, Obamanomics finally reverses and repudiates the economic philosophy that has dominated America since 1981."
http://robertreich.blogspot.com/2009/03/is-obamanomics-conservative-or.html