September 04, 2012
David Brooks tells us that Obama has three choices for “big ideas.” (Too bad he could only think of three, but that’s another matter.) Anyhow, his choice number 2, fixing a broken capitalism, sounds pretty good. The basic point is that the gains from growth have been going primarily to the richest 1 percent and that this could be reversed. (Why this can’t be merged with his idea number 1, slowing global warming, is a mystery to me.)
Anyhow, the idea seems solid, but the solutions are Brooksian silly. Brooks proposes strengthening unions, hiring more teachers and creating jobs rebuilding infrastructure. That part sounds good. We can strengthen unions by giving workers their day in court, let workers sue in real court for wrongful firing when they are involved in union organizing rather than sending them to children’s court (the National Labor Relations Board) where the penalties are a joke. In other words, strengthening unions is largely about not rigging the deck against workers who are trying to organize.
Firing teachers in the middle of a downturn was really bad economic policy, both short-term and long-term. Hiring them back would make lots of sense. Rebuilding infrastructure is a great idea when the real interest rate on government debt is negative. Let’s include retrofitting buildings, both public and private, to make them more energy efficient. (There we go, mixing Brooks’ idea #1 and #2, it’s so hard to get things right.)
Then we get a set of proposals from Brooks that are more mixed in their seriousness:
“He could cap the mortgage interest deduction, cap social security benefits, raise taxes on the rich, raise taxes on capital gains and embrace other measures to redistribute money from those who are prospering to those who are not.”
Let’s see, capping the mortgage interest deduction? And what exactly is the public benefit from subsidizing the purchase of a bigger home by a wealthy family? That should be a non-brainer. (This subsidy is likely larger than the welfare checks to poor people that seem to get Republicans so excited.)
Capping Social Security benefits? I don’t know that this one will hit the Peter Petersons of the world very hard. I do know that it won’t save any noticeable amount of money and will likely undermine support for the program. These are the reasons that no progressive/populist ever has means-testing for Social Security on their list.
Raising taxes on the wealthy sounds fine, but how about raising taxes in a way that eliminates economic waste. The obvious story here would be a financial speculation tax that would downsize the financial sector. This would both make it more efficient in carrying through its economic function (allocating capital from those who want to save to those who want to borrow) and help to reduce inequality by reducing the huge rents earned by some in this sector. Ending the subsidy provided by too big to fail insurance for the largest banks would also be a good item in this category.
A knowledgeable columnist would have these items on his populist agenda for Obama. Brooks either has not done his homework or just wants to make the agenda look silly.
Finally Brooks suggests:
“He could crack down on outsourcing and regulate trade.”
Brooks probably missed it, but we already regulate trade. A major item on Obama’s (and Bush and Clinton’s) trade agenda has been increasing patent and copyright protection throughout the world. This imposes enormous economic costs, often raising the price of protected items by a factor of 10 or even 100. Our trade negotiators have also sought to eliminate barriers on trade to manufacturing goods, which lowers the wages and costs the jobs of manufacturing workers, while leaving in place protectionist barriers for highly educated professionals like doctors and lawyers.
President Obama can actually push a free trade agenda that would mean millions of new manufacturing jobs. For example, he could pursue a competitive dollar policy that will push the dollar down to levels where U.S. goods and services are better able to compete internationally. This would bring our trade deficit closer to balance. This would be both good economics (it is the only way to end the borrowing that gets folks like Brooks so upset) and good politics since it would have huge appeal to the bulk of the population, although it would likely lose President Obama many big donors.
Of course Brooks volunteers that he wouldn’t like this route, but he also claims that it would alienate moderate voters. That is more difficult to see given the potential benefits to the non-rich from following this route.
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