Understanding Obamanomics

When Barack Obama bails out failing banks but also calls for a restructuring of the banking system—when he proposes hundreds of billions of dollars in deficit spending but promises long-term fiscal responsibility—when the President insists on universal health care now but leaves crucial details in doubt—what is he thinking? How can we understand the Obama economic philosophy?

Franklin Foer and Noam Scheiber recently wrote a long article in The New Republic [1]entitled “Nudge-ocracy” attempting to answer that question. Their conclusion is that Obama considers heavy-handed government control to be either undesirable or impractical. They say he prefers to nudge economic actors into a better position:

In Obama’s state, government never supplants the market or stifles its inner workings—the old forms of statism that didn’t wash economically, and certainly not politically. But government does aggressively prod markets—by planting incentives, by stirring new competition—to achieve the results he prefers.

While I don’t fundamentally disagree, I don’t think this provides a very useful description either.

I believe that, first and foremost, Barack Obama accepts America’s market system. While I’m sure he understands that capitalism is deeply flawed, I’m equally sure he believes it’s the best economic system available. The trick is to use government to minimize injustice and maximize the public good by harnessing the independent energies of individual Americans.

This is difficult for some progressives to understand because they hold a communitarian vision of government. One for all and all for one! But this is simply not how most Americans think or feel.

American economics from a ground view

Most Americans aren’t trying to achieve a society where government secures the greatest good for the greatest number. They believe in an American dream that is unambiguously personal and individualistic. It’s a dream about a poor child delivering newspapers and one day ending up as the publisher. It’s about an unskilled worker attending night school and becoming a successful manager. It’s about individuals and families practicing their religion without interference, getting ahead through hard work, and being able to retire in security and comfort.

The American dream is a prayer, a vision, a fervent hope that every individual in our nation may be given a fair chance to build a successful life. This deeply held, deeply felt common vision for our nation is both about money—individuals and their families getting ahead, and about self determination—individuals and their families deciding what to think and how to live. Our dream celebrates the individual.

“Our culture is very, very individualistic,” explains pollster Celinda Lake. “Even when people think collectively, they are thinking of a collection of individuals.” When faced with a proposed government policy, “People look for themselves in the proposal. People want to know what the proposal will do for me and to me.”

American individualism goes way back. If you took political science in college, you may recall that Alexis de Tocqueville, observing the America of 1831, was impressed (but not favorably) by our individualism. Even earlier, Benjamin Franklin—the quintessential self-made man—reflected the thinking of his era, “The U.S. Constitution doesn’t guarantee happiness, only the pursuit of it. You have to catch up with it yourself.” Thomas Jefferson initially made individualism an explicit part of the Declaration of Independence. His first draft stated that “all men are created equal and independent.” The founding fathers’ dedication to individualism led them to make the Bill of Rights a centerpiece of American government. And throughout the history of our nation, despite great hardships, immigrants traveled here (those who came voluntarily), settlers moved across the plains, and farmers migrated to cities, all to find a better life for themselves and their families. America has been shaped by this common quest of individual Americans.

Individualism is our nation’s greatest strength and its greatest weakness. It drives innovation and progress, but it also consigns millions of Americans to lives spent in poverty.

My point is, we can’t force a communalistic philosophy on an individualistic nation. The progressive-liberal-Democratic base of voters would gladly accept and espouse a communitarian philosophy. I, too, wish that American culture were more oriented toward altruism and community. But it isn’t.

I think that Barack Obama has demonstrated an entirely realistic economic philosophy—one that accepts our national culture of individualism and—nevertheless—seeks to make the American dream accessible to all. How can we envision such a philosophy?

Balance is justice

Imagine a balance scale—the old-fashioned kind with two pans, one suspended from each end of a bar. It’s the kind of scale that symbolizes equal justice under law. In a progressive world, the role of government is to help balance the scale when powerful individuals or organizations compete against weaker ones. Government should function as a counterweight on the scale of justice. The greater the disparity of power between competing interests, the greater weight the government must provide to the weaker side.

It is not government’s job to ensure that everyone wins every competition—that would be a logical impossibility. Instead, government must ensure that, whenever possible, competition is both fair and humane. In other words, justice is the purpose of government, and in an individualistic society, balance is the means of achieving justice.

A system in balance rewards hard work, efficiency, and innovation—which benefit all of society, and discourages crime, corruption, and schemes to game the system—which rob all of society. As a practical matter, despite all efforts, our system will never be perfectly in balance. Justice is a journey not a destination. But we can switch this mighty country onto the right track and open up the throttle to increase its speed.

Although he might not say it this way, I think President Obama is trying to offset the mighty special interests that are injurious to our economy—and use the power of government to balance the scale of justice for all Americans.