NY Times: WICHITA, Kan. — Senator Barack Obama says the top priority of the next president should be to create a more lasting and equitable prosperity than achieved by either President Bush in the current decade or even Bill Clinton in the 1990s.
In an hourlong interview outlining his economic views, Mr. Obama praised the Clinton administration for reducing the deficit and setting the stage for the ’90s boom. But he said Mr. Clinton had failed to halt a long-term increase in income inequality that had left the middle class feeling squeezed.
If elected, Mr. Obama said he would to try to forge a popular mandate for policy changes that could reverse a generation of slow wage growth and outlast any one administration. At the top of his list would be shifting the tax burden more toward the wealthy and making investments — in health care, alternative-energy research and education — that would cost a significant amount of money but could ultimately lift economic growth.
“The project of the next president is figuring out how do you create bottom-up economic growth, as opposed to the trickle-down economic growth that George Bush has been so enamored with,” Mr. Obama, an Illinois Democrat, said.
Mr. Obama’s agenda would be complicated by the government’s projected budget deficit, which is primarily a result of soaring Medicare and other health care costs expected in coming decades. No candidate, in either party, has yet offered a detailed plan for bringing those costs under control, health care experts say.
Speaking on a flight to Kansas from Washington this week, Mr. Obama predicted that the economy would continue to worsen in coming months. In particular, he said he expected some of the recent problems in the mortgage market to spread to other parts of the consumer-credit business, as households struggled to pay bills.
“I don’t think we’ve bottomed out yet,” he said.
Although Mr. Obama’s economic approach comes wrapped in his conciliatory rhetoric, it is in some ways more aggressive than that of Senator Hillary Rodham Clinton of New York, his rival for the Democratic presidential nomination.
He has called for shoring up Social Security by raising payroll taxes on very high earners, while she has not. He also favors a permanent tax credit of up to $1,000 for families in the bottom 90 percent or so of the income distribution, which makes his package of middle-class tax credits significantly larger than hers.
Clinton advisers say Mr. Obama has been unrealistic about paying for his tax cuts and would end up forfeiting the Democrats’ hard-won reputation for fiscal discipline. Obama aides say he would fully pay for his proposals by, among other things, cracking down on overseas tax havens and corporate tax loopholes.
Either way, the Obama program clearly emphasizes help for the middle class — through tax cuts and new programs — more than deficit reduction. His approach puts him somewhat to the left of the Clinton administration but broadly in line with the Democratic Party now.
Indeed, Mr. Obama and Mrs. Clinton hold similar or identical positions on a host of economic issues, and Democratic economists not aligned with either campaign often speak positively about both.
They each favor subsidies for families without health insurance (though Mrs. Clinton would mandate that everyone has insurance, while Mr. Obama would not). Both have also called for more government regulation of business, somewhat tighter restrictions on foreign trade and more investment in health care infrastructure, alternative-energy research and other basic science.
But the two candidates offer strikingly different strategies for achieving their economic agendas. Mrs. Clinton — drawing on her husband’s first year in the White House, when Congress passed a deficit-reduction package without a single Republican vote — said Democrats needed to be prepared to fight similar battles in the years ahead.
“We’ve got to be really clear that this is a struggle, and this is just not a moment where everybody will see the world the way it should be seen and come together to solve these problems,” she said in a recent interview. “There are powerful forces at work in our society.”
Mr. Obama also talks about overcoming special interests, but he proposes to do so by changing the terms of the debate, energizing disaffected voters and forging a new majority in favor of his programs. He called climate change “a perfect example,” because he would try to persuade Americans to accept some short-term sacrifice while explaining that their energy costs did not have to increase nearly as much as utilities would suggest.
But he would start, he said, by trying to turn the discussion about taxes into an advantage for the Democrats during the general election campaign this year.
“We have to disaggregate tax policy between the wealthy and the working class or middle class,” he said. “We have to be able to say that we are going to at once raise taxes on some people and lower taxes on others.”
He added: “This has been one of the greatest rhetorical sleights of hand of the Republican Party, and it has been a great weakness of the Democratic Party.”
The leading Republican candidates have called for the extension of Mr. Bush’s income tax cuts, saying that their scheduled expiration by the end of 2010 would damage the economy.
Mr. Obama and Mrs. Clinton would extend only the tax cuts for families making less than $250,000 and then use the revenue from the higher taxes on the affluent to help pay for other programs. The Democrats note that high-income workers have received far larger pay increases than others over the past generation and have also had their tax rates cut by a much greater amount.
More so than any other candidate this year, Mr. Obama has surrounded his campaign’s policy team with professional economists (most of them, like him, still shy of their 50th birthdays), as opposed to former White House officials or Congress members.
Several Obama proposals have their roots in an academic field known as behavioral economics, which points out how often people can be tripped up by complex bureaucracies. Mr. Obama sometimes talks about an “iPod government” that can achieve its aims by presenting choices more simply. Under one proposal, Medicare would be required to present its prescription drug plans more clearly, to cut down on the number of people who sign up for a more expensive one than they need.
His interest in “ease, convenience and usability,” he said, came from two sources — his years as a community organizer in Chicago, where he often saw people struggle to understand the choices they had, and his own experience trying to make sense of his 401(k) plan.
Mr. Obama’s father was also an economist, from Kenya, who received his Ph.D. at Harvard. And Mr. Obama’s first job out of college was at a trade publication for multinational businesses, where he was a financial writer.
At times, he can sound like an economic analyst, weaving stories that link seemingly disparate topics. The weak income growth of the last generation, he said, caused many families to dip into their home equity, which led to the crisis in the mortgage market. That crisis, in turn, hurt the balance sheets of American financial firms and forced them to seek cash infusions from overseas governments, which has raised some national-security concerns.
“I don’t think anybody knew exactly how that would get us in trouble,” he said, referring to the increase in consumer debt over the last two decades. “But it was predictable that it would get us in trouble.”
This period includes the late 1990s, when wages rose significantly for workers up and down the income spectrum.
In the interview, Mr. Obama said Mr. Clinton and Robert E. Rubin, the former Treasury secretary, took courageous steps in the early ’90s to lower the deficit and help make the record-long expansion that ran from 1991 to early 2001 possible.
He added that “some of the attacks on the Clinton administration from the left,” accusing it of operating as a group of corporate Democrats, had been unfair.
“They had an economic theory that in part was right — I do think fiscal discipline is important,” Mr. Obama said. “What he wasn’t able to do was address the emerging structural imbalance in our economy — partly due to globalization, partly due to technology and automation — where increasingly the benefits of economic growth were accruing to a smaller band of people.”
Mr. Obama said he would push for more investment in emerging industries, education and worker training — ideas that Mr. Clinton campaigned on in 1992 but mostly backed away from as president to repair the fiscal imbalance.
Mrs. Clinton also favors many of these ideas, in a sign that the Democratic Party has reached something of a consensus on its main economic policy goals. Indeed, Mr. Obama suggested that his cabinet would include a good number of Clinton administration alumni.
“I want an Alan Blinder, and I want a Jacob Hacker, and I want a Bob Rubin, and I want a Robert Reich,” he said, referring to a mix of centrist and more liberal Democratic economic advisers. “And I want a good robust argument about where we need to go.”
Barack Obama
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