In Defense of Obama
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The Nobel Prize-winning economist,
once one of the president’s most notable critics, on why Obama
is a historic success |
By Paul Krugman |
Rolling Stone |
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President Obama signing the
Affordable Care Act. In our new cover story, Paul Krugman
explores the president's successes.
Win McNamee/Getty |
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When it comes to Barack Obama, I've always
been out of sync. Back in 2008, when many liberals were wildly
enthusiastic about his candidacy and his press was strongly
favorable, I was skeptical. I worried that he was naive, that
his talk about transcending the political divide was a dangerous
illusion given the unyielding extremism of the modern American
right. Furthermore, it seemed clear to me that, far from being
the transformational figure his supporters imagined, he was
rather conventional-minded: Even before taking office, he showed
signs of paying far too much attention to what some of us would
later take to calling Very Serious People, people who regarded
cutting budget deficits and a willingness to slash Social
Security as the very essence of political virtue.
And I wasn't wrong. Obama was indeed naive: He faced
scorched-earth Republican opposition from Day One, and it took
him years to start dealing with that opposition realistically.
Furthermore, he came perilously close to doing terrible things
to the U.S. safety net in pursuit of a budget Grand Bargain; we
were saved from significant cuts to Social Security and a rise
in the Medicare age only by Republican greed, the GOP's
unwillingness to make even token concessions.
But now the shoe is on the other foot: Obama faces trash talk
left, right and center – literally – and doesn't deserve it.
Despite bitter opposition, despite having come close to
self-inflicted disaster, Obama has emerged as one of the most
consequential and, yes, successful presidents in American
history. His health reform is imperfect but still a huge step
forward – and it's working better than anyone expected.
Financial reform fell far short of what should have happened,
but it's much more effective than you'd think. Economic
management has been half-crippled by Republican obstruction, but
has nonetheless been much better than in other advanced
countries. And environmental policy is starting to look like it
could be a major legacy.
I'll go through those achievements shortly. First, however,
let's take a moment to talk about the current wave of
Obama-bashing. All Obama-bashing can be divided into three
types. One, a constant of his time in office, is the onslaught
from the right, which has never stopped portraying him as an
Islamic atheist Marxist Kenyan. Nothing has changed on that
front, and nothing will.
There's a different story on the left, where you now find a
significant number of critics decrying Obama as, to quote Cornel
West, someone who ''posed as a progressive and turned out to be
counterfeit.'' They're outraged that Wall Street hasn't been
punished, that income inequality remains so high, that
''neoliberal'' economic policies are still in place. All of this
seems to rest on the belief that if only Obama had put his
eloquence behind a radical economic agenda, he could somehow
have gotten that agenda past all the political barriers that
have con- strained even his much more modest efforts. It's hard
to take such claims seriously.
Finally, there's the constant belittling of Obama from
mainstream pundits and talking heads. Turn on cable news
(although I wouldn't advise it) and you'll hear endless talk
about a rudderless, stalled administration, maybe even about a
failed presidency. Such talk is often buttressed by polls
showing that Obama does, indeed, have an approval rating that is
very low by historical standards.
But this bashing is misguided even in its own terms – and in any
case, it's focused on the wrong thing.
Yes, Obama has a low approval rating compared with earlier
presidents. But there are a number of reasons to believe that
presidential approval doesn't mean the same thing that it used
to: There is much more party-sorting (in which Republicans
never, ever have a good word for a Democratic president, and
vice versa), the public is negative on politicians in general,
and so on. Obviously the midterm election hasn't happened yet,
but in a year when Republicans have a huge structural advantage
– Democrats are defending a disproportionate number of Senate
seats in deep-red states – most analyses suggest that control of
the Senate is in doubt, with Democrats doing considerably better
than they were supposed to. This isn't what you'd expect to see
if a failing president were dragging his party down.
More important, however, polls – or even elections – are not the
measure of a president. High office shouldn't be about putting
points on the electoral scoreboard, it should be about changing
the country for the better. Has Obama done that? Do his
achievements look likely to endure? The answer to both questions
is yes.
HEALTH CARE
When Obama signed the Affordable Care Act, an excited Joe Biden
whispered audibly, ''This is a big fucking deal!'' He was right.
The enactment and implementation of the Affordable Care Act,
a.k.a. Obamacare, has been a perils-of-Pauline experience. When
an upset in the special election to replace Ted Kennedy cost
Democrats their 60-vote Senate majority, health reform had to be
rescued with fancy legislative footwork. Then it survived a
Supreme Court challenge only thanks to a surprise display of
conscience by John Roberts, who nonetheless opened a loophole
that has allowed Republican-controlled states to deny coverage
to millions of Americans. Then technical difficulties with the
HealthCare.gov website seemed to threaten disaster. But here we
are, most of the way through the first full year of reform's
implementation, and it's working better than even the optimists
expected.
We won't have the full data on 2014 until next year's census
report, but multiple independent surveys show a sharp drop in
the number of Americans without health insurance, probably
around 10 million, a number certain to grow greatly over the
next two years as more people realize that the program is
available and penalties for failure to sign up increase.
It's true that the Affordable Care Act will still leave millions
of people in America uninsured. For one thing, it was never
intended to cover undocumented immigrants, who are counted in
standard measures of the uninsured. Furthermore, millions of
low-income Americans will slip into the loophole Roberts
created: They were supposed to be covered by a federally funded
expansion of Medicaid, but some states are blocking that
expansion out of sheer spite. Finally, unlike Social Security
and Medicare, for which almost everyone is automatically
eligible, Obamacare requires beneficiaries to prove their
eligibility for Medicaid or choose and then pay for a subsidized
private plan. Inevitably, some people will fall through the
cracks.
Still, Obamacare means a huge improvement in the quality of life
for tens of millions of Americans – not just better care, but
greater financial security. And even those who were already
insured have gained both security and freedom, because they now
have a guarantee of coverage if they lose or change jobs.
What about the costs? Here, too, the news is better than anyone
expected. In 2014, premiums on the insurance policies offered
through the Obamacare exchanges were well below those originally
projected by the Congressional Budget Office, and the available
data indicates a mix of modest increases and actual reductions
for 2015 – which is very good in a sector where premiums
normally increase five percent or more each year. More broadly,
overall health spending has slowed substantially, with the
cost-control features of the ACA probably deserving some of the
credit.
In other words, health reform is looking like a major policy
success story. It's a program that is coming in ahead of
schedule – and below budget – costing less, and doing more to
reduce overall health costs than even its supporters predicted.
Of course, this success story makes nonsense of right-wing
predictions of catastrophe. Beyond that, the good news on health
costs refutes conservative orthodoxy. It's a fixed idea on the
right, sometimes echoed by ''centrist'' commentators, that the
only way to limit health costs is to dismantle guarantees of
adequate care – for example, that the only way to control
Medicare costs is to replace Medicare as we know it, a program
that covers major medical expenditures, with vouchers that may
or may not be enough to buy adequate insurance. But what we're
actually seeing is what looks like significant cost control via
a laundry list of small changes to how we pay for care, with the
basic guarantee of adequate coverage not only intact but widened
to include Americans of all ages.
It's worth pointing out that some criticisms of Obamacare from
the left are also looking foolish. Obamacare is a system partly
run through private insurance companies (although expansion of
Medicaid is also a very important piece). And some on the left
were outraged, arguing that the program would do more to raise
profits in the medical-industrial complex than it would to
protect American families.
You can still argue that single-payer would have covered more
people at lower cost – in fact, I would. But that option wasn't
on the table; only a system that appeased insurers and reassured
the public that not too much would change was politically
feasible. And it's working reasonably well: Competition among
insurers who can no longer deny insurance to those who need it
most is turning out to be pretty effective. This isn't the
health care system you would have designed from scratch, or if
you could ignore special-interest politics, but it's doing the
job.
And this big improvement in American society is almost surely
here to stay. The conservative health care nightmare – the one
that led Republicans to go all-out against Bill Clinton's health
plans in 1993 and Obamacare more recently – is that once health
care for everyone, or almost everyone, has been put in place, it
will be very hard to undo, because too many voters would have a
stake in the system. That's exactly what is happening.
Republicans are still going through the motions of attacking
Obamacare, but the passion is gone. They're even offering
mealymouthed assurances that people won't lose their new
benefits. By the time Obama leaves office, there will be tens of
millions of Americans who have benefited directly from health
reform – and that will make it almost impossible to reverse.
Health reform has made America a different, better place.
FINANCIAL REFORM
Let's be clear: The financial crisis should have been followed
by a drastic crackdown on Wall Street abuses, and it wasn't. No
important figures have gone to jail; bad banks and other
financial institutions, from Citigroup to Goldman, were bailed
out with few strings attached; and there has been nothing like
the wholesale restructuring and reining in of finance that took
place in the 1930s. Obama bears a considerable part of the blame
for this disappointing response. It was his Treasury secretary
and his attorney general who chose to treat finance with kid
gloves.
It's easy, however, to take this disappointment too far. You
often hear Dodd- Frank, the financial-reform bill that Obama
signed into law in 2010, dismissed as toothless and meaningless.
It isn't. It may not prevent the next financial crisis, but
there's a good chance that it will at least make future crises
less severe and easier to deal with.
Dodd-Frank is a complicated piece of legislation, but let me
single out three really important sections.
First, the law gives a special council the ability to designate
''systemically important financial institutions'' (SIFIs) – that
is, institutions that could create a crisis if they were to fail
– and place such institutions under extra scrutiny and
regulation of things like the amount of capital they are
required to maintain to cover possible losses. This provision
has been derided as ineffectual or worse – during the 2012
presidential campaign, Mitt Romney claimed that by announcing
that some firms were SIFIs, the government was effectively
guaranteeing that they would be bailed out, which he called
''the biggest kiss that's been given to New York banks I've ever
seen.''
But it's easy to prove that this is nonsense: Just look at how
institutions behave when they're designated as SIFIs. Are they
pleased, because they're now guaranteed? Not a chance. Instead,
they're furious over the extra regulation, and in some cases
fight bitterly to avoid being placed on the list. Right now, for
example, MetLife is making an all-out effort to be kept off the
SIFI list; this effort demonstrates that we're talking about
real regulation here, and that financial interests don't like
it.
Another key provision in Dodd-Frank is ''orderly liquidation
authority,'' which gives the government the legal right to seize
complex financial institutions in a crisis. This is a bigger
deal than you might think. We have a well-established procedure
for seizing ordinary banks that get in trouble and putting them
into receivership; in fact, it happens all the time. But what do
you do when something like Citigroup is on the edge, and its
failure might have devastating consequences? Back in 2009,
Joseph Stiglitz and yours truly, among others, wanted to
temporarily nationalize one or two major financial players, for
the same reasons the FDIC takes over failing banks, to keep the
institutions running but avoid bailing out stockholders and
management. We got a chance to make that case directly to the
president. But we lost the argument, and one key reason was
Treasury's claim that it lacked the necessary legal authority. I
still think it could have found a way, but in any case that
won't be an issue next time.
A third piece of Dodd-Frank is the Consumer Financial Protection
Bureau. That's Elizabeth Warren's brainchild, an agency
dedicated to protecting Americans against the predatory lending
that has pushed so many into financial distress, and played an
important role in the crisis. Warren's idea was that such a
stand-alone agency would more effectively protect the public
than agencies that were supposed to protect consumers, but saw
their main job as propping up banks. And by all accounts the new
agency is in fact doing much more to crack down on predatory
practices than anything we used to see.
There's much more in the financial reform, including a number of
pieces we don't have enough information to evaluate yet. But
there's enough evidence even now to say that there's a reason
Wall Street – which used to give an approximately equal share of
money to both parties but now overwhelmingly supports
Republicans – tried so hard to kill financial reform, and is
still trying to emasculate Dodd-Frank. This may not be the full
overhaul of finance we should have had, and it's not as major as
health reform. But it's a lot better than nothing.
THE ECONOMY
Barack Obama might not have been elected president without the
2008 financial crisis; he certainly wouldn't have had the House
majority and the brief filibuster-proof Senate majority that
made health reform possible. So it's very disappointing that six
years into his presidency, the U.S. economy is still a long way
from being fully recovered.
Before we ask why, however, we should note that things could
have been worse. In fact, in other times and places they have
been worse. Make no mistake about it – the devastation wrought
by the financial crisis was terrible, with real income falling
5.5 percent. But that's actually not as bad as the ''typical''
experience after financial crises: Even in advanced countries,
the median post-crisis decline in per- capita real GDP is seven
percent. Recovery has been slow: It took almost six years for
the United States to regain pre-crisis average income. But that
was actually a bit faster than the historical average.
Or compare our performance with that of the European Union.
Unemployment in America rose to a horrifying 10 percent in 2009,
but it has come down sharply in the past few years. It's true
that some of the apparent improvement probably reflects
discouraged workers dropping out, but there has been substantial
real progress. Meanwhile, Europe has had barely any job recovery
at all, and unemployment is still in double digits. Compared
with our counterparts across the Atlantic, we haven't done too
badly.
Did Obama's policies contribute to this less-awful performance?
Yes, without question. You'd never know it listening to the
talking heads, but there's overwhelming consensus among
economists that the Obama stimulus plan helped mitigate the
worst of the slump. For example, when a panel of economic
experts was asked whether the U.S. unemployment rate was lower
at the end of 2010 than it would have been without the stimulus,
82 percent said yes, only two percent said no.
Still, couldn't the U.S. economy have done a lot better? Of
course. The original stimulus should have been both bigger and
longer. And after Republicans won the House in 2010, U.S. policy
took a sharp turn in the wrong direction. Not only did the
stimulus fade out, but sequestration led to further steep cuts
in federal spending, exactly the wrong thing to do in a
still-depressed economy.
We can argue about how much Obama could have altered this
literally depressing turn of events. He could have pushed for a
larger, more extended stimulus, perhaps with provisions for
extra aid that would have kicked in if unemployment stayed high.
(This isn't 20-20 hindsight, because a number of economists,
myself included, pleaded for more aggressive measures from the
beginning.) He arguably let Republicans blackmail him over the
debt ceiling in 2011, leading to the sequester. But this is all
kind of iffy.
The bottom line on Obama's economic policy should be that what
he did helped the economy, and that while enormous economic and
human damage has taken place on his watch, the United States
coped with the financial crisis better than most countries
facing comparable crises have managed. He should have done more
and better, but the narrative that portrays his policies as a
simple failure is all wrong.
While America remains an incredibly unequal society, and we
haven't seen anything like the New Deal's efforts to narrow
income gaps, Obama has done more to limit inequality than he
gets credit for. The rich are paying higher taxes, thanks to the
partial expiration of the Bush tax cuts and the special taxes on
high incomes that help pay for Obamacare; the Congressional
Budget Office estimates the average tax rate of the top one
percent at 33.6 percent in 2013, up from 28.1 percent in 2008.
Meanwhile, the financial aid in Obamacare – expanded Medicaid,
subsidies to help lower-income households pay insurance premiums
– goes disproportionately to less-well-off Americans. When
conservatives accuse Obama of redistributing income, they're not
completely wrong – and liberals should give him credit.
THE ENVIRONMENT
In 2009, it looked, briefly, as if we might be about to get real
on the issue of climate change. A fairly comprehensive bill
establishing a cap-and-trade system to limit greenhouse-gas
emissions actually passed the House, and visions of global
action danced like sugarplums in environmentalists' heads. But
the legislation stalled in the Senate, and Republican victory in
the 2010 midterms put an end to that fantasy. Ever since, the
only way forward has been through executive action based on
existing legislation, which is a poor substitute for the new
laws we need.
But as with financial reform, acknowledging the inadequacy of
what has been done doesn't mean that nothing has been achieved.
Saying that Obama has been the best environmental president in a
long time is actually faint praise, since George W. Bush was
terrible and Bill Clinton didn't get much done. Still, it's
true, and there's reason to hope for a lot more over the next
two years.
First of all, there has been much more progress on the use of
renewable energy than most people realize. The share of U.S.
energy provided by wind and solar has grown dramatically since
Obama took office. True, it's still only a small fraction of the
total, and some of the growth in renewables reflects
technological progress, especially in solar panels, that would
have happened whoever was in office. But federal policies,
including loan guarantees and tax credits, have played an
important role.
Nor is it just about renewables; Obama has also taken big steps
on energy conservation, especially via fuel-efficiency
standards, that have flown, somewhat mysteriously, under the
radar. And it's not just cars. In 2011, the administration
announced the first-ever fuel-efficiency standards for medium
and heavy vehicles, and in February it announced that these
standards would get even tougher for models sold after 2018. As
a way to curb green house-gas emissions, these actions, taken
together, are comparable in importance to proposed action on
power plants.
Which brings us to the latest initiative. Because there's no
chance of getting climate-change legislation through Congress
for the foreseeable future, Obama has turned to the EPA's
existing power to regulate pollution – power that the Supreme
Court has affirmed extends to emissions of carbon dioxide and
other greenhouse gases. And this past summer, the EPA announced
proposed rules that would require a large reduction over time in
such emissions from power plants. You might say that such plants
are only a piece of the problem, but they're a large piece – CO2
from coal-burning power plants is in fact a big part of the
problem, so if the EPA goes through with anything like the
proposed rule, it will be a major step. Again, not nearly
enough, and we'll have to do a lot more soon, or face
civilization-threatening disaster. But what Obama has done is
far from trivial.
NATIONAL SECURITY
So far, i've been talking about Obama's positive achievements,
which have been much bigger than his critics understand. I do,
however, need to address one area that has left some early Obama
supporters bitterly disappointed: his record on national
security policy. Let's face it – many of his original
enthusiasts favored him so strongly over Hillary Clinton because
she supported the Iraq War and he didn't. They hoped he would
hold the people who took us to war on false pretenses
accountable, that he would transform American foreign policy,
and that he would drastically curb the reach of the national
security state.
None of that happened. Obama's team, as far as we can tell,
never even considered going after the deceptions that took us to
Baghdad, perhaps because they believed that this would play very
badly at a time of financial crisis. On overall foreign policy,
Obama has been essentially a normal post-Vietnam president,
reluctant to commit U.S. ground troops and eager to extract them
from ongoing commitments, but quite willing to bomb people
considered threatening to U.S. interests. And he has defended
the prerogatives of the NSA and the surveillance state in
general.
Could and should he have been different? The truth is that I
have no special expertise here; as an ordinary concerned
citizen, I worry about the precedent of allowing what amount to
war crimes to go not just unpunished but uninvestigated, even
while appreciating that a modern version of the 1970s Church
committee hearings on CIA abuses might well have been a
political disaster, and undermined the policy achievements I've
tried to highlight. What I would say is that even if Obama is
just an ordinary president on national security issues, that's a
huge improvement over what came before and what we would have
had if John McCain or Mitt Romney had won. It's hard to get
excited about a policy of not going to war gratuitously, but
it's a big deal compared with the alternative.
SOCIAL CHANGE
In 2004, social issues, along with national security, were
cudgels the right used to bludgeon liberals – I like to say that
Bush won re-election by posing as America's defender against gay
married terrorists. Ten years later, and the scene is
transformed: Democrats have turned these social issues –
especially women's rights – against Republicans; gay marriage
has been widely legalized with approval or at least indifference
from the wider public. We have, in a remarkably short stretch of
time, become a notably more tolerant, open-minded nation.
Barack Obama has been more a follower than a leader on these
issues. But at least he has been willing to follow the country's
new open-mindedness. We shouldn't take this for granted. Before
the Obama presidency, Democrats were in a kind of reflexive
cringe on social issues, acting as if the religious right had
far more power than it really does and ignoring the growing
constituency on the other side. It's easy to imagine that if
someone else had been president these past six years, Democrats
would still be cringing as if it were 2004. Thankfully, they
aren't. And the end of the cringe also, I'd argue, helped
empower them to seek real change on substantive issues from
health reform to the environment. Which brings me back to
domestic issues.
As you can see, there's a theme running through each of the
areas of domestic policy I've covered. In each case, Obama
delivered less than his supporters wanted, less than the country
arguably deserved, but more than his current detractors
acknowledge. The extent of his partial success ranges from the
pretty good to the not-so-bad to the ugly. Health reform looks
pretty good, especially in historical perspective – remember,
even Social Security, in its original FDR version, only covered
around half the workforce. Financial reform is, I'd argue, not
so bad – it's not the second coming of Glass-Steagall, but
there's a lot more protection against runaway finance than
anyone except angry Wall Streeters seems to realize. Economic
policy wasn't enough to avoid a very ugly period of high
unemployment, but Obama did at least mitigate the worst.
And as far as climate policy goes, there's reason for hope, but
we'll have to see.
Am I damning with faint praise? Not at all. This is what a
successful presidency looks like. No president gets to do
everything his supporters expected him to. FDR left behind a
reformed nation, but one in which the wealthy retained a lot of
power and privilege. On the other side, for all his
anti-government rhetoric, Reagan left the core institutions of
the New Deal and the Great Society in place. I don't care about
the fact that Obama hasn't lived up to the golden dreams of
2008, and I care even less about his approval rating. I do care
that he has, when all is said and done, achieved a lot. That is,
as Joe Biden didn't quite say, a big deal. |
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