Paul Krugman’s defense of President Obama

I started reading Paul Krugman’s column in the New York Times during the Bush-Cheney administration, and quickly came to respect him for his incisive and fearless criticism of the administration’s policies.  He didn’t have any insider knowledge—just a willingness to look at the facts and state the obvious.

I don’t read his column regularly any more—partly because the New York Times has gone behind a pay wall and I’m not a subscriber.

Paul Krugman

Recently he wrote a long article entitled In Defense of Obama for Rolling Stone magazine, which, to me, is an example of how progressives have come to think of peace and prosperity as unattainable ideals.

I think it is worth discussing in some detail, but I first want to mention the way Krugman framed his argument.  He wrote that “the left” did not get all it wanted, like somebody going to a restaurant and not finding everything they like on the menu.

For me, it is not a question of the degree to which you satisfy the desires of “the left” and “the right”.  It is a question of whether the USA can halt its descent into authoritarianism, militarism and oligarchy before it is too late.  Obama, in my opinion, has not done this.  In my opinion, he has not even tried.

I know this language sounds exaggerated.  I don’t think it is and, if you follow this web log, you will see the reasons why I think so.

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Now, Krugman on health insurance reform and the Affordable Care Act.

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 [Chief Justice John] 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.  [snip]

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.

Notice what Krugman takes for granted here—that it is necessary to work within the limits of what the health insurance industry is willing to accept.   If this had been assumed in the 1930s or the 1960s, neither Social Security nor Medicare would ever have been enacted.

It’s still not clear whether the new law will be an Affordable Care Act.  It is good that millions of people who previously lacked medical insurance now have it, but millions are locked out of the system, those in the system receive different tiers of quality care, the pharmaceutical industry has been guaranteed monopoly drug prices and the insurance industry has gained a huge captive market.  There may well be many more winners than losers, but why should the U.S. government sort Americans into winners and losers in the first place?

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Next, on financial reform and the Dodd-Frank Act.

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.  [snip]

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.

Note once more what Krugman admits here.  The Obama administration did not exercise what authority it had.  It did not prosecute lawbreakers that were “too big to fail,” which every administration, including the George W. Bush administration, ahd done.

Krug thinks things will be better in the future because government agencies will have new discretionary power to regulate banks.  Maybe so.  But why would you expect the government to use its new powers for the benefit of the public when it failed to use its existing powers?

Note, too, the things that Krugman didn’t mention.  The President never proposed or supported legislation to break up the “too big to fail” banks when their size reached some threshold in relation to the overall economy, or to set minimum capital requirements for the big banks, or to restore the Glass Steagall Act and other laws that held Wall Street in check (to some extent) in earlier eras.

Simple and clear laws are much better than giving new powers to agencies that, in the past, have been captured by the industries they supposedly regulate.

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Next, the economy and the Obama stimulus plan.

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.

… …  Obama … … 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.  [snip]

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.

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.

Notice how Krugman brushed aside Obama’s willingness to cut Social Security and Medicare and his prioritizing of deficit reduction over job growth, just as he brushed aside Obama’s unwillingness to prosecute financial crime, as if that is something that doesn’t matter.

I don’t know of anything that would benefit average Americans that Obama has advocated so tirelessly as cutbacks in Social Security and Medicare as part of a budget balancing bargain.

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Moving right along, Krugman’s defense of Obama’s energy policy

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.

… … 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.

What Krugman does not mention is that President Obama is supporter of hydraulic fracturing for natural gas and of deep water drilling for oil (BP has quietly returned to the Gulf) as part of a strategy to revive the U.S. economy through cheap fossil fuels.  These have much more of an impact than his modest actions on renewable energy.  I will eat these words if he vetoes the Keystone XL pipeline after the November elections, but I’d be very surprised if this happens.

President Obama is a strong supporter of the Trans Pacific Partnership and the Transatlantic Trade and Investment Partnership agreements, which would, in the name of international trade, limit the powers of governments to protect the environment and create international tribunals to which aggrieved corporations could appeal if environmental laws unfairly deprived them of profit.  If enacted, these agreements would more than cancel any of the positive things Krugman mentioned.

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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.  [snip]

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.

This is where I disagree most strongly with Krugman.  I don’t accept as normal that a President claims the right to sign a death warrant to anybody he deems a threat to national security, to drop bombs and arm rebels in countries he deems a threat, to do all this in secret without accountability and to prosecute anyone who reveals the truth of what is being done.

Government spokesmen tell Americans we can expect to be at war for at least 10 more years.  I don’t accept that as normal.

I don’t accept as normal that there is a vast surveillance apparatus, operating in secret and without accountability and, so far as I can tell, more interested in suppressing dissenters than terrorists.  President Obama did not create this apparatus, but he has done nothing to limit its powers.

The worst possibility is that the “deep state” is more powerful than he is, and that he is unable to do anything to curb it.

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Finally, social change.

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.

I agree with Krugman here.

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Paul Krugman sees President Obama as a reformer with good intentions who failed to accomplish everything he desired, but did accomplish something.  I see the President differently.   I see Obama as a brilliant and successful defender of the status quo—a status quo that we Americans cannot afford to regard as normal.

LINKS

In Defense of Obama by Paul Krugman for Rolling Stone

Paul Krugman’s columns in the New York Times

The Conscience of a Liberal, Paul Krugman’s web log.

Paul Krugman: Pictures, Videos, Breaking News on Huffington Post

The Unofficial Paul Krugman Web Page

Krugman Bashes Progressives for Criticizing Obama on the Grounds He Criticizes Obama by Bill Black for New Economic Perspectives.  [added 10/20/14]

 

Tags: Barack Obama, Congressional Budget Office, financial institutions, Health insurance, Obama, Obama stimulus plan, Paul Krugman, President Obama, Social Security