Neo-Liberal Timesman on Obama the "Fiscal Conservative"

David Leonhardt obsesses over income inequality and claims that "Relative to McCain...Obama does indeed look like a fiscal conservative."

The Times on Wednesday postedstaff writer David Leonhardt'slong analysis (from the upcoming edition of the Times Sunday Magazine) of Barack Obama's economic priorities, "How Obama Reconciles Dueling Views on Economy." Leonhardt's neo-liberal thinking and obsession with economic inequality marinates throughout his Obama profile. He alsoinsists that while John McCain is an orthodox Republican on economic issues, Obama is unclassifiable, and that in fact Obama looks like "a fiscal conservative" next to McCain (despite Obama carrying one of the most liberal voting records in the Senate).

(Leonhardt, who is also an economics columnist for the Times,wrote a similar long think-piece on the economic thinking of John Edwards lastDecember, a storyrich in liberal assumptions about the danger of relative economic inequality. "Two Americas" Edwards wasn't even called a liberal, but a "populist.")

From the upcoming story on Obama:

John McCain's economic vision, as he has laid it out during the campaign, amounts to a slightly altered version of Republican orthodoxy, with tax cuts at the core. Obama, on the other hand, has more-detailed proposals but a less obvious ideology.

Well before this point on the presidential calendar, it's usually clear where a candidate fits within the political spectrum of his party. With Obama, there is vast disagreement about just how liberal he is, especially on the economy.


Obama's agenda starts not with raising taxes to reduce the deficit, as Clinton's ended up doing, but with changing the tax code so that families making more than $250,000 a year pay more taxes and nearly everyone else pays less. That would begin to address inequality. Then there would be Reich-like investments in alternative energy, physical infrastructure and such, meant both to create middle-class jobs and to address long-term problems like global warming.

All of this raises the question of what will happen to the deficit. Obama's aides optimistically insist he will reduce it, thanks to his tax increases on the affluent and his plan to wind down the Iraq war. Relative to McCain, whose promised spending cuts are extremely vague, Obama does indeed look like a fiscal conservative.

Displaying a familiar labeling tic, Leonhardt called Obama's left-wing proposals like a windfall profits tax on oil companies "populist energy plans," but did admit that "Today's Democratic consensus has moved the party to the left."

Leonhardt also foresees what a subhead terms "The End of the Age of Reagan"

For three decades now, the American economy has been in what the historian Sean Wilentz calls the Age of Reagan. The government has deregulated industries, opened the economy more to market forces and, above all, cut income taxes. Much good has come of this - the end of 1970s stagflation, infrequent and relatively mild recessions, faster growth than that of the more regulated economies of Europe. Yet laissez-faire capitalism hasn't delivered nearly what its proponents promised. It has created big budget deficits, the most pronounced income inequality since the 1920s and the current financial crisis.

Leonhardt doesn't label the Tax Policy Center as left-leaning, even thought it's a research group administered by the liberal Brookings Institution and Urban Institute. He makes sure to put it's striking findings in context, telling readers not to be scared of Obama's hard-to-swallow tax hikes on families earning over $250,000 a year:

He would then pay for the cuts, at least in part, by raising taxes on the affluent to a point where they would eventually be slightly higher than they were under Clinton. For these upper-income families, the Tax Policy Center's comparisons with McCain are even starker. McCain, by continuing the basic thrust of Bush's tax policies and adding a few new wrinkles, would cut taxes for the top 0.1 percent of earners - those making an average of $9.1 million - by another $190,000 a year, on top of the Bush reductions. Obama would raise taxes on this top 0.1 percent by an average of $800,000 a year.

It's hard not to look at that figure and be a little stunned. It would represent a huge tax increase on the wealthy families. But it's also worth putting the number in some context. The bulk of Obama's tax increases on the wealthy - about $500,000 of that $800,000 - would simply take away Bush's tax cuts. The remaining $300,000 wouldn't nearly reverse their pretax income gains in recent years. Since the mid-1990s, their inflation-adjusted pretax income has roughly doubled.

To put it another way, the wealthy have done so well over the past few decades, with their incomes soaring and tax rates plummeting, that Obama's plan would not come close to erasing their gains. The same would be true of households making a few hundred thousand dollars a year (who have gotten smaller raises than the very rich but would also face smaller tax increases). As ambitious as Obama's proposals might be, they would still leave the gap between the rich and everyone else far wider than it was 15 or 30 years ago. It just wouldn't be quite as wide as it is now.

There's a tic among liberal journalists to treat Bush's tax cuts as somehow illegitimate, a kind of unwelcome but temporary anomaly from the default (higher) set of tax rates. This enables them to argue that when a liberal proposes raising taxes, they're not actually raising them, but only rolling back "Bush's tax cuts."

Leonhardt sprinkles the long piece with admissions that not everything liberals believe about the economy is true - yet he concludes by suggesting those old flawed ideas have newfound validity in today's grim economic climate. The background: Obama had just made two arguments to Leonhardt: 1) GDP doesn't measure everything important, and 2)current economic trends are unsustainable and dangerous. Leonhardt reflected:

Both of these points, I realized later, were close cousins of two of the weaker arguments that liberals have made in recent decades. Liberals have at times dismissed the enormous benefits that come with prosperity. And for decades some liberals have been wrongly predicting that economic growth was sure to leave the world without enough food or enough oil or enough something. Obama acknowledged as much, saying that technology had thus far always overcome any concerns about sustainability and that Kennedy's notion had to be tempered with an appreciation of prosperity.

What's new about the current moment, however, is that both of these arguments are actually starting to look relevant. Based on the collective wisdom of scientists, global warming really does seem to be different from any previous environmental crisis. For the first time on record, meanwhile, economic growth has not translated into better living standards for most Americans. These are two enormous challenges that are part of the legacy of the Reagan Age. They will be waiting for the next president, whether he is Obama or McCain, and they'll probably be around for another couple of presidents too.