Interesting Article About Obama's Economic Ideology

[Mr. Peabody]

For those of you interested in Obama's economic underpinnings, here is a great article from the New York Times. I have included excerpts and a link to the much longer article.

The article seems to take some of the wind out of the argument that Obama is merely proposing a typical left-wing economic agenda. An interesting read.

Entire Article:http://www.nytimes.com/2008/08/24/ma...gewanted=print

Starting in the early 1990s, Obama spent 12 years at the University of Chicago, mostly as a senior lecturer on cons utional law. It was a part-time job that helped him make money while he began to build his political career. But it also happened to place him inside what is arguably the intellectual center of modern American economic conservatism, the home of Milton Friedman and the laissez-faire philosophy known as the Chicago School of economics. By all accounts, Obama didn’t spend much time with Friedman’s disciples at the law school. Instead, he became friendly with another crowd: liberals who had come to think that Friedman was right about a lot, just not everything.

The Chicago School believes that markets — that is, millions of individuals making separate decisions — almost always function better than economies that are managed by governments. In a market system, prices adjust whenever there is a shortage or a glut, and the problem soon resolves itself. Just as important, companies constantly compete with each other, which helps bring down prices, improves the quality of goods and ultimately lifts living standards.

In its more extreme forms, the Chicago School’s ideas have some obvious flaws. History has shown that free markets aren’t so good at, say, preventing pollution or the issuance of fantastically unrealistic mortgages. But over the last few decades, as Europe’s regulated economies have struggled and Asia’s move toward capitalism has spurred its fabulous boom, many liberals have also come to appreciate the virtues of markets.

One of these liberals is Cass Sunstein, a prolific law professor who sometimes ate with Obama in the open, sunlit cafeteria off the lobby of the main building at Chicago’s law school. Over sandwiches in that cafeteria this spring, Sunstein told me that he didn’t think that Obama arrived at the law school as an old-style liberal or departed as anything like a Friedmanite. Yet Sunstein and other former Chicago colleagues I spoke with said they believed that Chicago had helped give Obama an intellectual framework for his instincts, at the least, and probably made him come to appreciate markets more.

Obama, when I asked him, agreed that his years surrounded by Chicago School thinking affected him. He tends to assign his motives to more intimate narratives, though, and he said that his grandmother, a high-school graduate who rose to become the vice president of a bank and was the family’s main breadwinner, had the biggest impact. “She had to think very practically about, How do you make money?” he told me. “How does the system work? That led me to have an orientation to ask hardheaded questions. During my formative years, there was still ideological compe ion between a social-democratic or even socialist agenda and a free-market, Milton Friedman agenda. I think it was natural for me to ask questions of both sides and maybe try to synthesize approaches.”

There is plenty of evidence that this synthesis isn’t merely a part of a candidate’s inevitable tack to the center for a general election. In Obama’s memoir, “Dreams From My Father,” he sympathetically recounts a conversation he had with a Kenyan farmer, in which the man complains both about rich people who won’t pay their fair share of taxes and about burdensome government regulations on coffee growing. In Obama’s second book, “The Audacity of Hope,” he goes further: “Reagan’s central insight — that the liberal welfare state had grown complacent and overly bureaucratic, with Democratic policy makers more obsessed with slicing the economic pie than with growing that pie — contained a good deal of truth.”

The partial embrace of Reaganomics is a typical bit of Obama’s postpartisan veneer. In a single artful sentence, he dismissed the old liberals, aligned himself with the Bill Clinton centrists and did so by reaching back to a conservative icon who remains widely popular. But the words have significance at face value too. Compared with many other Democrats, Obama simply is more comfortable with the apparent successes of laissez-faire economics.

Sunstein, now on the faculty at Harvard, has a name for this approach: “I like to think of him as a ‘University of Chicago’ Democrat.”

It’s a useful label. Today’s Democratic consensus has moved the party to the left, and on issues like inequality and climate change, Obama appears willing to be even more aggressive than many fellow Democrats. From this standpoint, he’s a true liberal. Yet he also says he believes that there are significant parts of Reaganism worth preserving. So his policies often involve setting up a government program to address a market failure but then trying to harness the power of the market within that program. This, at times, makes him look like a conservative Democrat.

....

As anyone who has spent time with Obama knows, he likes experts, and his choice of advisers stems in part from his interest in empirical research. (James Heckman, a Nobel laureate who critiqued the campaign’s education plan at Goolsbee’s request, said, “I’ve never worked with a campaign that was more interested in what the research shows.”) By surrounding himself with economists, however, Obama was also making a decision with ideological consequences. Far more than many other policy advisers, economists believe in the power of markets. What tends to distinguish Democratic economists is that they set out to uncover imperfections of the market and then come up with incremental, market-based solutions to these imperfections. This helps explain the Obama campaign’s interest in behavioral economics, a relatively new field that has pointed out many ways in which people make irrational, short-term decisions. To deal with one example of such myopia, Obama would require companies to automatically set aside a portion of their workers’ salary in a 401(k) plan. Any worker could override the decision — and save nothing at all or save even more — but the default would be to save.

A more controversial version of Obama’s market friendliness came from his health-care proposal, which, unlike Hillary Clinton’s, would not mandate that people have health insurance. Like other Democrats, he was pushing for a big government program to deal with what he saw as market failures in health care and to bring down the price of insurance. Once the program was in place, though, he trusted a market of individuals to make its own decisions; once the government had subsidized health insurance, he thought the vast majority of the uninsured would sign up.
. . . .
Dating back to Reagan, Republicans have packaged tax cuts on high earners with more modest middle-class tax cuts and then maneuvered the Democrats into an unwinnable choice: are you for tax cuts or against them? Obama, however, argues that this is the moment when the politics of taxes can be changed.

To do this, he is proposing tax cuts for most families that are significantly larger than those McCain is offering, along with major tax increases for families making more than $250,000 a year. “That’s essentially a major part of our economic plan,” Obama said. “But it’s also a political message.” Economically, he is trying to use the tax code to spread the bounty from the market-based American economy to a far wider group of families. Politically, he is trying to drive a wedge through the great Reagan tax gambit.

The Tax Policy Center, a research group run by the Brookings Ins ution and the Urban Ins ute, has done the most detailed analysis of the Obama and McCain tax plans, and it has published a series of fascinating tables. For the bottom 80 percent of the population — those households making $118,000 or less — McCain’s various tax cuts would mean a net savings of about $200 a year on average. Obama’s proposals would bring $900 a year in savings. So for most people, Obama is the tax cutter in this campaign.

If there is a theme to the Obama tax philosophy, it’s that the tax code is not quite as progressive as you think it is. Most of the public discussion about taxes tends to focus on the income tax, which taxes the affluent at a considerably higher rate than anyone else. But the income tax doesn’t take the biggest bite out of most families’ annual tax bill. The payroll tax does. And even as the federal government has been reducing income taxes over the last few decades, it has allowed the payroll tax, which finances Social Security and Medicare, to creep up. That’s a big reason that overall tax rates for the bottom 80 percent of earners have not fallen as much as rates for the affluent.

Obama’s second-most-expensive proposal, after his health-care plan, is the equivalent of a $500 cut in the payroll tax for most workers. (It is actually a credit that is applied toward income taxes based on payroll taxes paid.) In a speech this month in Florida, he proposed that the cut take effect immediately, in the form of a rebate, to stimulate the economy. For most workers, it would be the first significant cut in the payroll tax in decades, if not ever.

The other way that he would cut taxes involves a series of technicalities. But since the campaign began, Goolsbee has been arguing that those technicalities offer one of the best glimpses of how Obama thinks about the tax code. Right now, several big tax breaks that sound broad-based — like those for child care and mortgage interest — don’t always benefit middle-income and lower-income families. Another example is the Hope Credit for college tuition, a creation of the Clinton administration. Obama wants to more than double the credit, to $4,000. More to the point, he would make it “fully refundable.” As a result, a family with an income-tax bill of $3,000 wouldn’t merely have that bill eliminated; it would also receive a $1,000 check. Increasingly, the income-tax system becomes a way to transfer money to poor families.

All told, Obama would not only cut taxes for most people more than McCain would. He would cut them more than Bill Clinton did and more than Hillary Clinton proposed doing. These tax cuts are really the essence of his market-oriented redistributionist philosophy (though he made it clear that he doesn’t like the word “redistributionist”). They are an attempt to address the middle-class squeeze by giving people a chunk of money to spend as they see fit.

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.

[FromWayDowntown]

No, no, no! Obama is a socialist, nay, a communist! Don't you know anything!?!?!?

[Mr. Peabody]

No, no, no! Obama is a socialist, nay, a communist! Don't you know anything!?!?!?

I know what you mean. I was torn. As I was reading the article I kept thinking "This isn't what Sean Hannity tells me during my drive home during his 'Stop Obama Express.' And how can I doubt the veracity of a program with such a moniker." But it seemed like a good article and I am sure that the newspaper version has a picture or two. I tend to trust things that have pictures. You know like picture books, books with pictures, and articles about Barack Obama with pictures.

[101A]

Take $800,000 from one person and spread it around in $900 parcels to nearly 900 other citizens.

Very enlightened (and, btw, convenient in a Democracy). Those 900 beneficiaries then thank Obama; and NOT the person who actually earned the money they are receiving.

How low DO taxes for most Americans need to be before it is considered "fair"?

After Obama gets elected, sticks it to those evil rich people, and they pay an even bigger share of everybody's burden, THEN what will Dems run on when there are still people with bigger cars, boats and houses than most?

You guessed it, EVEN higher taxes for those bas s. All the while, they take those people's money, and distribute it to the population for favors and votes (and wealth, let's not forget how economically fortunate our legilators become AFTER they get elected).

Cutting payroll taxes on most Americans while SS and Medicare steamroll to bankruptcy - and counting on a handfull of the ultra rich to foot the bill is truly a brilliant idea; it's not like those people have the means and intelligence to figure out a way to shield themselves from that or anything.

[Anti.Hero]

He wants oil companies to give everyone $1k back! And he wants to raise capital gains tax rates!

That's all I need to know to predict what direction he will take the economy. I'll leave the NYT to ease my worries for someone else.


This hate on the wealthy, which in reality is an attack on the middle-class, will eventually backfire on the dems. There will come a point where the actual working get fed up enough that they will start to hate the poor. Just gotta wait till the pendulum swings back that way.

[clambake]

This hate on the wealthy, which in reality is an attack on the middle-class,

is it middle-class or wealthy? what number would you need to be considered middle-class? we already know what number describes the wealthy

whats wrong with raising taxes on capital gains? i don't mind pitching in.

[Anti.Hero]

whats wrong with raising taxes on capital gains? i don't mind pitching in.

If you have to ask, you have already lost the argument. Sorryz


The wealthy don't give a about the tax talk. They are smart enough to find the loopholes and get above it (remember, rich guvment guy will always leave those little loopholes in for rich friend down the street). When they look at a 15% increase in capital gains tax, those entrepreneurial investments aren't nearly as enticing...among other things. Not when they can shift their money into less riskier stuff with just as much of a return. That's really going to boost the economy.

And then there's the part of not even increasing tax revenue a lot of the time by increasing capital gains tax. Ask yourself! What reason does my government have on raising capital gains tax if it will not raise tax revenue. Connect the dots!


Capital gains, investments are an amazing tool for a newcomer to quickly build wealth through hard work, intelligence, and luck. Just another example of the libs wanting to keep common man down by telling them they are attacking rich whitey. I believe this 100%.

[clambake]

If you have to ask, you have already lost the argument. Sorryz

you misinterpreted my statement. i don't mind doing my part to help this for economy.

The wealthy don't give a about the tax talk. They are smart enough to find the loopholes and get above it (remember, rich guvment guy will always leave those little loopholes in for rich friend down the street). When they look at a 15% increase in capital gains tax, those entrepreneurial investments aren't nearly as enticing...among other things. Not when they can shift their money into less riskier stuff with just as much of a return. That's really going to boost the economy.

the loops are beginning to close already. if we reign in the corp. greed we might start getting our dividends and distributions again.

Capital gains, investments are an amazing tool for a newcomer to quickly build wealth through hard work, intelligence, and luck. Just another example of the libs wanting to keep common man down by telling them they are attacking rich whitey. I believe this 100%.

you can still do this without screaming fire.

[101A]

you misinterpreted my statement. i don't mind doing my part to help this for economy.

Tax increases DO NOT stimulate an economy, that is why the recent, bipartisan, stimulus package called for the govt. to send US checks, not the other way around.

[RandomGuy]

If you have to ask, you have already lost the argument. Sorryz


The wealthy don't give a about the tax talk. They are smart enough to find the loopholes and get above it (remember, rich guvment guy will always leave those little loopholes in for rich friend down the street). When they look at a 15% increase in capital gains tax, those entrepreneurial investments aren't nearly as enticing...among other things. Not when they can shift their money into less riskier stuff with just as much of a return. That's really going to boost the economy.

And then there's the part of not even increasing tax revenue a lot of the time by increasing capital gains tax. Ask yourself! What reason does my government have on raising capital gains tax if it will not raise tax revenue. Connect the dots!


Capital gains, investments are an amazing tool for a newcomer to quickly build wealth through hard work, intelligence, and luck. Just another example of the libs wanting to keep common man down by telling them they are attacking rich whitey. I believe this 100%.

One can earn income either through providing capital to the economy or providing labor to the economy.

If you tax capital at a rate lower than you tax labor then you are essentially telling people who work for a living but don't have enough money to save much that their labor income should be taxed at a rate higher than the capital gains income for billionaires like Warren Buffet.

“The 400 of us [here] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”--W.B. speaking to a group of large investors in 2007

I respect Mr. Buffet's common sense approach to such things immensely.

[RandomGuy]

Tax increases DO NOT stimulate an economy, that is why the recent, bipartisan, stimulus package called for the govt. to send US checks, not the other way around.

Is government spending a component of GDP?

[101A]

One can earn income either through providing capital to the economy or providing labor to the economy.

If you tax capital at a rate lower than you tax labor then you are essentially telling people who work for a living but don't have enough money to save much that their labor income should be taxed at a rate higher than the capital gains income for billionaires like Warren Buffet.

“The 400 of us [here] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”--W.B. speaking to a group of large investors in 2007

I respect Mr. Buffet's common sense approach to such things immensely.

I don't consider giving to the govt. "Humanitarian", or noble in ANY way.

I think this is a major difference in the basic beliefs of liberals and conservatives.

EVERYTHING Buffet says should be taken with a grain of salt in this election. HE has a LARGE interest in the inheritance tax going back up.

[RandomGuy]

Take $800,000 from one person and spread it around in $900 parcels to nearly 900 other citizens.

Very enlightened (and, btw, convenient in a Democracy). Those 900 beneficiaries then thank Obama; and NOT the person who actually earned the money they are receiving.

How low DO taxes for most Americans need to be before it is considered "fair"?

After Obama gets elected, sticks it to those evil rich people, and they pay an even bigger share of everybody's burden, THEN what will Dems run on when there are still people with bigger cars, boats and houses than most?

You guessed it, EVEN higher taxes for those bas s. All the while, they take those people's money, and distribute it to the population for favors and votes (and wealth, let's not forget how economically fortunate our legilators become AFTER they get elected).

Cutting payroll taxes on most Americans while SS and Medicare steamroll to bankruptcy - and counting on a handfull of the ultra rich to foot the bill is truly a brilliant idea; it's not like those people have the means and intelligence to figure out a way to shield themselves from that or anything.

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.

So basically, the people who are going to be taxed most are the people who (gasp) have benefitted most from our economy, and they will STILL be better off than they were a decade ago.

Can you say that about the middle class?

[RandomGuy]

I don't consider giving to the govt. "Humanitarian", or noble in ANY way.

I think this is a major difference in the basic beliefs of liberals and conservatives.

EVERYTHING Buffet says should be taken with a grain of salt in this election. HE has a LARGE interest in the inheritance tax going back up.

No, he doesn't. Remember that he gave away the bulk of his fortune to the Gates Foundation.

[101A]

Also, Buffet is obviously referring to payroll taxes (including the employer match), to come to his conclusion, right?

Whose ing fault in Medicare and Social Security? Certainly not conservatives!

The fact that those are bloated programs, out of control, requiring VAST sums of money to fund are simply "I told you so's" at this point; now the model in which those funds are collected is being brought into question; it is no longer a plan, paid for by a person during their working lives for retirement; it is rapidly now devolving into a standard govt. program, and is now going to be subject to the same "progressive" scheme the rest of our country is being funded under. Why don't we go ahead and start means testing the people who are going to be funding it right out now, as well?

[RandomGuy]

I don't consider giving to the govt. "Humanitarian", or noble in ANY way.

I think this is a major difference in the basic beliefs of liberals and conservatives.

EVERYTHING Buffet says should be taken with a grain of salt in this election. HE has a LARGE interest in the inheritance tax going back up.

Then move to Somalia. They don't have a government there to pay money to. Go ahead. Let me know how that works out.

Government is where we organize to do things that we can't individually.

Do we or do we not have collective interests as a society?

[Mr. Peabody]

I
The wealthy don't give a about the tax talk. They are smart enough to find the loopholes and get above it (remember, rich guvment guy will always leave those little loopholes in for rich friend down the street). When they look at a 15% increase in capital gains tax, those entrepreneurial investments aren't nearly as enticing...among other things. Not when they can shift their money into less riskier stuff with just as much of a return. That's really going to boost the economy.

Maybe you are misinformed about his plan. His plan is a 5% increase in capital gains tax. Basically, it reverts back to what it was pre-2003.

Sen. Barack Obama's campaign on Thursday spelled out the details of the Democratic presidential candidate’s tax plan on his website and in an op-ed piece in the Wall Street Journal.

I just wanted to note the basic proposals for capital gains and dividend tax rates here:

--- Families with incomes below $250,000 would pay current capital gains rates (a maximum tax of 15% on gains on assets held more than one year). Those earning more than $250,000 would face an increase -- a top rate of 20%.

--- The top dividend tax rate would remain the current 15% for those earning less than $250,000, but would rise to 20% for those earning above that threshold.

--- For single people, the tax increases above would apply to those earning more than $200,000.

[101A]

No, he doesn't. Remember that he gave away the bulk of his fortune to the Gates Foundation.

He is an insurance guy, first and foremost; a life insurance guy.

You know why most LARGE life insurance policies are sold?

To pay inheritance taxes.

Buffet didn't get the billions he has by not looking out for number 1, and his own personal interest.

[101A]

Then move to Somalia. They don't have a government there to pay money to. Go ahead. Let me know how that works out.

Government is where we organize to do things that we can't individually.

Do we or do we not have collective interests as a society?

It's a necessary evil; it is not humanitarian, as Buffet, and you in proxy, suggest.

I thought "love it or leave it" was only for conservatives, btw.

[RandomGuy]

Also, Buffet is obviously referring to payroll taxes (including the employer match), to come to his conclusion, right?

Whose ing fault in Medicare and Social Security? Certainly not conservatives!

The fact that those are bloated programs, out of control, requiring VAST sums of money to fund are simply "I told you so's" at this point; now the model in which those funds are collected is being brought into question; it is no longer a plan, paid for by a person during their working lives for retirement; it is rapidly now devolving into a standard govt. program, and is now going to be subject to the same "progressive" scheme the rest of our country is being funded under. Why don't we go ahead and start means testing the people who are going to be funding it right out now, as well?

I will not make any apologies for Mecidare and Social Security. Both mitigate some of the worst poverty in the most vulnerable parts of society.

One only has to look into our own past and the present of countries that have no such programs to see the human costs of doing nothing. The misery of the disabled in places like India, or our own early 19th century where there was no evil bloated government wealth ditribution shocks the conscience.

I suppose it would also be "conservative" to have kept allowing children to mine coal, or work in unregulated factories (silly OSHA...)...?

[FromWayDowntown]

Maybe you are misinformed about his plan. His plan is a 5% increase in capital gains tax. Basically, it reverts back to what it was pre-2003.

Obviously, you have no idea what a crushing blow even a 5% increase in a tax mechanism applicable only to a fraction of taxpayers can make to a crippled economy!

What we need to stimulate this economy is bigger deficits and more wars!

[Mr. Peabody]

I will not make any apologies for Mecidare and Social Security. Both mitigate some of the worst poverty in the most vulnerable parts of society.

One only has to look into our own past and the present of countries that have no such programs to see the human costs of doing nothing. The misery of the disabled in places like India, or our own early 19th century where there was no evil bloated government wealth ditribution shocks the conscience.

I suppose it would also be "conservative" to have kept allowing children to mine coal, or work in unregulated factories (silly OSHA...)...?

[

We all know that OSHA is just another liberal tool to keep corporations from maximizing profit. If workers want safety, tell them to move to France.

[RandomGuy]

It's a necessary evil; it is not humanitarian, as Buffet, and you in proxy, suggest.

I thought "love it or leave it" was only for conservatives, btw.

Heh, I revel in using it the other way when people start complaining about taxes and "big government".

If one is really that opposed to either, there are plenty of places in the world where both are lacking. For some reason they don't tend to be nice places to live. This indicates to me that government is more necessary than a lot of hyper-individualists seem to think.

[101A]

Heh, I revel in using it the other way when people start complaining about taxes and "big government".

If one is really that opposed to either, there are plenty of places in the world where both are lacking. For some reason they don't tend to be nice places to live. This indicates to me that government is more necessary than a lot of hyper-individualists seem to think.

O.K.; now, since I am pointing out that Social Security and Medicare have become the pigs they are, and that some people of my political leanings said as much and were shouted down years ago, I'm a "radical", wanting everybody starving in the street, sweat shops, etc.....

Typical.

[101A]

Seems like a good thread to ask:

What is a fair percentage for a top marginal tax rate?