Obama’s New Square Deal

WASHINGTON — President Obama has decided that he is more likely to win if the election is about big things rather than small ones. He hopes to turn the 2012 campaign from a plebiscite about the current state of the economy into a referendum about the broader progressive tradition that made us a middle-class nation. For the second time, he intends to stake his fate on a battle for the future.

This choice has obvious political benefits to an incumbent presiding over a still-ailing economy, and it confirms Obama’s shift from a defensive approach earlier this year to an aggressive philosophical attack on a Republican Party that has veered sharply rightward. It’s also the boldest move the president has made since he decided to go all-out for health insurance reform even after the Democrats lost their 60-vote majority in the Senate in early 2010.

The president’s speech on Tuesday in Osawatomie, Kan., the site of Theodore Roosevelt’s legendary “New Nationalism” speech 101 years ago, was the Inaugural address Obama never gave. It was, at once, a clear philosophical rationale for his presidency, a straightforward narrative explaining the causes of the nation’s travails, and a coherent plan of battle against a radicalized conservatism that now defines the Republican Party and has set the tone for its presidential nominating contest.

In drawing upon TR, Obama tied himself unapologetically to a defense of America’s long progressive and liberal tradition. The Republican Roosevelt, after all, drew his inspiration from the writer Herbert Croly, whose book “The Promise of American Life” can fairly be seen as the original manifesto for modern liberalism. Thus has the tea party’s radicalism encouraged a very shrewd politician to take on a task that Democrats have been reluctant to engage since Ronald Reagan’s ascendancy.

Obama was remarkably direct in declaring that the core ideas of the progressivism advanced by Theodore and Franklin Roosevelt were right, and that the commitments of Reagan era supply-side economics are flatly wrong. He praised TR for knowing “that the free market has never been a free license to take whatever you can from whomever you can” and for understanding that “the free market only works when there are rules of the road that ensure competition is fair and open and honest.”

He also eviscerated supply-side economics, a theory promising that “if we just cut more regulations and cut more taxes — especially for the wealthy — our economy will grow stronger.”

“But here’s the problem,” Obama declared. “It doesn’t work. It has never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible postwar booms of the ’50s and ’60s. And it didn’t work when we tried it during the last decade.”

A White House that just a few months ago was obsessed with the political center is now not at all wary, as a senior adviser put it, of extolling “a vision that has worked for this country.” But this adviser also noted that Obama implicitly contrasted the flexibility of the Rooseveltian progressivism with the rigidity of the current brand of conservatism. The official pointed to Obama’s strong commitment to education reform, including his critique in Osawatomie of “just throwing money at education.”

“You can embrace it (the progressive tradition) if you can make the point that philosophies and political theories can evolve as facts on the ground change,” the adviser said. The liberalism Obama advocated thus contains a core of moderation that the ideology of the tea party does not. Finally, Obama has realized that the path to the doors of moderate voters passes through a wholesale critique of the immoderation of the right.

For months, progressives have asked why Obama wasn’t invoking the populist language of Franklin D. Roosevelt and his attacks on “economic royalists” and “the privileged princes” of “new economic dynasties.” What progressives often forget is that FDR offered these words only when his first term was almost over, in his acceptance speech at the 1936 Democratic National Convention. Roosevelt did not become a full-throated economic populist until the election was upon him — and only after he was pressed by a left and a labor movement that demanded more of him.

Facing his own re-election and pushed by an Occupy Wall Street movement that has made economic inequality a driving issue in our politics, Barack Obama discovered both of his inner Roosevelts.

E.J. Dionne’s email address is ejdionne(at)washpost.com. (c) 2011, Washington Post Writers Group

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Author: E.J. DIONNE, JR., WASHINGTON POST COLUMNIST

  • JSpencer

    Good. I hope he genuinely believes it and is genuinely committed to it. He still has plenty of opportunity to prove he can fully realize the potential his more traditional democratic supporters believed he had. More power to him – and by extension, to US. It’s high time we as a country put aside the cynicism, the lies, the counterproductive tribal loyalties and kicked ourselves in the ass! We can still do great things in this country if we really want to.

  • slamfu

    Ditto JSpencer. I wonder what Obama is going to pull off with his newfound balls if he wins and doesn’t have to worry about getting re-elected.

  • http://www.americaincontext.com Barky

    Ugh. Why are we caught between extremes? We need sanity & thought, a calculated balance between action and restraint. Some things need to be done, but some things should NOT be done. Yet we’re stuck between GOP-inspired entropy where the government & country is no longer worth investing in and whose only purpose is to feed the rich; and Democratic progressivism full of unfunded promises destined to not only further bankrupt the country but solidify the path to dependency for millions of Americans.

    Where’s the middle ground? Is it truly eroded into the ocean?

  • Rcoutme

    @Barky Are you really trying to suggest that helping poor and middle class Americans to get higher education is going to “solidify the path to dependency” for them? Is it your contention that ensuring that all Americans have access to health care is going to bankrupt the country–particularly when the individual mandate is the core of the plan? I think that you have been shown so much territory in right field that you are no longer able to distinguish between center field and left field. Similar to the way that Ted Williams used to pull the ball to right (he was a left handed hitter) because ‘that’s where they’re playing me’, you don’t appear to realize that LEFT leaning programs would regulate, direct and designate everything. Thus a Left-leaning health care program would nationalize all health care and not allow any procedures (think plastic surgery, etc) that they did not pay for. A Left-leaning taxation system would likely have a top rate of 90-95% and would apply to all income above $70,000, with lesser amounts for income under that. A Left-leaning financial regulatory agency would not have to worry about too-big-to-fail banks because the government would be the banks.

  • JSpencer

    “Why are we caught between extremes?”

    I guess if something gets repeated often enough and long enough even otherwise reasonable people start believing it. It’s a bogus narrative that’s dying hard.

  • bluebelle

    I vote for whoever is invested in saving the middle class, because the economy cannot recover without them.

  • http://www.americaincontext.com Barky

    Rcoutme: there are two progressive-inspired initiatives that have really hurt the country.

    1) the liberal homeownership programs with federal-backed loans directly (but not exclusively) led to the housing bubble and banking collapse.
    2) federally-guaranteed college loan programs led to a massive ballooning of tuition rates and is leaving an entire generation burdened with indebtedness before they even start their careers. There was a post on this very issue not too long ago here on TMV.

    So we all think that homeownership is good (it is) and education is good (it is) but we ruin it by getting the government involved. We would’ve been better off not having government fiscal involvement in either.

    That also bothers me about Obamacare, except our current health care sustem is so poor I’m not sure the risk of government incolvement is that large.

  • rudi

    @Barky
    The federal back mortgages weren’t written up by the government. Mortgage brokers made $ pushing loans without true info like salaries. CRE(commercial real estate) loans also pushed the bubble to burst.
    The housing bubble also hurt the wealthy in Tampa.
    http://www.tampabay.com/news/business/realestate/mortgage-defaults-among-floridas-high-value-loans-highest-in-us/1116533

  • http://www.americaincontext.com Barky

    The federal back mortgages weren’t written up by the government. Mortgage brokers made $ pushing loans without true info like salaries.

    Before I go on, let me first repeat what I said in my last post, with emphasis:

    the liberal homeownership programs with federal-backed loans directly (but not exclusively) led to the housing bubble and banking collapse.

    I still stand by that. Here’s how:

    Real estate was a “bubble”. The definition of an economic bubble is “trading in assets at prices far higher than intrinsic value”. Basically, it’s money being invested on something that really isn’t worth what is being invested. Eventually, the market collapses because the value doesn’t hold up the cost of the investment and people go broke.

    So you have to ask yourself: why were housing prices so high that they formed this bubble?

    Prices of a product turn high when demand outstrips supply. Simple enough.

    Demand goes high because people are flush with cash or, in this case, are capable of getting lots of loans for very little.

    I contend this problem was worse because of the various federal mortgage programs. There were more people who now had capital than there were houses, and therefore prices went through the roof.

    What the feds did with this program is put more people into the market. If this program didn’t exist, there would be less people in the market and, coincidentally, the price of houses would go down (or, more accurately, be at their normal, intrinsic level).

    Now banks did lots of bad lending. Yes, agreed. But why? Because they, too, thought that housing had no upper limit to value. All of it was a good investment, even if they foreclosed they’d make a profit. Why? Because the federal mortgage programs unnaturally increased the demand for housing, meaning prices would inevitably go up.

    Is it the only cause? No. Is it part of the Perfect Storm? Most assuredly yes.

  • http://wideeyedandreal.blogspot.com ProfElwood

    @Rudi
    Shortly after a loan is sold to the GSEs, the originator is absolved of all responsibility if it goes bad. That, of course, would encourage originators to write shaky loans, as long as they could make it past the vetting period. Also, artificially low interest rates made loans more attractive than renting, which artificially drove house prices up at all levels. Why would it matter if mansions were also affected?

  • http://wideeyedandreal.blogspot.com ProfElwood

    As for student loans, regardless of who made the loans, the idea of setting the loan value to the tuition is deeply flawed. Loan amounts are supposed to be tied to the value of the purchase, which in this case would be the potential salary of the student when they get the degree. That’s been destroying the value of higher education.

  • Rcoutme

    I am not disagreeing with you in principle. People who could not afford the housing prices did cause the bursting of the bubble. However, your direction of blame is misplaced. The Federal Reserve kept interest rates low during the boom years of 2001-2005 (boom for housing, not necessarily the economy) so that they could increase employment. They were happy to do this because the CPI was not rising too fast (thus inflation was under control). Meanwhile, banks were giving out 2/28 loans, liar loans, etc to anyone who had a pulse!

    Many of the initial foreclosures were of houses that were NOT EVEN OCCUPIED. Let that sink in a little. The GSE’s Fannie and Freddie were losing market share of the subprime mortgages. The corporate officers of those companies made a business decision to get in on the action–this was NOT a mandated program created by the government. Meanwhile, one of the programs that WAS mandated was the Community Reinvestment Act.

    The CRA has been blamed for the bubble and burst. The evidence, however, is totally against the claim. CRA loans in 2000 were failing at a rate of about 10%. In 2008 they were failing at only 8%. Furthermore, CRA loans were made directly by institutions that were covered under the legislation (large banks and thrifts). These loans were not derivitised and sold to Wall Street. Thus: CRA loans probably played either a very tiny fraction of or no part in the bubble and burst of 2008. In addition, the housing bubble was rampant throughout Europe. Fannie, Freddie and CRA don’t even apply there. So, once again, the idea that they played a significant roll in the bubble and burst is unlikely (since otherwise there would have been no equivalent in other countries).

  • http://www.americaincontext.com Barky

    Rcoutme, you make some very valid points.

    Regarding the Fed, hoo-boy, I could go on for pages how artificially low interest rates actually screwed us over.

    I’m simply trying to point out that interventionist federal programs (meaning interference in basic economic principles) often have unintended consequences, regardless of intent, and need to be approached very carefully. Muck around with market forces at your own peril.

  • http://wideeyedandreal.blogspot.com ProfElwood

    @Rudi
    Once one group gets a competitive advantage, even if it’s illegal, unethical, or immoral, their competitors have to make up for it somehow. It causes a contagion.

    Either that, or some orbital mind-control device caused everyone to become corrupt at once. I’m sticking with a systemic cause.

  • http://wideeyedandreal.blogspot.com ProfElwood

    Sorry, I meant to address that last comment to Rcoutme.