Thursday, January 10, 2008

Obama’s Economic Advisers

Louis Proyect's analysis of Obama's economic team, gives us a glimpse of where he actually stands politically. I doubt if CNN will question him much about social security, healthcare etc.



Austan Goolsbee: U. of Chicago neoclassicist and “Sicko” critic





David Cutler: Harvard economist who believes
that high health costs are good for the economy





Jeffrey Liebman: another Harvard economist and
former Clinton adviser who favors privatizing social security


Last night I was on my stationary exercise bike watching early MSNBC news coverage of the New Hampshire primaries prior to vote totals being reported. The pundits were falling all over each other in praise of Barack Obama’s campaigning skills. I was especially struck by Tom Brokaw’s describing the Black candidate as “A thoroughbred who has broken away from the pack,” a perfect encapsulation of the idiotic horse race character of these elections.

Despite the intense rivalry between Obama and Hillary Clinton, they both are cut from the same mold, namely the Bill Clinton presidency. In his 2004 speech to the Democratic Party convention titled “The Audacity of Hope”, Obama adopted the bipartisan, centrist pose perfected by Hillary’s husband during his regime:

The pundits, the pundits like to slice-and-dice our country into Red States and Blue States; Red States for Republicans, Blue States for Democrats. But I’ve got news for them, too. We worship an “awesome God” in the Blue States, and we don’t like federal agents poking around in our libraries in the Red States.

Since Obama’s speeches are rather thin on substance, you have to extrapolate their meaning from sentences such as the following, which occurred in the same 2004 address:

Now, don’t get me wrong. The people I meet — in small towns and big cities, in diners and office parks — they don’t expect government to solve all their problems. They know they have to work hard to get ahead, and they want to. Go into the collar counties around Chicago, and people will tell you they don’t want their tax money wasted, by a welfare agency or by the Pentagon.

Since welfare was gutted long ago, we can only presume that this reference was meant to establish Obama’s belt-tightening fiscal outlook. Although it is not widely understood, Obama is pretty much committed to the neoclassical economics outlook of his home-town University of Chicago. Since becoming Senator, he has relied on the advice of a professor named Austan Goolsbee, who calls himself “a centrist, market economist” (Washington Times, July 16, 2007).

Goolsbee has been a columnist for Slate.com and the NY Times, as well as a standup comedian. His economics are not meant as a joke, as I understand it. His columns are written very much in the same vein as fellow U. of Chicago neoclassical economist Steven Levitt’s “Freakonomics,” examining everyday problems such as “Why you get stuck for hours at O’Hare.” Most are fairly uncontroversial except for the swipe he took at Michael Moore’s “Sicko”, whose single-payer recommendations violate his free market principles.

Another adviser with a particular interest in health care is David Cutler, a Harvard economist who was also an adviser to Bill Clinton–surprise, surprise. Cutler wrote an article for the New England Journal of Medicine in 2006 asserting that “The rising cost … of health care has been the source of a lot of saber rattling in the media and the public square, without anyone seriously analyzing the benefits gained.”

Anxious to show the good side of rising costs, Cutler and a group of other economists defend the idea that a powerful and profitable medical industry can serve as an engine of economic growth in the USA as the wretched Gina Kolata reported in the August 22, 2006 NY Times.

By 2030, predicts Robert W. Fogel, a Nobel laureate at the University of Chicago Graduate School of Business, about 25 percent of the G.D.P. will be spent on health care, making it ”the driving force in the economy,” just as railroads drove the economy at the start of the 20th century…

Other economists agree.

”We have to spend our money on something,” says Robert E. Hall, a Stanford University economist.

In a paper published in The Quarterly Journal of Economics, Dr. Hall and Charles I. Jones of the University of California, Berkeley, write: ”As we get older and richer, which is more valuable: a third car, yet another television, more clothing — or an extra year of life?”

David Cutler, an economist at Harvard, calculated the value of extra spending on medicine. ”Take a typical person aged 45,” he said. ”They will spend $30,000 more over their lifetime caring for cardiovascular disease than they would have spent in 1950. And they will live maybe three more years because of it.”

I guess this is why they call economics the dismal science. It should be noted in passing that the aforementioned Robert W. Fogel was the co-author with Stanley Engerman of “Time on the Cross”, a book that argued that slaves actually had it pretty good under the plantation system. His latest book is titled “The Escape from Hunger and Premature Death, 1700–2100: Europe, America, and the Third World” that posits a “technophysio evolution” that is filled with Panglossian enthusiasm about capitalism’s ability to bring prosperity to the developing world.

Another Harvard University to Obama is Jeffrey Liebman, a Harvard economist who co-authored a paper on the feasibility of privatizing social security when he was an adviser to Bill Clinton. Apparently, the momentum toward adopting such a proposal was halted after the Monica Lewinsky affair put the president on the defensive. Liebman has co-authored a book on social security “reform” with Martin Feldstein, another Harvard economist who was–appropriately enough–the chairman of the Council of Economic Advisors under Ronald Reagan. In an article titled “The Rich, the Poor, and the Economists” that appeared in the January 2002 Monthly Review, Michael Yates notes the following:

Before he became Reagan’s chief economist, he [Feldstein] was an expert on the economics of social security. In published papers, he claimed to have empirically demonstrated that the social security system in the United States inhibited savings. Since savings are the source of capital investment, the implication of his research was that the social security system also reduced investment and thereby reduced the growth rate of the economy, since investment is the engine of economic growth.

Feldstein’s work fit nicely into the growing conservative movement which arose after the post World War Two boom came to an end in the early 1970s. The Keynesian economics that was gospel during my college years was giving way to a return to the pre-Keynesian theory that “freely” operating markets (free from the poison of government control and regulation) were the only solution to all economic problems. Led by the famous “Chicago Boys,” especially Milton Friedman, the anti-Keynesians carried the day in the economics profession and still do. No wonder, then, that when Ronald Reagan became president, he tapped Feldstein to chair the Council. For years, Reagan had been railing against social security from his General Electric radio pulpit. Now here was an economist who could lend professional credence to Reagan’s reactionary views. Social Security would be a tough nut to crack. It was an extremely popular program, run with great efficiency and effective in sharply reducing poverty among the elderly.

There was just one problem. Feldstein’s research was fatally flawed. Two staff economists at the Social Security Administration asked Feldstein for his supporting data. After three years of repeated requests, he sent the data to them. When they tried to use Feldstein’s numbers to replicate his results, however, they could not. They uncovered an error in the computer program Feldstein had used, and when they corrected the error, the results were exactly the opposite of Feldstein’s. That is to say, the social security system actually encouraged savings and, according to Feldstein’s cherished “free market” theory, facilitated capital formation and economic growth. (For more on this, see “‘Superstar’ Feldstein and His Little Mistake” in Dollars & Sense, Dec. 1980, pp. 1-2 and the citations therein.)

One imagines that the average primary voter in Iowa or New Hampshire has not even the slightest clue that Obama is carrying around such baggage. For most of them, the mantras of “change” and “hope” are supposed to be sufficient to earn their vote, at least that was what was expected in New Hampshire. In utter defiance of the media coronation of Obama, Hillary Clinton was the choice of the people in this miserable, economically stagnant New England state. The World Socialist Website, whose political insights are sometimes undermined by their boilerplate calls for building revolutionary parties (i.e., their own) has a rather astute explanation for Clinton’s victory:

The outcome of the Democratic primary suggests that Clinton benefited from a growing concern among working class voters over the state of the US economy. Clinton was the only candidate to raise the growing danger of recession in Saturday’s televised debate, and exit polls showed that the economy was the number one issue of those who turned out to vote, whether they cast a Democratic or a Republican ballot. A staggering 98 percent of those who voted in the Democratic primary said they were “very” or “somewhat” worried about the economy.

Clinton ran ahead of Obama in the working class industrial city of Manchester, New Hampshire’s largest, and there were significant class and economic distinctions between their voters. Clinton led Obama by sizeable margins among those with family incomes less than $100,000 a year, among union members, among those without college degrees, among those who felt that the state of the US economy is poor, and among those with children in the home. Her largest margin was among single working women.

Perhaps the most striking distinction between Clinton and Obama voters concerned feelings about their family’s economic futures. Those who said their families were “getting ahead” backed Obama by 48 to 31 percent. Those who said their families were “falling behind”—a much larger group—voted for Clinton by 43 to 33 percent.

Of course, they will eventually be disappointed in a Clinton presidency because her economic program and his are virtually identical. In considering the “differences” between the two, I am reminded of what Fred Halstead used to say when he was running for president on the Socialist Workers Party ticket exactly 40 years ago: “Whoever wins the election, the American people will end up the losers.”
RENEGADE EYE

33 comments:

azgoddess said...

thank you - well said!

Anok said...

I also hadn't realized that Obama was listening to these guys for advice. Hmmm. I'd like to look into a bit more.

But hey, like I said over on Enigma's page - the only hope I have is that he's too fresh to have succumbed to corruption. I figured something like this would pop up. It always does.

Meh. I like a bumper sticker that came about in the 90's (altered for my own religion)

"If the Gods had intended us to vote, they would have given us candidates".

*grin*

The Pagan Temple said...

Nobody benefits from Chicago Democratic machine politics without some level of corruption being involved. Even if he is as big an advocate of "change" as he portrays himself, it is useless. By the time the Democratic Party operatives and Washington establishment elites and bureaucrats get done with him, he will be lucky if he can find the time to change his underwear, let alone anything involving the political system in a substantial way.

Larry Gambone said...

Funny how "centrist" in the USA is right-wing anywhere else.

JDHURF said...

I caught this post at Louis' blog the other day. It was an excellent post. I have been long opposed to Obama's empty stances on universal healthcare, U.S. military intervention, abortion, gay rights and the economy, but, I had no idea that he had such extremists informing his policies. Jeffrey Liebman, David Cutler and Austan
Goolsbee are as extreme as they come. The recent issue of the Socialist Worker had two good articles on this subject. Lance Selfa points out in his Less than meets the eye article that, in reference to Obama's role, on behalf of health insurance companies, in the watering down of the 2004 legislation committing the state of Illinois to the goal of universal health care, "If this is what post-partisanship and compromise really mean to Obama, the millions who invested their hopes in him will be disappointed. But the smaller group who invested their millions in him may be very satisfied indeed."

Graeme said...

Of course, this is no surprise. I like the guy (every once in a while I drop the cynicism and listen to a speech) but he is by no means on the left. This really highlights why I left the democratic party.

enigma4ever said...

I left a comment here, and it is gone, Renegade , I hope I did not offend. But I did write that I don't know these members of his team, and some of what and who they are does not match the policies and goals on his website...But I apologize if I did indeed offend for saying that I would like more information.

thanks.

( you might not have deleted me- it might easily be Blogger woes..)

Renegade Eye said...

Enigma: Nothing was deleted. Try reposting.

sonia said...

Great post.

This certainly wasn't the author's intention, but Obama looks much better to me after reading this post.

If Obama wins, neoliberalism will win.

If Obama runs against Huckabee, it will for the first time since Woodraw Wilson that a Democratic candidate will be be more pro-capitalist than the Republican candidate.

I am looking forward to it.

Farmer John said...

I'm sure that Louis' intent was to have these individuals proscribed, sonia.

...commies are merely projecting when they accused Joe McCarthy of blacklisting. Lenin/Stalin practically invented the art.

Renegade Eye said...

More about Obama here.

Farmer: You're getting abstract. Is your comment a backdoor to support for McCarthyism?

Sonia: I think I agree. The top Dems except for Edwards, are to the right of the GOP.

I would rather have Bush try to privatize Social Security than Obama.

The Happy Revolutionary said...

Why would you expect a different economic climate to come with a new leader? What we call 'neoliberals' is, I think, what you guys call neoclassicals. Either way, they're about screwing the worker out of everything he or she has.

Incidentally, why do you continue to put up with Farmer John? Clearly he is a semi-literate troll, unhappy that Bovine University couldn't extend their degree program to thick-tongue imbeciles. He adds nothing - let him go back to milkin', or whatever it is he does.

Kilroy said...

The oligarchy have chosen their leaders. It doesn't matter what anyone else does now. The longer and hotter the campaign the more money the MSM makes on commercials, ergo a Chris Mathews intentionally pisses off women to keep her in the race.

Pay no attention to the man behind the curtain and just pretend your vote counts.

Mad Zionist said...

It doesn't matter who wins or loses this election. There are no true conservatives or true liberals in this, just more of the same big machine ball-players looking to maintain status quo and attain power. The beat goes on...no matter who wins.

Renegade Eye said...

Happy: I have no illusions about Democrats. This topic is relevant, because many don't judge candidates on their program.

I need Farmer John here, to create a dialectic.

He is a great resource to find out the latest thunking from the Venezuelan opposition.

Kilroy: Do you have a blog?

MZ: Here is where I say both parties, are two sides of the same coin.

blackstone said...

As someone else mentioned, i'm going to have to look into this.

Whoever wins the election, the American people will end up the losers.”


Love this quote

Eitan said...

I agree with just about everyone here: both parties are not presenting us any viable candidates and by "viable" I'm refering to someone with both the knowledge and the capacity to bring about some real change(not the kind of change Obama is going on about).

Eitan said...

sonia: are you a nudist and why would you choose a nude photo of (presumably) yourself for your logo? Seems tasteless to me though knowing MZ, he'd probably contest you have amazing jugs and I wouldn't have a problemo with him saying that. After all, you're the one exposing(pun intended) yourself....

Eitan said...

Sonia: just visited your blog out of curiosity and I must admit...that's some crazy shit!!! If you're wondering, no, I'm NOT turned on. I prefer a beautiful woman with her cloths on. It's a lot more classy.

a very public sociologist said...

Could you take your letching elsewhere? There are other blogs for that kind of thing you know! ;)

Thanks Renegade for bringing these advisers to our attention. I would think most the people visiting this blog know there is little difference between the GOP and Democrats when it comes to it, but it's always good to be reminded nonetheless. It makes it easier for socialists and others who support third party alternatives to put forward our case for doing so.

If there are any 'Anyone but the GOP' types reading this, with the shower advising Obama, what does this man offer the US working class that the Republicans don't?

sonia said...

Ren,

The top Dems except for Edwards, are to the right of the GOP.

I wouldn't go that far. It would be more precise to say that on economic issues (and only economic issues), Obama and Clinton are both to the right of Mike Huckabee (and only Mike Huckabee).

Eitan,

I prefer a beautiful woman with her cloths on.

Your weird sexual perversions are your own business...

Cero said...

Very good post, Ren.

Eitan said...

public sociologist: I'm the one who's "letching"?

sonia: "(My) weird sexual preferences..." My dear, I pitty your husband is all I've got to say at this point. Poor fellar!

Mad Zionist said...

For the record, I do think Sonia's avatar is hot...but why is that relevant? Anyway, Eitan, by shouting that you are not turned on so loudly it gives one the impression you are actually very, very turned on. Cool down big dog!

Renegade Eye said...

Sonia: McCain is the only Republican who can win the nomination, isn't far from Obama or Hillary on anything.

Edwards would be good, if he refused to endorse the winner, and walked away from the Dems. In all actuality he is doing a bait and switch.

MZ: Sonia has provided a dialectic on this blog for several years.

Eitan said...

Ren: you must have deleted my comment by accident. What I'd like to say is that I've listened to Gert and will, as the saying goes, live and let live.

Anok said...

I feel like I've missed a party! Great discussion Ren, I'm glad I could get caught up.

Sonia - for once, I agree with you! Maybe snowballs in Hell do exist ;)

Eitan said...

When you mention "snowballs" are you making a reference to Animal Farm;)

CB said...

orry I'm late to the party!

Obama is deftly creating the impression that he's a political "moderate." The only thing that's moderate is his tone, which when compared to his chief rival is down right mellifluous. He is winning converts by being black, poised and non confrontational in his approach and largely staying above the fray.

He has created a rift among elected black democrats who through years of patronage, support Clinton. Ironically, she may have succeeded in making the rift work for her except that her fangs came out when it appeared that she would lose and she and Bill played the "race card," a term that I despise.

Since she and Bill alternately talked about "spade work" and referring to Obama's campaign or some aspect of it as a fantasy in an angry diatribe. Then Hillary (at least the perception in some people's minds) diminished the role of Dr. King in the CRM.

Since that time, elected officials are in a real quandary. Because the black electorate has moved strongly in favor of Obama. He did not and cannot kiss the ring of the CRMerati which is just killing Jackson and Sharpton and others.

With regard to his economic advisers, they are adherents of a new school called "behavioral economics." The mystery of it all is that Obama has explained nothing of how this will effect his approach to governance. He was smart to get U of C economists to place their imprimatur on his plan because it is the most respected school (at least to we greedy capitalists) of economics in the world.

Oh, by the way guys, McCain has no chance of winning the GOP nomination. If Thompson doesn't show up strong in S.C. then Romney will sail to the nomination. McCain has been a consistent republican foil. He was wrong on interrogation, struck up a deal to offer amnesty with Ted Kennedy, another deal to limit free speech with Russ Feingold and opposed the Bush tax cuts just to name a few. New Hampshire is no longer the bellwether it once was because it has become more liberal as folks from Massachusetts have moved there.

markin said...

Good Blog Ren, Markin. What I need today though is not economic wisdom but technical help. How do I put your cite and others onto my links section. I have tried but I cannot seem to make the connection. HELP- Do you think Trotsky could have figured it out himself? I know he would have gone crazy writing on the Internet

Eitan said...

Trotsky was Snowball--or was Snowball Stalin? I'm getting old...

Renegade Eye said...

Eitan: I read 1984 in high school. There still was black and white TV,

CB: McCain is the party's choice. He has the support of something like 5 secretary of states. That means broad ruling class support.

I meet people who support Clinton because of gender. It's time for a woman president they argue. That is true in the abstract. Not time for Clintons again.

Everything but what is important is discussed. Obama has a reactionary program.

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