Razzle Dazzle

Obama's Capitalist Plan: 
Spend Money to Make It

The day after President Obama unveiled his Feb. 26 budget proposal, the New York Post, with its customary restraint, portrayed him as a stern-looking, finger-pointing Uncle Bam on its front page with the headline "Pay Up America," and inside the paper as Robin Hood, saying he "plans to soak the rich and give to the needy."

But if Mr. Obama's spending plans seem radical, it is only because they represent such a sharp departure from what we've grown accustomed to since Ronald Reagan moved into the White House in 1981.

At that time, the top tax rate for wealthy Americans was 70 percent, and it was hard to argue with anyone who thought they were being soaked to excess. More than a few of them availed themselves of loopholes in the tax code that significantly decreased the percentage of income they actually had to pay to the Federal Government, but if I were looking at that big a gouge in my paycheck, I wouldn't feel much guilt about finding ways to legally reduce the pain.

Tax Hike Followed by Prosperity

By the time Bill Clinton became President 12 years after the Reagan Revolution, the top tax rate was down to 35 percent. When he increased taxes later in 1993, the top rate went to 39.6 percent, but despite the predictable howls, it wasn't the beginning of the end of American capitalism. By the time he left office at the beginning of 2001, in fact, the U.S. was still basking in prosperity, and wealthy people were enjoying the biggest glows.

CAPITALIST JEWEL: President Obama, according to two top union officials, is not dismantling capitalism, as some critics charge, but restoring its proper balance in American life with a budget plan that targets resources to areas like alternative energy sources, education and health-care reform rather than rewarding those at the top of the economic pyramid.

George W. Bush's eight years in office were predicated on the desire to help the rich get richer, and until the economy began to come tumbling down over the past year, that was one of the few areas in which our 43rd President succeeded. The top tax rate was knocked back to 35 percent, with two major tax cuts enacted whose greatest beneficiaries were those at the top of the economic pyramid— the first in 2001; the second, in what Dick Cheney called a reward for winning the mid-term elections, in 2003 at about the same time that we invaded Iraq. The basic economic principle that you don't cut taxes when you're preparing to fight a war didn't apply, as far as the Bushies were concerned; they were like gamblers who figured they were playing with the house's money. In this case, the house was ours.

Well, it's sprung a few leaks lately, between the home-mortgage crisis and the banking crisis and the collapse of Wall Street. And Mr. Obama's proposed budget, rather than trying a bit of patching here and calking there, is aiming at a major renovation. In his inspired Feb. 24 speech to Congress and the budget document that followed it, he made the case that unless we deal with complex solutions to energy needs, health-care costs, neglected infrastructure and education problems, we can't hope to achieve better than a short-term fix—if we do that much.

It's notable that, at the same time that one of the key elements of Mr. Obama's plan is to do away with the Bush tax cuts and eventually impose additional taxes on the wealthy, Governor Paterson is balking at similar proposals offered by Assembly Speaker Sheldon Silver and the state labor movement while pushing for serious cuts in both public services and employee compensation.

It is not that Mr. Paterson is more of a fiscal conservative than the President; based on their records and their past rhetoric, a strong case could be made that he is more of a liberal than Mr. Obama. But the Governor, who was getting high marks from the editorial boards for his budget stance until his mishandling of the U.S. Senate appointment dramatically changed public perception of him, is responding to the conventional political wisdom that has prevailed even in New York since the fiscal crisis of the mid-1970s and Mr. Reagan's ascendancy.

Glamorize Wealth, Whack Workers

What that comes down to is that you rule wisely by getting tough with public employees, which has often served the additional benefit of helping to limit the aspirations of working people in general. Tabloids like the Post tend to glamorize wealth and its most-ostentatious displays, even as they pretend to poke fun at them. It doesn't matter whether it's by traditional entrepreneurs buying apartments for millions of dollars, Wall Street go-getters running up huge tabs in strip clubs, or rappers defining downward Duke Ellington's credo to, "It don't mean a thing if you ain't got that bling."

Amid the conspicuous consumption and the tabloid TV lifestyle shows, we become numb to what's actually been happening here, as executive pay has skyrocketed at top corporations while those further down the totem pole struggle to keep up with inflation even when the cost of living is not soaring. The fact that those at the top were seeing their compensation go airborne at the same time that their taxes were substantially reduced, starting with President Reagan, further widened the gap.

David Leonhardt, the New York Times's economic columnist, recently noted the way the impact this swing of the pendulum has been described by Larry Summers, Mr. Obama's top fiscal adviser: "each family in the bottom 80 percent of the income distribution was effectively sending a $10,000 check, every year, to the top 1 percent of earners."

A Pragmatic Response

Given the current state of our economy, the right question to ask comes courtesy of Dr. Phil: How's that working out? And in that context, what the President has proposed doesn't look so radical. The changes he has proposed seem both pragmatic and logical responses to the mess we're in today, while Mr. Paterson's seem like place-holders that won't ultimately substitute for an increase in state taxes on wealthy New Yorkers.

There is nothing terribly radical about putting an end to the no-bid contracts that were a hallmark of the Bush Administration's incursion in Iraq, which provided bang for the buck only for the well-connected contractors who reaped billions while delivering little and, in some case, worsening international impressions of this country. This one made so much sense that, as much as John McCain has opposed the new administration's economic policies, he aligned with his election foe on it.

Nor is there anything beyond the pale about finally doing something about health insurers and their outrageously escalating profits, large agricultural firms that have gotten fat from unnecessary government subsidies, and banks and corporations that, both here and overseas, have operated as if the laws of this country were not intended for them. Where President Clinton often sought the course of least resistance and so undercut in advance his ability to correct inequities after his plan for national health-care got tunneled, Mr. Obama seems inclined to use his considerable powers of persuasion to build a national consensus for changes that could actually restore equilibrium to our priorities.

Gasbag Rising

And as much as national Republicans are inveighing against his budget plan as the road to socialist hell, they have the misfortune of relying upon Rush Limbaugh as the man beating that worn-out drum.

Louisiana Gov. Bobby Jindal auditioned for the role when he gave the GOP response to Mr. Obama's speech to Congress and floundered miserably, his most vivid talking point being that you can't trust the government to get us out of the mess because look at what happened after Hurricane Katrina, when the feds failed under, umm, the Bush Administration. All he served to do, besides seeming like he was trying to channel Kenneth the Page on "30 Rock" the way that show's star, Tina Fey, had done with Sarah Palin, was remind viewers of why they had been so anxious to elect someone who promised a clean break with our last President's policies.

And when Republican National Chairman Michael Steele tried to assert himself by claiming he was the party's true spokesman and Mr. Limbaugh was just a brassy entertainer, he quickly got slapped sillier than he previously seemed to be and had to submit to the humiliation of a public apology to His Rushness.

Rooting for Failure

But when Mr. Obama's Chief of Staff, Rahm Emanuel, sought to further raise Mr. Limbaugh's profile by criticizing him, the entertainer took the bait, braying once more about his desire for the President to fail so as to preserve the American way of life.

For most people, this sounded as logical as the position taken by Students for a Democratic Society during the 1968 election that it was better that Richard Nixon won because it would ensure greater repression and speed the left-wing revolution. And just as the SDS drew most of its strength from well-to-do college kids with more bravado than brains, Mr. Limbaugh presides over what might be called the Frat House Wing of the Republican Party, where being loud transcends making sense. (It's also the primary selling point for the pseudo populism practiced by the Post, which if it really were the voice of working people that it spins itself to be would be more likely to support the President's proposals than to reflexively bash them.)

'A Time to Spend Our Way Back'

That gives Mr. Obama an advantage, particularly at a time when Democrats control both houses of Congress, since a battle with Mr. Limbaugh for the hearts and minds of the public is likely to tilt his way for the immediate future. The main dilemma he confronts by seeking such sweeping changes in America's priorities is whether he is trying to do too much too soon, leaving him vulnerable to a reaction if his initiatives don't make it intact through the Senate or there is some other stumble, practical or political, that shifts the advantage to his opponents.

Bill Henning, the Communications Workers of America Local 1180 vice president who is one of municipal labor's most-eloquent left-wing voices, said March 5, "I actually believe he's being too cautious. I think we need a massive infusion of resources not unlike the New Deal. Government spending has to be the order of the day—the Federal Government is capable of putting people back to work."

He continued, "You need increased spending and economic activity to get the economy going again. A balanced budget at this point would be absolutely the worst solution."

United Federation of Teachers President Randi Weingarten is more moderate in her liberalism than Mr. Henning, but her analysis was similar. The traveling she has done in the nine months since becoming president of the American Federation of Teachers, she said, has made her aware that problematic as the city's fiscal situation may be, it is not facing the desperation found in other parts of the U.S.

"We're going through a terrible fiscal crisis, the likes of which our generation has never seen," she said. And the scope of the problem makes a multi pronged solution more appropriate than chipping away incrementally, even with the potential pitfalls.

'Use Clout While He's Got It'

"You always run the risk of being nibbled to death, but I admire him for wanting to do this," Ms. Weingarten remarked. "Presidents typically have more clout and moral authority in the first six months of their administration than at any other time, and you have this terrible need."

There is always the possibility, with the Democrats being just shy of a filibuster proof majority in the Senate, and with some Senators from southern states known to break ranks at times, that the major changes he has proposed will either get stymied completely or shrink during the negotiating cycle. The UFT leader is hoping, though, that Mr. Obama's popularity will instead swing enough votes his way to prevail even if most Republicans line up against him, pointing to the three moderate Senate GOPers who jumped the fence to vote for the stimulus bill.

Referring to the razor-thin margin of victory that is likely to make Al Franken a Democratic Senator from Minnesota, Ms. Weingarten said, "I think this is where you can see that elections matter. The difference in having Franken in the Senate [rather than the man he is leading, Norm Coleman] may be the difference on several different cloture votes."

Even as the President and his advisers seem to welcome Mr. Limbaugh emerging as the voice of his opposition, however, she remains uneasy about what she calls "the appalling level of demagoguery right now. There was a much tamer debate [on the Wall Street bailout] than there is now."

'Capitalism Back in Rightful Place'

And those who portray Mr. Obama as some revolutionary socialist are misreading both his intentions and the feelings of the overwhelming majority of Americans who currently support him, Ms. Weingarten said.

"This is not a country that engages in socialism. Barack Obama is attempting to bring capitalism back into its rightful place, and not let unbridled recklessness rule the day."

Ms. Weingarten continued, "Was FDR's agenda ambitious? Yes. Was Teddy Roosevelt's agenda ambitious? Yes. Did they accomplish everything they set out to do? No. But is it better to have an activist President who's trying to get us out of this mess? Yes."