Bryan Caplan  

Is Obama the Next FDR?

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I've previously said that I'll count myself lucky as long as Obama doesn't turn out to be the next FDR.  Now the affable Paul Rubin's arguing that my luck won't hold:

Barack Obama is one of the most liberal members of the Senate. His reaction to the financial crisis is to blame deregulation. He even leverages fear of deregulation onto other issues. For example, Sen. John McCain wants to allow consumers to buy health insurance across state lines. Mr. Obama likens this to the financial deregulation that he alleges got us into the current mess.

But a President Obama would also enjoy large Democratic majorities in Congress. His party might even win a 60-seat, filibuster-proof majority in the Senate, giving him more power than any president has had in decades to push a liberal agenda. And given the opportunity, Mr. Obama will likely radically increase government interference in the economy.

Until now, this election has been fought on the margins, over marginal issues. But it is important to understand how much a presidential candidate wants to move the needle on taxes, trade and other issues. Usually there isn't a chance for wholesale change. Now, however, it appears that this election will make more than a marginal difference. It might fundamentally change America.

Unlike FDR, Mr. Obama will not have to create the mechanisms government uses to interfere with the economy before imposing his policies. FDR had to get the Supreme Court to overturn a century's worth of precedents limiting the power of government before he could use the Constitution's commerce clause, among other things, to increase government control of the economy. Mr. Obama will have no such problem.

I take Paul's warning seriously.  But is it time, in Kent Brockman's words, "to crack each other's heads open and feast on the goo inside?"  I don't think so.  I still give the Obama=FDR scenario only a 15% probability.  If Paul's probability is substantially higher, I'm amenable to a friendly wager on the future of economic freedom in America.  Either way, Paul wins!

HT: Corina Caplan

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COMMENTS (18 to date)
Daniel Scheer writes:

I think Obama's approach to economic policy is more moderate than you suggest. I've been encouraged by comments from people like James Heckman, who said "I’ve never worked with a campaign that was more interested in what the research shows." But I guess we'll have to wait and see.

Also, great Simpsons reference!

El Presidente writes:

Two observations:

1. Not having to create the institutions means that he will cause less of a shift than FDR did even if he takes us to the same place.

2. He is not inclined to undermine competition so long as competition does not end in private consolidation. Monopoly is not "competition", though it may very well be derived from the "free market". Oiligopoly is similaryly perilous, however one arrives at that point. He is not a reincarnation of FDR. He will be formidable but not radical, mostly because he doesn't have to be.

Greg writes:

I think we're getting a little carried away here. FDR, Mugabe, etc.? Aren't these fairly meaningless ghost stories, essentially? What are we really worried about? If it's free trade, Obama seems more inclined to fiddle at the margins rather than make sweeping changes. If it's farm subsidies, then I'm afraid they probably won't get better, but that didn't happen with a Republican president and Congress, either. If it's income and investment taxes, Obama's proposals are pretty middle-of-the-road. Health care is a concern, but our healthcare system is already completely out of control. No one seems to have an economically and politically sound approach to fixing that one. In fiscal terms, Obama's preference for bringing our foreign adventures to a close brings him to at least a wash.

So what's really the problem here? Can you make a specific statement about what you're worried about?

Troy Camplin writes:

I think FDR would be shocked and appalled at what Obama will do as President. If Machiavelli is right and you can know a man by his associations, then the fact that Obama's father was a Marxist, his childhood mentor was a Marxist poet (member of the Communist Party), his associate Bill Ayers is a communist, when Obama ran for state senate, he sought and received the endorsement of The New Party, which was a communist party, and the fact that his church practices liberation theology, which is a combination of Marxism and Christianity, then Obama is in fact a Marxist. FDR was merely a fascist. Bad enough, but not as far Left as Marxism.

El Presidente writes:

By the way . . .

Rubin's inability to look through history backward AND forward from a given point of reference betrays his stubborn ideological bent. He displays remarkable unwillingness to acknowledge the benefits of the New Deal in the same breath. He insists that what we should learn is that FDR made things worse by slowing the climb out of the hole. One could just as easily argue that he made things better for a long time to come by climbing out instead of catapulting out and cratering upon return; by laying the foundation for the most productive decades the US has ever had. We don't have to move at break-neck speed to be doing well. Slow and steady is all it takes. Why do we have to dig the hole so deep in the first place, and why would Rubin forgo criticism for the few holding shovels and sporting sheepish grins?

Shameless . . . and shameful.

wd40 writes:

Paul Rubin has let his ideology interfere with his normal good sense. Obama is very intelligent and cautious. He has surrounded himself with good economists. He will not lead us into costly and useless wars. McCain is not cautious. He jumps from one thing to another without thinking through. And if he should die, Palin would be a disaster.

Cowcup writes:

Bryan, we will have the next FDR. In fact, we already have the next Keynes. The world is funnier than ever.

* Obama ~ FDR
* Krugman ~ Keynes
* Putin ~ Hitler
* Georgia ~ Austria
* China after 20 years of economic freedom ~ Japan after 20 years of economic freedom
* Russia re-emerges after defeat in the last war albeit cold ~ Germany re-emerges after defeat in the last war
* Balkan ~ Mideast

etc. etc. ;)

Again, the beginning of 21st century will be a comic replay of the beginning of 20th century. I hope.

Dr. T writes:

El Presidente (rather egoistic name, don't you think?), can you expound upon those great benefits from the New Deal?

I see nothing but negatives: decreased federalism, greater federal government power, expensive programs that sounded good but prolonged the depression, and the creation of a toehold for socialistic government programs that have now expanded to many expensive "entitlements." In his first two terms, FDR moved us further from our libertarian heritage than any other president.

Bob Kozman writes:

Let's not forget the peril of the Supreme Court under Obama. While FDR tried to pack the court to get them to fall under his sway Obama will have the opportunity to replace retiring justices. And we can be sure he will fill those slots with liberal justices who will undoubtedly legislate from the bench. With new (liberal) justices serving lifetime appointments we can look forward to another fundamental shift in the political lean toward socialism.

RobbL writes:

Dr. T says

"In his first two terms, FDR moved us further from our libertarian heritage than any other president."

Uh... I would say we moved further from our libertarian heritage under the first president when Hamilton essentially created the federal model of finance and money and debt that we have today and crushed the libertarians of the day who said it was tyranny. Of course he was just continuing the crushing that started with the abandonment of the articles of confederation.

El Presidente writes:

Dr. T,

"El Presidente (rather egoistic name, don't you think?), can you expound upon those great benefits from the New Deal? . . . I see nothing but negatives . . . FDR moved us further from our libertarian heritage than any other president."

It's actually a self-deprecating name, an inside joke of sorts. But don't let that stop you from assuming I'm an asshole. By all means, indulge.

Given your affinity for libertarianism I understand why you would not see the outcomes of the New Deal as positive. You see what you want to see. However, things like Social Security might qualify as improvements to the status quo at that point in time, our subsequent refusal to adequately fund the program not withstanding. It did have a substantial impact on poverty among seniors which encouraged consumption spending employing many others. The shift toward income taxes (payroll deduction) as opposed to excise taxes changes the nature of taxation to make it less punitive toward particular products and causes less distortion in prices for any given amount of revenue. Progressive taxation has lent stability to our economy as a whole, reducing income polarization which sows the seeds for social strife (read: violence). It is my opinion that is served to buttress movements for social equality such as the civil rights and women's rights movements which drew more minority and female labor into the workplace. That certainly increased total output, no? Infrastructure investment made it possible to make use of our large and relatively isolated national market for goods. This was a boon to domestic producers allowing them to take advantage of economies of scale while broadly distributing the costs.

elvin writes:

It's not Obama's economic advisors that I worry about. They are a very sane group of people. It's a Democratic Congress combined with Obama's natural leftist/socialist views and his cautious style that I worry about. I don't see Obama checking some of the worst policies that Nancy Pelosi and Harry Reid will produce. He will happily sign anything they pass. Goolsbee and Furman will be thrown under the bus very quickly.

Seriously, based on his campaign rhetoric, would Obama not sign legislation with higher taxes, more regulation, protectionism, expanded welfare state, higher government spending? When did he speak up about free trade? What in his voting record indicates that he's for free trade? And don't forget things like union card check, CO2 being declared a pollutant and heavily regulated (given the trashing the free market is getting and market oriented ideas like carbon taxes are out of the question), and Supreme Court nominees that view the Constitution as a living document, and you have the makings of a very bad economic policy.

I hope I am wrong and he turns out to be a Bill Clinton--a terrific supply sider. But Bill Clinton was always sympathetic to "business"--he supported free trade whole-heartedly, cut capital gains taxes, increased immigration, and basically got out of the way of the economy. Bill Clinton "gets it"; I've heard nothing in Obama's soothing words that he "gets it" when it comes to economics.

Many things can break Obama's way and create healthy economic growth--in 2010 many of the imbalances will have passed--housing corrected and starting to grow, trade deficit down to 1%, TARP assets paying off and lowering the deficit, savings back up to 5%, oil trading at $40 barrel. If he "gets it", he can turn out to Bill Clinton without the baggage, if not, well, . . . let's not go there.

I wonder who Obama will appoint to replace Bernanke in 2010?

Babinich writes:

Obama as FDR II? What country assumes the role of Poland in this tragedy?

The myth that is FDR just keeps on keepin' on.

"It's not Obama's economic advisors that I worry about. They are a very sane group of people. It's a Democratic Congress combined with Obama's natural leftist/socialist views and his cautious style that I worry about. I don't see Obama checking some of the worst policies that Nancy Pelosi and Harry Reid will produce. He will happily sign anything they pass. Goolsbee and Furman will be thrown under the bus very quickly."

The handwriting is on the wall. Protect the wealthy and punish those seeking to create wealth. If Goolsbee & Furman get sacrificed than that's their problem.

They should know better...

David Peterson writes:

So Bryan,

If you give the FDR scenario a 0.15 chance, what weight do you give to the scenarios of Obama being more of a Clinton or being a Carter?

aaron writes:

I'm more worried about McCain, Global Warming hysteria, and his propensity to regulate. Control can be more valuable and much more costly economically than reckless spending.

However, I try to adhere to a rule: When someone tries to assign numbers to uncertainty, listen very carefully, to fully consider the opposite of what they suggest.

aaron writes:

Elvin, regarding "CO2 being declared a pollutant and heavily regulated,"

I am less worried about this with Obama because he has sane people whispering in his ear: "Sure, go ahead and declare CO2 a pollutant. But if you do anything to seriously regulate it, costs are going to go up and risk on all that lending we just stimulated in 2008 will sky rocket. You'll be looking at Financial Crisis Part Deux: This Time We Mean It. And the US is already leveraged to the Hilt. People won't lend to us at 0% like the last two times."

Kathy Samuels writes:

What kept us in the depression was the devotion to government rather than the market. That is exactly what Obama and many in Congress want to do again. Government intervention is not the answer. What we need is to restore our faith in capitalism. It was capitalism that got us out of the great depression and it will be capitalism that will get us out of the current problem. Steve Forbes, always a wise commentator, has a great new article on this topic- I think he has it figured out.

Acton. writes:

He'll be much worse than Mr Roosevelt. Believe me. Unfortunately, Mr Obama doesn't have a debilitating illness like Mr Roosevelt to abbreviate his "brilliance"

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