The New Republic has an interesting take on Obama's governing philosophy. It's been difficult for allies and enemies to categorize due in part to the fact that Obama is a different kind of Democrat. Charges of Socialism may roll easily off the tongue for many conservatives, but it's not a label with any merit if you actually look at his proposals. But he's also not a New Democrat in the Clinton mold either. He retains the faith that so many Democrats lost in government having any positive influence.
So what is he?
Obama has set out to synthesize the New Democratic faith in the utility of markets with the Old Democratic emphasis on reducing inequality. In Obama's state, government never supplants the market or stifles its inner workings--the old forms of statism that didn't wash economically, and certainly not politically. But government does aggressively prod markets--by planting incentives, by stirring new competition--to achieve the results he prefers. With health care, for instance, he would make it easier for employees to tote their insurance from job to job, eliminating the disincentive for insurers to invest in preventive care. Or take his bank plan, which helps banks dispose of their toxic assets, reducing uncertainty and making the banks more attractive to private investors--a far less drastic step than nationalization. Rather than force markets to conform to his wishes, he shapes their calculus so they conclude (on their own) that their interests coincide with his wishes.
Contrasted with the "Third Way" espoused by Bill Clinton and his BFF Tony Blair, it would appear that Obama is now positing a "Fourth Way." One with faith in government to nudge markets when they veer towards a cliff, as we've recently seen, but stays away from direct control. It places trust in the market making smart decisions when the costs, risks, and rewards are all clearly known. When it is the interests of the Republic to have a change, rather than a heavy-handed approach, Obama seems to favor a more nuanced incentive based system which can be found in most of his major proposals.
The core of conservative ideology is faith in the perfection of the market. Think back to the last election, my guess is that you probably heard a politician say "you know how to spend your money better than the government." That's an allusion to this economic principle. Whatever the market does, it's right. I think a quick tip-toe through Wall Street at the moment may tell us this faith is misguided.
Obama's faith in the market is less sturdy. While he's not interested in government ownership of the means of production (the classic definition of Socialism) he believes that the market makes mistakes and occasionally needs to be set back on its path.
Perhaps the easiest place to see it is in the administration's fondness for behavioral economics, the branch of the dismal science that recognizes that humans aren't utility-maximizing automatons, but flawed creatures who often screw up simple calculations and struggle with self-control. The key behavioral insight is that the way we frame choices matters enormously.
The article uses the great example of the 401k. If the market worked perfectly everyone would enroll in them. But people are prone to making silly decisions and many don't for whatever reason. A simple solution would be to change 401k's from an opt-in to an opt-out. That subtle shift is the kind of nudge we're talking about. Utilizing the power of perception to steer the market in a healthier direction without taking away freedom. The person still has the ability to not participate. But the positive action would be to stop investing rather than start investing. It's a subtle shift in perspective which could have monumental impact nationwide.
If he's successful, this new philosophy could be transformational. Nobody has made serious effort to use this approach as a governing principle, but I see promise in its application.
