This is going to drive the Daily Kos folks nuts. Barack Obama just gave a pretty meaty interview on economic policy to the Wall Street Journal in which he kind of sounded like a guy applying for a job at the Wall Street Journal, at least its editorial board. A few observations:
1) Obama certainly comes off as a Bill Clinton, Tony Blair, Democratic Leadership Council "Third Way" centrist. But here's the catch: On more liberal issues—higher taxes, more government spending, more regulation—he's been very specific throughout the campaign and has been talking about them since he started running. But now that he has the nomination, he seems to be moving to the right. First with the hiring of economist Jason Furman and now with this interview, where he talks about cutting corporate taxes, eliminating capital gains on start-up companies, and rebating money raised from selling carbon emission permits. Lots of buzz words but few details. Here he is on cutting corporate taxes, something he never mentioned in all those many debates with Hillary Clinton:
On the corporate side, for example, one of the things I've asked my folks to look at is: Are there ways we can close existing loopholes in tax havens at the same time as we're lowering overall rates?...We're going to have to, I think, revisit that.... We're still working with our team to take a look at that.
And here is Obama on what do with the money the government will raise—$100 billion a year or more—from selling carbon emission permits. Again, specific on the spending, fuzzy on the tax cuts:
...$100 billion is conservative, but I think $15 billion is about what we can wisely spend on R&D and some of the other proposals that I put out here. And we're going to have to rebate a whole bunch of that money to consumers.
It sure seems as if he is trying to reassure Wall Street, corporate America, and the Investor Class—that's everyone with a 401(k), folks—that he cares about economic growth and competitiveness, not just redistributing income. But why then has he not been talking about that through the longest primary campaign in American political history?
2) Obama notes that America has increased worker productivity dramatically since 1995. But yet again, he doesn't say why. OK, I will: Productivity started booming in the mid-1990s because of the low tax and low regulation policies of the 1980s. Yet Obama seems to think boosting productivity in the future mostly depends on government spending on research and infrastructure. So while the rest of the world is turning to that American model, he says it's time for a change.
3) Obama is no believer in Bill Clinton's bond market strategy—that the way to increase economic growth is by cutting the deficit. Nope, Obama is going the "putting people first" route that candidate Clinton proposed, investing in physical capital—Obama even recycles Clinton's high-speed rail proposal—and human capital via government spending. That, even though a President Obama will most likely be facing a $500 billion budget deficit.
4) If Republicans are counting on voters being frightened by Obamanomics—at least as Obama presented it in this interview—they are woefully mistaken. John McCain is going to have to make a compelling economic argument on why Obama is wrong and he is right. Here is what market strategist Ed Yardeni concluded about Obamanomics after reading the interview (bold is mine):
Naturally, in meetings with our accounts recently, I am asked more frequently about how Barack Obama might impact the economy and financial markets if he wins.... The consensus seems to be that his policies won't be good for the economy and the financial markets. I agree, though he might not be as bad as some fear. The spectrum of opinion seems to be that he will either be like Jimmy Carter (bad) or more like Bill Clinton (good). My hunch is that his foreign policies will be more like Jimmy's, but his economic policies may be more like Bill's. Indeed, a few of his economic advisors also worked for Bill Clinton, namely Robert Rubin and Robert Reich. Obama was interviewed by the WSJ in the June 17 issue. He made it clear that he won't be getting advice from Adam Smith. He is not a believer in the "invisible hand." He wants to increase government spending and redistribute income. On the other hand, he said, "It's not clear to me that we want a larger government, but we certainly want a government that is setting more intelligent priorities and using taxpayer dollars more wisely and structuring tax policies that are conducive to long-term economic growth." In the tradition of Democratic liberals, he would use the tax code to redistribute income. However, he sounds more like Bill Clinton (and a bit like Arthur Laffer!) on the subject than Nancy Pelosi.
When smart folks like Yardeni start comparing Obama to Art Laffer, you know John McCain has a long road ahead.