Sunday, November 02, 2008

Predicting the Obama Presidency

With the election of Barack Obama just a day away, I wanted to take a few moments to consider what an Obama presidency means for this country.

It's not going to result in socialism and riots, per his opponents, or in a new Golden Age, per his adherents. But it will represent a major break with the past eight years.

Foreign Policy
Here is where an Obama presidency will have the greatest positive impact. Anyone who succeeded George W. Bush would receive a warm welcome from the rest of the world, but given Obama's popularity overseas, expect the initial reaction to be borderline ecstatic.

It is not simply that Obama is a proponent of greater engagement and multi-lateralism; it is that his election makes a mockery of many of the slanders spoken against America--that it is racist, insular, and ruled by a ossified ruling class. The Obama presidency can help restore our moral standing, so badly eroded by the abuses of the Bush Administration.

There is the risk that Obama will prove naive and weak, but having watched this steely operative ruthlessly destroy both the Clinton and Republican political machines, I am not too worried.

This one is pretty simple--Obama plans to take from the rich and give to the poor. Under Obama's tax plan, 44% of the US population will either pay no Federal taxes, or actually receive money from the Federal government; in 2005, this figure was only 33%.

Whether you think this is a good thing or a bad thing depends largely on your political philosophy. On the one hand, government exists to do things that the market cannot. Essentially any government spending is redistributive, since it is incredibly unlikely that any program will provide benefits that are exactly aligned with the amount of money each citizen pays in taxes. But on the other hand, aggressive redistribution discourages enterprise; when the marginal tax rate is too high, even the most diligent discover better things to do with their time than working.

On the whole, I dislike Obama's tax plan, but if the Democrats win a 60-seat majority in the Senate, there's not much I can do about it.

A President Obama would take another run at healthcare reform. How ironic if he does in fact make Hillary Clinton the healthcare czar. Unfortunately, while his healthcare plan will increase coverage, it will also increase costs.

The basic problem with the American healthcare system is that, for legacy reasons, health insurance is largely provided by employers. This is a ridiculously inefficient system that increases costs, obfuscates incentives, and reduces labor market flexibility.

The two logical solutions are either single-payer healthcare (which capitalists like me hate, because it substitutes government rationing and policy for simple market incentives, resulting in long lines and poorer care) or individually-purchased health insurance (with some sort of safety net to cover the uninsurable).

Obama's plan is neither fish nor fowl, simply applying another patch to a broken system. It will increase the role of the government without dramatically lowering costs.

This one is also pretty easy. Obama intends to fund a massive public effort in renewable energies. The sound you just heard was John Doerr pumping his fist as he contemplates Kleiner Perkins' massive bet on cleantech.

The problem with this that the government has a horrendous track record in industrial policy. "Success stories" like the Manhattan Project and the Apollo moon landings are in fact great examples of how American wealth and industrial might can be used to accomplish non-economic goals. There was no real way to monetize nuclear weapons or lunar exploration, so naturally the government had to step in.

That's not the case with renewable energy. There's plenty of smart folks betting on these technologies already; all a massive public investment is likely to do is to inflate another bubble (and once again, John Doerr with the fist pump).

On the whole, an Obama presidency is likely to provide foreign policy positives, but domestic policy negatives. Yet because the strength of the presidency lies far more with the former than the latter, it is likely that the gains in foreign policy will offset economic losses relative to a McCain/Palin administration.

Ironic, isn't it? In an election that's being decided for Obama because of the economy, this capitalist believes that the greatest benefit of an Obama presidency will be in the realm of foreign policy.

American has done pretty well over the past 242 years, even under mediocre or even poor presidents. Even if Obama the President fails to live up to Obama the Candidate (remember, George W. Bush was elected as a bipartisan, compassionate conservative, who would unite America after the polarization of the Clinton years), America will eventually be fine.

But fondly do I hope, and fervently do I pray, that Barack Obama will rise to the challenge before him, live up to his rhetoric, and truly unite our country, rather than enacting a left-wing bizarro version of the last eight years.

Whether you vote for him on Tuesday or not, we will all be better off if Barack Obama really has the greatness that his supporters see within him.

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