John McCain’s campaign started calling Barack Obama a socialist last fall as a last-ditch attempt to avoid what by then looked to be near-certain defeat. Of course, at that point Obama was surging because the global financial meltdown had pretty much demolished Republican arguments for unregulated markets and minimalist governments, so socialism actually sounded to some people like a good thing.
The socialism boom really took off after Obama’s election. A Newsweek cover story proclaimed, seemingly approvingly, “We Are All Socialists Now.” That’s when we knew we had reached the top of the bull market for socialism. The last time someone (namely, Richard Nixon) pronounced “us all” to be something – in that case, Keynesians – a decades-long reaction to Keynesianism had already set in. The Wall Street Journal last week referred to Obama’s advisors as “Keynesians” in a way that made clear it was meant as a slur – something like “socialist” – although it’s not clear why: When the traditional alternative to Keynes – monetarism – is currently getting a full try-out, with interest rates effectively at zero with no apparent effect on the economy, how much worse could Keynesianism be?
The answer apparently lies in Europe. All those who swear Obama is a socialist should have accompanied the President on his foreign trip: Those folks over there are socialists – and, by the way, they don’t seem to like Keynesianism. Or much else about US policy, including Obama’s.
The economic summit was widely heralded by not just the Europeans but also the Chinese (who like to think themselves socialists) and scattered developing countries (real socialists) as establishing a “new world order” and the end of US dominance. More significant was Obama’s own pronouncement that the rest of the world must stop relying on US demand to keep the global system afloat – that part, the foreign leaders didn’t want to hear. Despite the gleeful criticism of the US for its profligate ways – rightly, as Obama has essentially conceded – other nations don’t want to make the changes necessary to accommodate a world that functions in some fashion other than as a US charity. The Franco-German opposition to trying some Keynesian stimulus themselves is not based on anything they read in the Wall Street Journal: Unlike the US, they’re hard-pressed to execute such an aggressive rescue of their own, let alone other countries’, economies because their recessions are deeper, the IMF forecasts that their recoveries will be less dynamic, and their credit postures (and thus the interest rates they have to pay on stimulus spending) are worse than America’s. They – like the developing world and the Chinese – therefore prefer export-laced policies that exploit the US spending addiction even while moralizing against it: They’re against US spending – except on them. Come to think of it, socialists might simply be learning the cynical political lessons of American conservatives over the past decade or two. In any event, it doesn’t sound like a world shorn of American dominance.
Incidentally, the same was true at the NATO summit: The conjunction of terrorism, failing states, and nukes poses an existential threat to all civilization – so, obviously, better to let the US bear that burden, in blood and treasure, alone.
The French/German explanation (here’s the socialism part) is that their more robust welfare states are providing their fair share of stimulus spending. It’s not a very convincing argument: Their tax cuts don’t really help laid-off workers who aren’t paying taxes anyway, and counter-cyclical welfare payouts are nice but rank near the bottom of ways government spending can generate further growth. It’s better, as the Obama administration argues, to put money into long-term investments like infrastructure, renewable energy, and technologies that will produce structural cost-reductions, than simply hand out coupons at the supermarket. Then again, that’s Keynes: He noted that if the government simply printed money and buried it at the bottom of a pit, the resulting economic activity to dig it up would produce a needed stimulus – but it’s better to put that money into something of more lasting value, like, say, a bridge. And consumer handouts or tax cuts that don’t really benefit those hardest hit by the recession? Well, not only would those be less effective, but these French socialists are, again, starting to sound an awful lot like American Republicans.
That’s not to say that US budget and trade deficits aren’t unsustainable and becoming more so. But there are two ways to tackle this: I could, for instance, simply recognize that I need to cut my household spending across the board and accept a lower living standard to make up for my prior overspending. Or I could install solar panels on my roof so I won’t have $1,000 monthly bills for heating oil in future winters, get rid of our 20-year-old refrigerator and shell out for a new one that would consume a lot less energy. I could switch to a healthier diet and exercise more so my healthcare bills will be lower someday. In fact, I’m doing all these things – and so, metaphorically speaking, is the Obama administration. But there are two dangers in this approach: First, this positive change can mask the fact that actual, and more painful, reductions in spending are still needed; so far, for instance, Obama has been content to avoid “transformational leadership” on the great political conceit of the last three decades that tax cuts with simultaneously-increased spending are every American’s birthright. The second danger is that “investments” in future cost-reduction become simply excuses for continued, if not exacerbated, consumption spending – after all, every interest in America has studies “proving” that you get $X back in the future for every dollar spent today on its pet project.
In fact, the stimulus legislation, laden with pork, suggests the magnitude of the President’s gamble. It may be getting harder to tell socialists from conservatives, but if the “change” he believes in means US-led world institutions that don’t supersede domestic regulation, increased investment rather than consumption at home, and an aversion to tax increases, Barack Obama is, well, a conservative.