In his new book, Robert Kuttner has provided a context for the current discussion on Barack Obama’s economic team, men like Timothy Geithner who will be leaving his post as head of the NY Federal Reserve to become Treasury Secretary. What will be their influence in determining the direction of the new Administration? Events have moved rapidly since he wrote the book (released this past labor day), but it is still timely and prescient.

Not only does he base it upon a number of concrete proposals – Kuttner was one of the earliest policy thinkers to spell out the need for a massive economic stimulus package and is a strong advocate for a well-thought out, universal health program and a proponent of a resurgent trade union movement – but he offers a profound discussion of the nature of the presidency.He believes that if President Obama rises to the challenge of dealing with what he calls the worst financial collapse since the Great Depression, he will join the ranks of three great U.S. presidents, Lincoln, Roosevelt and Johnson, each of whom transformed the nation at a moment of great crisis. In Kuttner’s view:

“[E]ither Barack Obama will be a transformative president, or the bad economic circumstances that he inherits will sink his promise and America’s, and the moment will have been lost. He will be a great president—or a failed one.” (7)

The depth of the crisis is such that there is no middle ground. Obama must decisively reject the Republican frame that has dominated America since Ronald Reagan became president.

“A crisis is an opportunity, but it hardly guarantees a successful presidency. For every Franklin Roosevelt, there is a Herbert Hoover,. For every Lyndon Johnson turning the civil rights impasse into a moment of national greatness, there is a Jimmy Carter fumbling the energy crisis—or Johnson himself blundering into Vietnam.” (6)

“But going forward, will Obama use [his] political genius as a true progressive? Here the jury is out—though my bet is that economic circumstances will compel nothing less, and that Obama is astute enough to grasp this reality.” (9)

Based upon Obama’s choice of campaign advisors, Kuttner worried that Obama’s cabinet picks, etc. would be experts who are “smart and Orthodox,” and that he would rely upon their expertise rather than set his own priorities. The book is written, in Kuttner’s words, as a “citizen’s open letter” to the new president,” and his intention is not to be a cheerleader but to offer a sober counterweight to a lot of the “bad advice that he will receive to simply govern as a post-partisan, pragmatic centrist.” (6.7)He references Robert Rubin as exemplifying the problem.

“Rubin places top priority on capping the costs of so-called entitlement programs such as Social Security and Medicare and sharply reducing the current deficit tempered by only modest spending increases. This group, illustrated by the work of Rubin’s Hamilton Project, favors fiscal restraint, some tax increases on the wealthy, and very modest spending increases.

The Hamilton Project, whose directory until June 2008 was Jason Furman, is an ad hoc think tank based at the Brookings Institution. If you visit the projects Web Site you will find bold rhetoric on the need for both fiscal discipline and public outlay, coupled with the most modest of spending proposals. The general premise of the Hamilton group is that social outlays should be reconfigured, but that net spending increases should be minimal.” (27)

Kuttner is emphatic that only a large scale infusion of capital into the economy, minimally a $700 billion stimulus package, will work. While Obama has set a more modest dollar goal for his initial package, he is pushing the House and Senate to have that package on his desk ready for him to sign on January 20th, and he has said that he believes that for at least two years will fiscal concerns about balancing the budget will need to take second place to an ambitious recovery plan. Although at the time of writing, Kuttner expressed concern that during the campaign Obama’s economic proposals “mocked his rhetoric,” he did not direct his attention to the danger that Obama might reverse his priorities prematurely, as in fact was the case with President Roosevelt when in his second term he inadvertently placed a brake on the economic recovery that had begun with the New Deal, by cutting spending and raising taxes. In a recent opinion piece in the New York Times, “Franklin Delano Obama?”, Paul Kuttner address this point specifically. He writes in answer to critics of the New Deal who only credit the economic stimulus effect of WWII.

“Well, it wasn’t as major as you might think. The effects of federal public works spending were largely offset by other factors, notably a large tax increase, enacted by Herbert Hoover, whose full effects weren’t felt until his successor took office. Also, expansionary policy at the federal level was undercut by spending cuts and tax increases at the state and local level.

The depth of the crisis is such that there is no middle ground. Obama must decisively reject the Republican frame that has dominated America since Ronald Reagan became president.

“A crisis is an opportunity, but it hardly guarantees a successful presidency. For every Franklin Roosevelt, there is a Herbert Hoover,. For every Lyndon Johnson turning the civil rights impasse into a moment of national greatness, there is a Jimmy Carter fumbling the energy crisis—or Johnson himself blundering into Vietnam.” (6)

“But going forward, will Obama use [his] political genius as a true progressive? Here the jury is out—though my bet is that economic circumstances will compel nothing less, and that Obama is astute enough to grasp this reality.” (9)

Based upon Obama’s choice of campaign advisors, Kuttner worried that Obama’s cabinet picks, etc. would be experts who are “smart and Orthodox,” and that he would rely upon their expertise rather than set his own priorities. The book is written, in Kuttner’s words, as a “citizen’s open letter” to the new president,” and his intention is not to be a cheerleader but to offer a sober counterweight to a lot of the “bad advice that he will receive to simply govern as a post-partisan, pragmatic centrist.” (6.7)He references Robert Rubin as exemplifying the problem.

“Rubin places top priority on capping the costs of so-called entitlement programs such as Social Security and Medicare and sharply reducing the current deficit tempered by only modest spending increases. This group, illustrated by the work of Rubin’s Hamilton Project, favors fiscal restraint, some tax increases on the wealthy, and very modest spending increases.

The Hamilton Project, whose directory until June 2008 was Jason Furman, is an ad hoc think tank based at the Brookings Institution. If you visit the projects Web Site you will find bold rhetoric on the need for both fiscal discipline and public outlay, coupled with the most modest of spending proposals. The general premise of the Hamilton group is that social outlays should be reconfigured, but that net spending increases should be minimal.” (27)

Kuttner is emphatic that only a large scale infusion of capital into the economy, minimally a $700 billion stimulus package, will work. While Obama has set a more modest dollar goal for his initial package, he is pushing the House and Senate to have that package on his desk ready for him to sign on January 20th, and he has said that he believes that for at least two years will fiscal concerns about balancing the budget will need to take second place to an ambitious recovery plan. Although at the time of writing, Kuttner expressed concern that during the campaign Obama’s economic proposals “mocked his rhetoric,” he did not direct his attention to the danger that Obama might reverse his priorities prematurely, as in fact was the case with President Roosevelt when in his second term he inadvertently placed a brake on the economic recovery that had begun with the New Deal, by cutting spending and raising taxes. In a recent opinion piece in the New York Times, “Franklin Delano Obama?”, Paul Kuttner address this point specifically. He writes in answer to critics of the New Deal who only credit the economic stimulus effect of WWII.

“Well, it wasn’t as major as you might think. The effects of federal public works spending were largely offset by other factors, notably a large tax increase, enacted by Herbert Hoover, whose full effects weren’t felt until his successor took office. Also, expansionary policy at the federal level was undercut by spending cuts and tax increases at the state and local level.

And F.D.R. wasn’t just reluctant to pursue an all-out fiscal expansion — he was eager to return to conservative budget principles. That eagerness almost destroyed his legacy. After winning a smashing election victory in 1936, the Roosevelt administration cut spending and raised taxes, precipitating an economic relapse that drove the unemployment rate back into double digits and led to a major defeat in the 1938 midterm elections.”

A good background discussion on how Roosevelt mobilized the U.S. during his first hundred days can be found in Chris White’s five-part Journal article, FDR and the Unfinished Agenda.

To achieve success Obama will need to reverse the Reagan paradigm – actually begun during the Carter administration – which has governed the country over the past 30 years.

1. The fiscal cupboard is bare.
2. Government is generally perverse or incompetent.
3. Tax cuts are one of the few benefits that governments can reliably deliver.
4. Private markets invariably work better than government.

And the political corollary

5. Successful Democrats need to talk more like Republicans.” (75)

In order to transform the country, he will need to,

“reverse the thirty-year trend not just of Republican rule but of voter quiescence and Democratic complicity. He must raise expectations—and then rise to meet them. More than anything else, he needs to rehabilitate the constructive role of government, both in the minds of the people and in what government delivers [emphasis added]. For in the current economic crisis, there is no alternative to the redemption of government to serve a broad common good.” (21)Not only will Obama assert his priorities in setting the policy agenda, but he will need to rally the country behind him (including the more conservative Blue Dog wing of the Democratic party). While the New Deal seems the most relevant point of comparison to the situation today, Kuttner believes that there are important lessons to be learned both from Lyndon Johnson’s domestic policy successes in contrast to the failures of Jimmy Carter and Bill Clinton.

Kuttner argues that despite Johnson’s failed Vietnamese policy, his ability to achieve passage of ground-breaking civil-rights legislation in face of congressional opposition from the Southern Democrats in his own party was masterful. The country was in crisis.

“The landslide election of November 1964 increased the Democratic margins from 66 to 68 in the Senate, and from 259 to an astounding 295 in the House, a better than two-to-one margin that nearly equaled FDR’s at the peak of his power. But the right to vote continued to be denied through the Deep south, and when legal maneuvers failed the white power structure turned to terror. (40)

[snip]

It was in this climate of breakdown of law that Lyndon Johnson addressed Congress and the nation March 15. In just the way that FDR more than thirty years before had spelled out what had befallen the banking system, what the president was doing to remedy the crisis, and what he expected of the people, Johnson spoke masterly words about civil rights. (50)

In contrast, Kuttner faults Clinton most severely for missing the opportunity of passing a health-care reform bill. His besetting sin was his tendency to compromise with conservatives rather than mobilize the country and force through a victory. It remains to be seen whether Obama will be willing to play hardball to push an ambitious program for social change through the House and Senate, with a smaller and less solid majority than either Johnson or FDR had.

Kuttner dedicates the book to Goodwin and he credits a three-hour conversation with her with helping him to shape his notion of what a transformational president needs to accomplish. His interview with her was featured in the American Progressive magazine.

During their discussion, Kuttner posed the question to her:

“You've written extensively about the great transformative presidents, Franklin Roosevelt, Abraham Lincoln, Lyndon Johnson, and the promise of John Kennedy. Considering all the damage that has been done to the very idea of a collective good, the task facing the next president will go far beyond the normal challenge of finding the votes to legislate. For progress to be made, this would have to be one of those periods of transformation in how public opinion views America. How should the next president think about this enterprise of leadership?”

To which she replied:

“History suggests that unless a progressive president is able to mobilize widespread support for significant change in the country at large, it's not enough to have a congressional majority. For example, Bill Clinton had a Democratic majority when he failed to get health reform. When you look at the periods of social change, in each instance the president used leadership not only to get the public involved in understanding what the problems were but to create a fervent desire to address those problems in a meaningful way.”

This is Obama’s Challenge.

Kuttner writes:

All transformative reforms involve struggles. Forces that have resisted reform are, by definition, immensely powerful. Reform entails mobilizing the less powerful, sometimes lending presidential authority to a brave minority, as Lincoln and Roosevelt did; and sometimes building support among the people almost from scratch.

[snip]

The great presidents know how to use words to inspire—but they also know how to play hardball. (59)

It remains to be seen whether Obama will be willing to play hardball to push an ambitious program for social change through the House and Senate, with a smaller and less solid majority than either Johnson or FDR had. Kuttner concludes his book on a note of guarded optimism.

And so America waits. What will become of our economy, our society, our nation and our children?” What sort of a leader will our next president be, at this perilous and promising moment? Never in my political lifetime has more apprehension come bundled with more hope. I leave the last words to Barack Obama. “The true test of the American ideal is whether we’re able to recognize our failings and then rise together to meet the challenges of our time. Whether we allow ourselves to be shaped by events and history, or whether we act to shape them.” (200)

Kuttner has written an important book that hopefully will have an influence in helping to shape that future.

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About the Reviewer: Carol White is Book Review Editor for ePluribus Media. She has edited a small science journal and is presently a free-lance writer, who covers the arts and related matters for her local newspaper.

ePluribus Media Contributors: cho, roxy, jenn718, greyhawk

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