In “Hope, but Not Much Change” Bobo says President Obama seems sure of himself, but where’s the big agenda? It wasn’t in the State of the Union address. Bobo thinks the Cat Food Commission was just grand… Prof. Krugman, in “Jobs, Jobs and Cars,” says Gov. Mitch Daniels got so much wrong in his reply to the president’s State of the Union address. To really create jobs, it takes a cluster, not just heroes. Here’s Bobo:
The Simpson-Bowles report wasn’t just a policy document. For a few months, it expanded the national debate. Everybody seemed to realize that the country was beset by large challenges that could no longer be neglected: soaring debt, lagging growth, wage stagnation, family breakdown, political dysfunction.
Suddenly, there was a sense of urgency. There were grand plans coming from all directions.
A bipartisan group of 65 senators gathered to think about government afresh. The Times had a fantastic online budget calculator to let readers reinvent government according to their own priorities.
The Peter G. Peterson Foundation asked six think tanks from across the political spectrum to offer fiscal solutions. The proposals teemed with big ideas: fundamental tax reform that would simplify the code and boost growth; fundamental entitlement reform to restrain cost; doubling spending on science, pre-K education and adult retraining; taxing fossil fuels to spur innovation; shifting from a consumption-led to an investment-led economy.
It’s sad to compare that era of bigness to the medium-sized policy morsels that President Obama put in his State of the Union address. He had some big themes in the speech, but the policies were mere appetizers. The Republicans absurdly call Obama a European socialist on the stump, but the Obama we saw Tuesday night was a liberal incrementalist.
There was nothing big, like tax reform or entitlement reform. There was no comprehensive effort to restore trust in government by sweeping away the tax credits and special-interest schemes that entangle Washington. Ninety percent of American workers work in the service economy, but Obama spoke mostly about manufacturing.
Instead, there were a series of modest proposals that poll well. In that sense, it was the Democratic version of Newt Gingrich’s original “Contract With America” — a series of medium-size ideas with 80 percent approval ratings.
Some of Obama’s ideas are outstanding. Presidential nominees should get an up-or-down vote within 90 days. We should connect community colleges more closely with labor markets. We should raise the income tax rates for millionaires back to Clinton-era levels. We should responsibly promote fracking to develop natural gas.
Some of the ideas were lamentable. Instead of simplifying the tax code, Obama would muddy it up with more tax loopholes for corporations as long as they conformed to this or that industrial policy.
Some of the ideas were just inexplicable. Is the government really going to defund Ivy League science labs if Ivy League colleges raise their tuitions?
But the core point is that these policies are incremental, not transformational. You could pass them all and the country might be slightly better off or slightly worse off, but it wouldn’t be on a different trajectory.
It’s odd that an administration that once wanted to do everything all at once now should be so gradualist. Maybe its members were scarred by the traumas of health care and the 2010 election. Maybe they just want to win the election, so every policy has to be politically easy instead of politically challenging.
Maybe the president’s aides believe that most of our problems are overhyped. I have heard them hint that in dozens of interviews. To balance the budget, we only need to bend revenues and taxes a bit. To compete with China, we only need to shift the playing field a bit.
Maybe the president’s cautious tendencies are just coming out.
In normal times, that sober, incremental approach would be admirable. In normal times, the best sort of change is gradual, flexible and constant. But these are not normal times. This is not Clinton’s second term, or Eisenhower’s. The fiscal train wreck is coming. The current U.S. growth model is insufficient. The American family and the American political system are cracking up.
Legislatively, the president has to build a center-left governing majority that can overwhelm those Republicans who will never support him. That can be done only with ground-shifting policies. Politically, the president has to resonate with voters who feel the country is on the wrong track. Prudentially, the president has to prepare for the likelihood that the economy is going to hit another rough patch this year — if Greece leaves the euro or if the French banks implode or if the Iranian crisis comes to a head. If any of that happens, the desire for profound change would be overwhelming and the candidate with a few carefully targeted tax credits would get blown away.
This election is about averting national decline. The president is making a mistake in ceding the size advantage to the Republicans. The Republicans at least speak with epic alarm about the nation’s problems. They are unified behind big tax and welfare state reforms that would purge Washington and shake things up.
The president is making a mistake in running a Sunset Boulevard campaign: I am big; it’s my presidency that got small.
Here’s Prof. Krugman:
Mitch Daniels, the former Bush budget director who is now Indiana’s governor, made the Republicans’ reply to President Obama’s State of the Union address. His performance was, well, boring. But he did say something thought-provoking — and I mean that in the worst way.
For Mr. Daniels tried to wrap his party in the mantle of the late Steve Jobs, whom he portrayed as a great job creator — which is one thing that Jobs definitely wasn’t. And if we ask why Apple has created so few American jobs, we get an insight into what is wrong with the ideology dominating much of our politics.
Mr. Daniels first berated the president for his “constant disparagement of people in business,” which happens to be a complete fabrication. Mr. Obama has never done anything of the sort. He went on: “The late Steve Jobs — what a fitting name he had — created more of them than all those stimulus dollars the president borrowed and blew.”
Clearly, Mr. Daniels doesn’t have much of a future in the humor business. But, more to the point, anyone who reads The New York Times knows that his assertion about job creation was completely false: Apple employs very few people in this country.
A big report in The Times last Sunday laid out the facts. Although Apple is now America’s biggest U.S. corporation as measured by market value, it employs only 43,000 people in the United States, a tenth as many as General Motors employed when it was the largest American firm.
Apple does, however, indirectly employ around 700,000 people in its various suppliers. Unfortunately, almost none of those people are in America.
Why does Apple manufacture abroad, and especially in China? As the article explained, it’s not just about low wages. China also derives big advantages from the fact that so much of the supply chain is already there. A former Apple executive explained: “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away.”
This is familiar territory to students of economic geography: the advantages of industrial clusters — in which producers, specialized suppliers, and workers huddle together to their mutual benefit — have been a running theme since the 19th century.
And Chinese manufacturing isn’t the only conspicuous example of these advantages in the modern world. Germany remains a highly successful exporter even with workers who cost, on average, $44 an hour — much more than the average cost of American workers. And this success has a lot to do with the support its small and medium-sized companies — the famed Mittelstand — provide to each other via shared suppliers and the maintenance of a skilled work force.
The point is that successful companies — or, at any rate, companies that make a large contribution to a nation’s economy — don’t exist in isolation. Prosperity depends on the synergy between companies, on the cluster, not the individual entrepreneur.
But the current Republican worldview has no room for such considerations. From the G.O.P.’s perspective, it’s all about the heroic entrepreneur, the John Galt, I mean Steve Jobs-type “job creator” who showers benefits on the rest of us and who must, of course, be rewarded with tax rates lower than those paid by many middle-class workers.
And this vision helps explain why Republicans were so furiously opposed to the single most successful policy initiative of recent years: the auto industry bailout.
The case for this bailout — which Mr. Daniels has denounced as “crony capitalism” — rested crucially on the notion that the survival of any one firm in the industry depended on the survival of the broader industry “ecology” created by the cluster of producers and suppliers in America’s industrial heartland. If G.M. and Chrysler had been allowed to go under, they would probably have taken much of the supply chain with them — and Ford would have gone the same way.
Fortunately, the Obama administration didn’t let that happen, and the unemployment rate in Michigan, which hit 14.1 percent as the bailout was going into effect, is now down to a still-terrible-but-much-better 9.3 percent. And the details aside, much of Mr. Obama’s State of the Union address can be read as an attempt to apply the lessons of that success more broadly.
So we should be grateful to Mr. Daniels for his remarks Tuesday. He got his facts wrong, but he did, unintentionally, manage to highlight an important philosophical difference between the parties. One side believes that economies succeed solely thanks to heroic entrepreneurs; the other has nothing against entrepreneurs, but believes that entrepreneurs need a supportive environment, and that sometimes government has to help create or sustain that supportive environment.
And the view that it takes more than business heroes is the one that fits the facts.
