Obamanomics Explained

I just finished reading this piece from the Times Magazine about Obama's economic positions. It's really enlightening if you have the time to read it.

What is comforting about the article is that it shows Obama has a firm grasp of economics. He seems to understand that markets are on the whole efficient, but often not fair, and that there exist obvious market failures. The key is in balancing all of this. Here are some of his plans:

- Obama is for tax cuts for middle- and low-income wage earners,

The Tax Policy Center, a research group run by the Brookings Institution and the Urban Institute, has done the most detailed analysis of the Obama and McCain tax plans, and it has published a series of fascinating tables. For the bottom 80 percent of the population — those households making $118,000 or less — McCain’s various tax cuts would mean a net savings of about $200 a year on average. Obama’s proposals would bring $900 a year in savings. So for most people, Obama is the tax cutter in this campaign.

and tax increases for the highest earners (partly reversing the Bush tax cuts, and then increasing the taxes further). For those of you who are concerned the increases would stifle innovation and investment, consider that the proposed increases wouldn't come close to reversing the gains upper income earners have seen over the past few decades. Also realize that, "Most families [low- and middle-income] are still making less, after accounting for inflation, than they were in 2000." This might sound like pandering, but the reality of stagnant wages for middle- and low-income earners can't be ignored and isn't good for the country.

And it seems on the surface at least that recent history supports at least some redistribution. As the article points out, the negative effects of Clinton's tax increases never materialized and the trickle-down effects of the Reagan and Bush tax cuts also never seemed to occur. Granted, showing a direct causal relationship between a president's policies and economic outcomes is imperfect to say the least, but I would be willing to increase taxes on the rich and risk losing some efficiency in the market for at least some increase in fairness.

- Obama favors an increase in government spending on infrastructure. This I think has the most promise, if done wisely. While we don't need new highways as much as we did after World War II (which by the way, I hadn't realized was a result of witnessing how easily Germans could move good during the war), we have serious unmet needs relating to energy and the environment. With significant government funding, we could increase sustainable energy and the infrastructure that supports it (ie power lines, which are unfit to meet probable changes in our production according to this article). What makes this so attractive is that it could provide jobs for the part of the workforce that is suffering from the loss of manufacturing and related industries overseas. I don't believe in protectionism and I realize that re-educating workers isn't the solution many pretend it is.

To the extent that he sticks with these policies, and manages to move on them, it seems that Obama by far represents our best hope in managing our economy.