Coming Out of Obama Derangement Coma: Welcome Back, Paul Krugman

Paul Krugman, Nobel winning economist and New York Times columnist, and I have crossed paths before. My impression of Dr. Krugman has always been what I wrote in August of 2011: a political rookie, compared to President Obama (who isn't?). Krugman took some offense to that, calling my article ritual bearded professor bashing, but I have also always regarded him as a top notch economist. It's when he tried to give his economics a brand of politics that in my judgment his critics often failed.

Because Krugman is first and foremost a policy wonk and economist - despite the populist rants that have made him a darling of the Professional Left - he was bound to come around to this President's record being amazingly good under stunningly tough circumstances - from the disaster of the Bush economic collapse to the disaster of Bush's party's political obstructionism.

And last week, Krugman finally did just that. In an article he penned in the Rolling Stone, Krugman terms Obama "one of the most consequential and, yes, successful presidents in American history." Professor Krugman shines through most of his piece, highlighting the President's achievements that will far outlast his presidency, though he seems to feel obligated to start with his signature political naivete. Let's deal with that first.

Obama was indeed naive: He faced scorched-earth Republican opposition from Day One, and it took him years to start dealing with that opposition realistically. Furthermore, he came perilously close to doing terrible things to the U.S. safety net in pursuit of a budget Grand Bargain; we were saved from significant cuts to Social Security and a rise in the Medicare age only by Republican greed, the GOP’s unwillingness to make even token concessions.

There has been many analytic pieces on TPV proving these political prognostications wrong, and the reader can use the search field to find them all (here's one). But suffice it to say that under this President the social safety net has in reality been massively expanded - with the Affordable Care Act not just expanding health insurance (and Medicaid) to tens of millions with subsidies, but also through making Medicare more generous and closing the Part D prescription drug coverage gap.

As for the Grand Bargain, we have shown here that it was a two-prong strategy on the president's part. Yes, the President was willing to make modest adjustments to Social Security benefits (while protecting the most vulnerable and even boosting benefits for the oldest), which were and will at some point be needed - but only in exchange for further concessions from Republicans on raising taxes on the very wealthy. We won't again go into the discussion of why some form of reforms to the Social Security system is needed, but in the real world, the results turned out thus: the president got partial tax increases on the rich through a deal in January of 2013, but Republicans have had no concessions from the president to show for it.

Luckily, Krugman does not waste much time on expanding on his political ideas in his recent piece. On health care, for example, Krugman wades through the media-disaster talk with the brilliance worthy of Nobel-winning intellect, pointing out that Obamacare is working "better than even the optimists expected" expanding coverage to tens of millions, and providing for new financial security for those who were able to gain coverage.

Krugman wields his sharpest sword, though, against a Leftist attack on the Affordable Care Act. The loud Left's argument that Obamacare was a miserable failure at cost control has been just as persistent and wrong as the screeching Right's howls of a government takeover. What has the economist to say about Obamacare's cost control? He points to evidence.

What about the costs? Here, too, the news is better than anyone expected. In 2014, premiums on the insurance policies offered through the Obamacare exchanges were well below those originally projected by the Congressional Budget Office, and the available data indicates a mix of modest increases and actual reductions for 2015 – which is very good in a sector where premiums normally increase five percent or more each year. More broadly, overall health spending has slowed substantially, with the cost-control features of the ACA probably deserving some of the credit.

Krugman is talking about cost-control features such as competition, the ban against discriminatory rating based on health conditions, the requirement that insurance companies spend 80-85% of premium revenue on actually providing health care services, and the massive investment in community health centers. (For more, search for our Beyond Insurance series about Obamacare).

Krugman isn't exactly shy about pointing out that President Obama's policy successes are making his critics - the Right and the Left - look foolish (Krugman's words), but the simplest statement is perhaps the best in determining the legacy of Obamacare.

Health reform has made America a different, better place.
— Paul Krugman

On financial reform, Krugman once again goes through the Left's political ritual of faulting the president of not parading around Wall Street executives, but to use his own words, the passion is gone. But once again, he hits the Leftier-than-thou limousine liberals:

It’s easy, however, to take this disappointment too far. You often hear Dodd- Frank, the financial-reform bill that Obama signed into law in 2010, dismissed as toothless and meaningless. It isn’t. It may not prevent the next financial crisis, but there’s a good chance that it will at least make future crises less severe and easier to deal with.

I don't have to explain that one to you, but Krugman does. Putting on the professorial glasses that I have so loved about him, Krugman outlines three key features of Dodd-Frank that are so significant that the financial industry's distaste for it has driven their donations - which used to be roughly equally divided among the political parties (heck, John McCain attacked Obama for taking too much Wall Street money in 2008) - almost exclusively into the loving arms of the Financial Chaos Party.... I mean the Republican party:

  • Giving the government the ability to designate "systematically important financial institutions" or SIFI's. While this is derided as toothless, the proof is in the pudding. Financial institutions are fighting tooth and nail to keep themselves from being designated as SIFI's, because of the amount of additional regulations and reserve requirements that can be levied on them once they are so designated.
  • "Orderly liquidation authority:" Along with the SIFI designation authority, the orderly liquidation authority actually allows regulators to take over high risk financial institutions in an orderly fashion in a crisis. Krugman points out that had this explicit authority existed during the Bush financial catastrophe, the government could have ... what's the word... yeah, nationalized banks like Citigroup!
  • Last but not least, the Consumer Financial Protection Bureau: Elizabeth Warren's brainchild met with President Obama's executive prowess on this one. The first federal agency ever to focus solely on financial protection, Krugman notes that "the new agency is in fact doing much more to crack down on predatory practices than anything we used to see."

But there would be no legacy of the Obama presidency without this president's leadership in holding back the tide of a Second (Republican-caused) Great Depression and rebuilding the economy to the point where we are now experiencing the longest continuous period of private sector job growth ever. In that light, and in the light that Krugman was an early critic of the size of the President's Recovery Act package, it is truly remarkable that Krugman now nonetheless terms it a success. And even though it seems painfully slow, Krugman crunches the number and shows that under Obama, we have performed better not only than other industrial economies but also by historical standards.

Make no mistake about it – the devastation wrought by the financial crisis was terrible, with real income falling 5.5 percent. But that’s actually not as bad as the ‘’typical’’ experience after financial crises: Even in advanced countries, the median post-crisis decline in per- capita real GDP is seven percent. Recovery has been slow: It took almost six years for the United States to regain pre-crisis average income. But that was actually a bit faster than the historical average.

Of course, the recovery could have happened even faster had Republicans decided even for a minute that they loved their country more than they hated their president.

Neener, neener, you say. Obama had nothing to do with the recovery! - roars the Right. Turns out, the overwhelming consensus among economists is that Obama's policies - namely his early stimulus efforts - helped.

Did Obama’s policies contribute to this less-awful performance? Yes, without question. You’d never know it listening to the talking heads, but there’s overwhelming consensus among economists that the Obama stimulus plan helped mitigate the worst of the slump. For example, when a panel of economic experts was asked whether the U.S. unemployment rate was lower at the end of 2010 than it would have been without the stimulus, 82 percent said yes, only two percent said no.

If the Right is busy screaming about how Obama must be given no credit for the recovery, Obama's critics on the Left have accused him of being a tool for the wealthy oligarchy. In perhaps his best paragraph of the entire article, Krugman swats this argument down masterfully.

While America remains an incredibly unequal society, and we haven’t seen anything like the New Deal’s efforts to narrow income gaps, Obama has done more to limit inequality than he gets credit for. The rich are paying higher taxes, thanks to the partial expiration of the Bush tax cuts and the special taxes on high incomes that help pay for Obamacare; the Congressional Budget Office estimates the average tax rate of the top one percent at 33.6 percent in 2013, up from 28.1 percent in 2008. Meanwhile, the financial aid in Obamacare – expanded Medicaid, subsidies to help lower-income households pay insurance premiums – goes disproportionately to less-well-off Americans. When conservatives accuse Obama of redistributing income, they’re not completely wrong – and liberals should give him credit.

Boom. Many structural problems remain in our economy, but this president's policies have aimed to increase the social responsibility of the wealthy and reduce the social burden on the poor - from tax policy to stimulus to health care.

Economic policy is Krugman's strong suit, so it's no wonder that this part of his argument is the strongest. Nonetheless, Krugman draws his piece to a close by highlighting the President's achievements on environmental issues (dramatically increased wind and solar power, higher gas mileage standards, and regulating Carbon-di-oxide emissions from coal plants) and - I'm sure to the horror of many armchair liberals - social change.

Social change - Krugman is not a sociologist, and I disagree with his characterization of the president as "following, rather than leading" on social issues. It is manifestly demonstrable that the president's declaration of support for marriage equality spiked its support among ethnic minorities, for example. But Krugman is not wrong when he says this:

Before the Obama presidency, Democrats were in a kind of reflexive cringe on social issues, acting as if the religious right had far more power than it really does and ignoring the growing constituency on the other side. It’s easy to imagine that if someone else had been president these past six years, Democrats would still be cringing as if it were 2004. Thankfully, they aren’t.

I would also argue that social change is often understated as the catalyst for economic change. Because Democrats are on the offensive on women's reproductive rights, we can also be on the offensive about pay parity. Because Democrats are on the offensive about equal rights for LGBT Americans, Republican legislation to explicitly allow employment discrimination have retreated to middle earth. Because Democrats are on the offensive about voting rights, the economic elite is having all kinds of trouble justifying their new poll taxes.

At the end, Krugman didn't exactly turn into an TPV groupie when it comes to highlighting this president's accomplishments, but he has done more than what the Left's loudest mouths have been willing to do: point out the real consequential nature of this president in favor of a progressive America, and acknowledge that the perpetual disappointment crowd is ignoring reality - both policy and political.

I'll take it. It's a good way to wake up from the coma caused by the Obama Derangement Syndrome. It's good to have you back, Dr. Krugman.



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