IV. Obama and the Democrats: Their Policies
See Part I, Part II & Part III. The stimulus, bailouts and Obamacare are the most egregious and well-known examples of the corporatist tendencies in Obama’s policy portfolio. But there numerous others.
A. Entitlement Reform
What is the purpose of Social Security and Medicare? They are neither individualist programs, in which individuals provide for themselves, nor welfare programs, in which the well-off provide for others. Rather, in their design, both programs are undeniably collectivist: they require contributions from all, even those who die before they can collect any benefits, and provide benefits to all pursuant to the same formulas regardless of need and – in the case of Medicare – regardless of contributions.
If the primary purpose of these programs is to provide retirement and medical benefits, then the government should be willing to look at what most private companies have done and what even state-level Democrats are starting to concede (grudgingly, and not uniformly) must be done for more state retirees to keep such programs fiscally sustainable: switch to something more like a defined-contribution plan where your contributions become actual assets you own, rather than a defined-benefits plan. Such a plan can still be supplemented by welfare-style benefits if it leaves the poorest Americans short, but it would free most Americans from being tied into a single, one-size-fits-all plan where their benefits are tied to everyone else’s.
Yet, every time Republicans propose something to move these programs in that direction, even on a limited, optional basis – from Bush’s private Social Security accounts plan to Paul Ryan’s Medicare premium support plan to Health Savings Accounts – Democrats from Obama on down react with shrieking horror at altering the collectivist structure of these programs. Obamacare, for example, targeted HSAs with burdensome new regulations aimed at driving them out of business, and could run most small business employees out of HSA. Obama, in the first debate, defended on explicitly collectivist grounds his main objection to premium support:
Now, in fairness, what Governor Romney has now said is he’ll maintain traditional Medicare alongside it. But there’s still a problem, because what happens is, those insurance companies are pretty clever at figuring out who are the younger and healthier seniors. They recruit them, leaving the older, sicker seniors in Medicare. And every health care economist that looks at it says, over time, what’ll happen is the traditional Medicare system will collapse.
In other words, Obama recognizes that competition could offer some seniors a better deal than they have now – and that’s his problem.
B. Education Policy
Barack Obama has posed, at times, as a reform-minded Democrat on education for supporting charter schools. But his persistent opposition to private school choice, like that of his party, is inseparable from a collectivist view of education. Obama spent years opposing even a small school choice program in DC before relenting briefly during the current election, and while he has been cagey in his own public statements, the reasons given by his allies strike a familiar note:
Opponents of the program, including Mayor Vincent Gray and Del. Eleanor Holmes Norton (D-D.C.), say that it steers attention and resources away from public schools in need and the city’s thriving charter school program.
This is a commonly-made argument, and one that is inherently collectivist: if a student leaving a school helps that student, it should not matter that the school has less funding left, especially if that funding remains the same on a per-student basis. When you strip away the veneer of pragmatic arguments (all of which attack the performance of school choice in the aggregate, rather than arguing that it’s not in the interests of individual students whose parents believe otherwise), the arguments marshalled against school choice, and private education in general (all of which are familiar to regular participants in this area), are all collectivist: that choice drains schools of good students (subtext: the good students must suffer for the benefit of weaker ones), and that public education has general benefits to society, ranging from inculcation of common ‘values’ to forcible racial integration. Not one of these arguments depends upon the idea that the policy prescriptions at issue benefit each and every student individually, or would be chosen by them or their parents voluntarily. This essay arguing for banning private schools, from Gawker’s execrable John Cook, is an extreme articulation of that view, but not an uncommon one:
From a purely strategic and practical standpoint, it would be much easier to resolve the schools crisis if the futures of America’s wealthiest and most powerful children were at stake. Wealthy people tend to lobby effectively for their interests, and if their interests were to include adequate public funding for the schools their children attend, and libraries, and air-conditioning, those goals could likely be achieved without having to resort to unpleasant things like teachers’ strikes.
…[E]ducational benefits are something that we as a nation have long held should be afforded to all children, irrespective of their backgrounds….Our current system of private and public education effectively distributes the best educations to those who were born into the right families, like Rahm Emanuel’s. He shouldn’t be able to buy his kids a better shot at life than his constituents can afford.
There are other more scholarly versions on the Left than Cook’s rant, but it provides a flavor of what regularly comes out of the Democrats when pushed on questions of public education, and what reasoning is required to sustain the Democrats’ stubborn opposition to private choice in education.
C. Labor And Student Loan Policy
Obama’s NLRB has been a nearly endless parade of efforts to bring private companies to kiss the ring of the Obama Administration and its Big Labor political allies, the most notorious of which was its treatment of Boeing last fall. The big airplane manufacturer announced its intention to build a new plant in South Carolina, a right-to-work state, and when unionized workers in Washington complained, Obama’s NRLB brought a case against Boeing for unfair labor practices for planning to open a factory in the United States of America employing American workers. In classic corporatist fashion, of course, the NRLB’s thumb on the scales put Boeing in the position of needing to make a deal with the union, which it did – the company cut a deal to “to raise wages and expand jet production in Washington,” and the NRLB dropped the case.
Why is it so important for Boeing to stay on the NRLB’s good side? Because it depends on other favors from the federal government, specifically loans from the Export-Import Bank:
Boeing is the behemoth of the export industry and for years has been a top beneficiary of Ex-Im’s programs.
…[B]etween 2000 and 2010, the bank provided more than $52 billion in guarantees to help foreign airlines buy Boeing aircraft, providing the financing for 950 jet planes. In the past few years, about 60 percent of all Ex-Im’s loans have gone to benefit Boeing, while a third of the company’s jets delivered to customers were backed by Ex-Im support.
Other companies also have won business with the help of Ex-Im, including U.S. makers of turbines, solar technology and trains.
That doesn’t sit well with other US companies who are less favored by the government:
Air India got U.S. government support and used it to vanquish the competition. With the help of cheap loans from the U.S. Export-Import Bank backed by American taxpayers, the airline bought Boeing 777s – manufactured in the United States by American workers – and then launched nonstop service between New York City and India’s business capital, Mumbai.
The only problem was that the competition on that route was Delta, which says it was forced to abandon the nonstop daily service it had pioneered two years earlier.
As with many such programs, you can’t blame Boeing for taking advantage of what the government will give it, or appeasing the government when it is in the crosshairs. Private business managers must do what they can to benefit their companies. But you can blame the people who perpetuate this system:
Speaking [in February] at a Boeing plant in Everett, Wash., President Obama pledged “to give American companies a fair shot by matching the unfair export financing that their competitors receive from other countries.”
Note that Obama’s appearance at the Washington Boeing plant was two months after the NLRB case was dropped.
The Obama Administration has also taken a variety of steps to implement Barack and Michelle Obama’s preference for government employment over the private sector. For example, Obama has pressed to structure student loan programs to favor or subsidize public employment; in his 2010 State of the Union speech, he proposed, “let’s tell another one million students that when they graduate, they will be required to pay only 10 percent of their income on student loans, and all of their debt will be forgiven after 20 years –- and forgiven after 10 years if they choose a career in public service.” In 2010, Obama’s Labor Department launched a crackdown on – of all things – unpaid internships, but of course the crackdown extended only to private sector employers, incentivizing interns to seek work with the government instead. Taken together, these policies raise the cost of private employment, reduce avenues for young people to learn about working in the private sector, and subsidize public employment.
As for the lending side, remember the point about how the threat of a public option could be held as a gun to insurers’ heads? Well, in 2010, Obama pulled the trigger in an analogous situation of student loans, eliminating the private sector lenders and having the government enter the business directly. Other companies that depend on the government’s favor, this could be you next if you don’t play ball.
D. Housing Policy and the Suburbs
Housing policy during the Obama Administration has necessarily been shaped by the aftermath of the 2006-08 crash in housing prices. Obama’s policies have been redistributionist, in terms of trying to find ways to bail out homeowners who can’t repay their mortgages, and the Administration enlisted the involuntary assistance of banks (with little success) in offering refinancings.
But the full scope of Obama’s inclinations on housing – a subject long near and dear to him, given his close ties to Chicago housing-development figures like Valerie Jarrett, Tony Rezko and Allison Davis – requires consideration of his record as a State Senator and US Senator.
Obama was long a supporter of corporatist housing policies; indeed, one of the major factors in his rise within Illinois politics was his work, launched by a 1997 speech at First Chicago Bank:
Obama described a practical strategy for building on the federal Low Income Housing Tax Credit, or LIHTC, contained in the 1986 Tax Reform Act, plus federal, state and local funds and programs, to create new public-private development partnerships.
The LIHTC encouraged the partnerships needed to unite government officials and progressive nonprofit activists behind the cause of building thousands of new affordable-housing units, first on Chicago’s poor South Side and then, as the movement spread, to similar neighborhoods across the nation.
…Obama’s innovation was to expand the concept beyond simply building affordable apartments and high-rises. It encompassed a cradle-to-grave vision of providing for the material needs of the low-income families residing in the new housing, including their schools, child care, job training, medical coverage, clothing and food.
In turn, the residents would campaign and vote for the officials advocating the partnerships, adding significantly to their political power.
Left unstated was the underlying reality that politically connected developers who built the housing would profit handsomely and could be expected to gratefully give millions of dollars in campaign contributions to politicians like Obama who made it all possible.
Of course, over his time in Chicago, that’s largely what happened: Obama was extensively supported, politically and financially, by the housing developers, ranging from Rezko being his first donor and helping him buy his own house, to Davis giving him his first job, to Obama’s and his wife’s long personal and professional alliance with Jarrett. In Washington, Obama was a major recipient of donations from the GSEs, and supported housing policies congruent with their interests.
Where do Obama’s housing policies go next if he’s re-elected? Stanley Kurtz, in a new book, has been promoting the bracing argument that a major part of Obama’s second-term agenda will be a full-scale attack on suburbia. Here’s the backdrop:
The community organizers who trained [Obama] in the mid-1980s blamed the plight of cities on taxpayer “flight” to suburbia. Beginning in the mid-1990s, Obama’s mentors at the Gamaliel Foundation (a community-organizing network Obama helped found) formally dedicated their efforts to the budding fight against suburban “sprawl.” From his positions on the boards of a couple of left-leaning Chicago foundations, Obama channeled substantial financial support to these efforts. On entering politics, he served as a dedicated ally of his mentors’ anti-suburban activism.
The alliance endures. One of Obama’s original trainers, Mike Kruglik, has hived off a new organization called Building One America, which continues Gamaliel’s anti-suburban crusade under another name.
Kurtz’ thesis is sensitive enough to cause the White House to scrub its website of photos showing the President meeting with Kruglik at the White House. Kurtz cites a variety of urban-planning maneuvers designed to advance these goals through local legislation, and notes that advocates for them have been funded by grants from Obama’s Sustainable Communities Initiative. But what could change is a proposal that appears to be still in the discussion stage: using the lever of federal funding to, yet again, dictate uniform state adoption of collectivist measures:
Obama’s former community-organizing mentors and colleagues want the administration to condition future federal aid on state adherence to the recommendations served up by these anti-suburban planning commissions. That would quickly turn an apparently modest set of regional-planning grants into a lever for sweeping social change.
Kurtz hasn’t connected the last dot to show that the Administration has yet signed off on such a plan, and it’s unsurprising that it would not be advertised at a time when Obama is battling for suburban votes. But given his prior support for Kruglik’s causes, such a move fits comfortably within the pattern of Obama’s politics.
E. The BP Shakedown
Even outside the green jobs boondoggles and the Obama Administration preferring ethanol over other feuls, old-fashioned oil policy provides another example of Big Government/Big Business symbiosis like the Obamacare pharma deal, in which the Obama Administration used a corporation it had over a barrel to cover for its own mistakes. In 2010, the Obama Administration imposed a (totally unjustified) moratorium on offshore drilling in response to the BP oil spill. That left a lot of oil workers out of work – so the Administration pressured BP into setting up a $100 million fund to compensate the oil workers, even though (1) it was the government that had harmed them and (2) this did nothing for the (in some cases smaller) BP competitors whose rigs got shut down. This was simply a shakedown to cover the Adminsitration’s mistakes, and was possible only because BP was a large enough company to absorb the cost and because the Administration had a lot of leverage over BP.
F. The Defense Sequester and the WARN Act
Recent weeks have given us yet another example of coercive corporatism at work, this one from an area – defense contracting – that has been rife with it from both parties dating back to the days when Eisenhower warned of a military-industrial complex. Lockheed and other major defense contractors face the risk of laying off thousands of employees as a result of budget cuts required by the sequestration process. Under the federal WARN Act, the contractors must give their workers advance notice of such anticipated layoffs or be held liable for damages – but because those notices would go out before the election, the Obama Labor Department has told the contractors not to send the notices, and that the government will cover their legal bills with taxpayer money. One hand washes the other: the contractors keep their primary customer happy, and Obama gets to use the taxpayers’ money to buy off a potential electoral problem. The losers? The workers, the taxpayers, and the law.
The “military-industrial complex” provides services too vital to national defense to be rid of it. But that doesn’t mean we can’t find its operation distasteful and something not to be imitated in domestic policy – and here, we have an example of how having leaders who see nothing wrong with this kind of conduct in domestic policy degrades the military contracting relationship as well.
As I noted at the outset, corporatist tendencies are on some level unavoidable in modern government, and certainly the Republican party at both the national and state levels has engaged in corporatist excesses at times. A major part of the Tea Party movement has been about combatting that within the GOP. But the Tea Party has a constituency within the GOP because its mission is consistent with the opposition to collectivism and reduction in government interference in the economy that is necessary to pare back corporatism. Democrats may conduct sporadic fights against the surface corruption, but always come back to expanding the underlying system that produces it.
The pattern of behavior laid out above really only scratches the surface of the Administration’s record – I’m not even touching here on complex areas like telecom and tech policy, or the status of other entities trapped either temporarily (like GM) or permanently in semi-public limbo, neither free private companies nor totally public – Amtrak, the Postal Service, AIG, Fannie Mae and Freddie Mac, etc. That pattern may look, at first glance, inconsistent. How can Obama be hostile to private enterprise, yet in bed with big business? Why is he sometimes operating through private companies, and sometimes through direct government action? But the point of a corporatist system is to retain governmental control, through private entities if possible, through government action if necessary. The more private businesses and semi-private “public private partnerships” are kept off-balance and wondering whose honey pot will be taken away next, the more incentive they have to keep donating, keep playing ball, and keep their objections to themselves. It’s a highly sophisticated system, honed by years of experience in the operation of political machines, and it inevitably, quietly politicizes everything while stifling public dissent as it does so.
The Obama Administration’s embrace of collectivism and corporatism at the expense of individual economic liberty, free markets and free institutions has been on a level unprecedented in the United States since at least the mid-1930s. This is not mere run-of-the-mill liberalism, much less “moderate” Democratic policy; it is a pattern and practice of undermining all the bulwarks we possess against thoroughgoing national politicization of the entire economy. Its defeat is the necessary first step in reclaiming space for free individuals, private enterprise, and the free associations that make up our communities – the American way of life.