Hoist by his own petard: Obama, the ACA, and the neo-progressive model

The recent controversy over HealthCare.gov, the still glitchy website through which the uninsured are supposed to apply for coverage under the Affordable Care Act, had seemed to us like a tempest in a teacup. It looked like just another iteration of partisan posturing over a law that is somehow both a fait accompli and an incomprehensible mess. But a scathing editorial from Bob Kuttner, editor of The American Prospect, made us stand up and take notice. Attacking Obama for being “tragically and inexcusably hands-off” Kuttner concluded that “the debacle reflects both flawed legislation and flawed leadership.” This editorial is notable because, for one, Kuttner is a left-liberal, usually sympathetic critic of the administration, not a right-wing bandwagoner. Other liberals began to join in. William Galston, a political philosopher who worked in the Clinton administration and now at the Brookings Institute, recently wrote in the Wall Street Journal that “Every experienced manager knows that, left to its own devices, the system will not always behave this way…So the president must lean against these perverse tendencies…[but] it has become clear that President Obama failed to institute such arrangements.”

These criticisms of Obama are more than just indications of liberal discontent. The attack on Obama for being incompetent hits the president where it hurts: the latter’s attempt to replace politics with expert management. The health care law was not just Obama’s signature initiatve, it was also the single best representative of his general post-political approach to politics. Obama thought he could rise above partisanship by taking an essentially Republican plan and then leaving it up to Congress to manage the details of compromise. He thought he could avoid all semblance of ‘class warfare’ by taking single-payer off the table and by eliminating any talk of redistribution. He thought he could find a consensus plan by working with, rather than taking on, the insurance companies. In other words, the belief was that he could get something done without taking any sides or even acknowledging that there were significant conflicts of interest and principle. The result was a public-private partnership that yielded a measure of agreement not so much because everyone could see their interests represented in the final result as because nobody could understand that result. It was legislation by stupefication.

Yet amid all of this, there was still one promise – that the Obama administration itself understood the moving parts. Once passed, the wonks and managers would deploy their technocratic savvy to guarantee the thing worked. ‘Fixing a broken system’ is the hopelessly apolitical metaphor endlessly deployed to describe this (and every other) piece of social policy the administration promoted. Somehow, though, the master technician rose so high above politics that he never made it back down to earth. As Kuttner observes, “This law, after all, is Obama’s signature initiative. It has been on the books since March 2010, with a full implementation date of 2014. An engaged chief executive would have been demanding frequent and detailed progress reports from his team. He would have gotten early warnings about possible glitches. But this president is tragically and inexcusably hands-off.” Galston says much the same, noting that in late September and early October checklists showed major and repeated failures during dry-runs of the website, concluding that there is good reason why “the president’s standing as a competent manager of his own government has eroded badly.” There is very little to be said for Obama’s passionless program of ‘getting things done,’ but even by his own low standards he has been caught out. In the Obama era being a bad manager is close to the worst thing you can say about anyone.

Of course, now that a management consultant has been brought in to patch up the website, we are supposed to rest assured that all will be right in the world. Undoubtedly, the technical problems with the website will eventually be resolved. But this was never just a problem with administrative efficiency, it was with a model of politics that one might call neo-progressive. Despite their many limitations, the original American progressives at least thought there were political tasks that could be best achieved through collective political agency. Neo-progressives like Obama, and Clinton before him, have raised what began as Reagan’s attack on Washington to the level of a concept. Not only have they tended to accept the view that public ownership and administration is, in itself, inefficient when compared to ‘market solutions,’ but they have turned this into a kind of principle. The operating assumption is that any government program would be better run as a public-private partnership operating in an artificially created market. The truth is much the opposite.

Here again, Kuttner’s recent editorial is on the mark. Noting the difference between Social Security and Medicare on the one hand, and the ACA on the other, he writes

“These great achievements [Social Security/Medicare] are public public programs, efficient to administer and testament to the fact that government can serve social objectives far more effectively than the private sector. Obamacare, by contrast, is the inefficiency of “public-private partnerships” at its worst. It is a public subsidy for the private insurance industry. No fewer than 55 separate contractors were hired to design the software. Yet though it is not a true public program worthy of the name, Obamacare is being used to discredit government.”

The argument generalizes to other boondoggles, like private prisons and highways. Not to mention that other signature, public-private Obama initiative – the charter school. These ‘partnerships’ reveal a special viciousness – they are harder to manage. That is because, as Kuttner notes elsewhere, “a layer of complexity is added because of the need to supervise and monitor the private vendor. Corruption is invited, because it pays the vendor to offer disguised bribes to the public officials in charge of the contract.” The standard response, moreover, is to try to expertly manipulate the incentives of the market in which these entities operate, itself an impossible task that introduces only more complexity and confusion.

The deepest irony, then, of the neo-progressive vision is that its faith in expert management is belied by its lack of belief in the public. Indeed, the reliance on private contractors, management consultants, financial executives, isn’t just a sign of corporate influence, but also of a skin-deep confidence in their own powers. It is not so much the product of corporate corruption as it is a vision of politics that invites such corruption, beginning with a natural and spontaneous belief in the intellectual prowess of the managers, CEOs and Wall Street financiers upon whom they end up relying. In this context, Obama’s oft-noted deference to major private sector consultants, in areas like finance, health and educational policy, are not so much a personality quirk as an ideological position. Rising above politics turns into an attempt to find a place beyond reproach, indeed, beyond the point at which one can be held accountable at all.

No wonder, then, that the legislative products are not only incomprehensible and difficult to administer, not to mention designed to blur the boundaries between public responsibility and private interest, but that Obama then finds himself hoist by his own petard. Of course, from the neo-progressive standpoint, it appears like everyone from Republicans on down to the “professional Left” is unreasonable. But it turns out the truly unreasonable position is the one that hopes to avoid the messy world of taking sides, of competing interests and political fights. At the end of the day, democratically determined objectives, like universal health care or public education are best promoted…democratically. That doesn’t just mean through socialized programs, but in a way that makes as transparent as possible the lines of authority and responsibility.

The Shadow Right

A familiar progressive narrative in the United States goes something like the following: “we could have achieved so much if it weren’t for the Southern racists, the religious reactionaries, the corrupt billionaires and the undemocratic procedures.” There is no question that many American institutions are deeply undemocratic, and purposefully so; it is equally evident that some of those driving the shutdown are, at best, uninterested in the normal democratic practices of convincing others of their views, and, at worst, looking for any means necessary to protect their unjust and unequal privileges.  But the recent flurry of effort to decipher just who this right-wing is reproduces a persistent error in the progressive narrative: a failure to address the conservatism of Democrats and the chaos and passivity of the American Left.

For instance, one prevailing question has been why the Republican Party would be willing to engage in apparent ‘anti-business’ brinksmanship that threatens the stability of global financial markets and draws us closer to another credit crunch? One explanation is that business does not control the Republicans (also here), which is why it can engage in seemingly irrational, ideological political games. Another explanation is that a “small group of radicals” are acting rationally with respect to their own interests, even if those interests are not the same as the national interest. Michael Lind has made the most persuasive version of this argument, claiming that this is a movement of regional elites or “local notables,” who find their power threatened by global financial markets and nationalization of social policy. Joe Lowndes reasonably argues this somewhat overlooks the national basis of the movement, and the tacit support of it among the Republican Party as a whole. And Doug Henwood has added the important point that a background class condition for these kinds of political games with American credit-worthiness and the stability of global finance is the increasingly fragmented and short-termist orientation of the capitalist class.

The emphasis of all these analyses is on the relative power and rationality of a right-wing movement. In this environment it is easy to forget some things about the Democrats and whatever stands to their left. The initial phases of this battle have essentially featured Obama going to the mats to defend the Republicans of the 1990s from the Republicans of today. Recall, for instance, that the basic principles of ‘Obamacare’ including the individual mandate come from Republican thinking circa 1994. As the negotiation now seems to be transitioning from the health care law to spending and entitlements, it is again worth recalling the Democratic embrace of the conservative position. Obama and the Democrats’ wider approach to the budget process is to affirm the need for balanced budgets (in contrast to at least some right-wing Keynesianism).  Presenting themselves as the party of responsible government and budget moderation is their only idea, even at a time when the cost of government borrowing is at historic lows. This is pretty thin gruel, especially for a public laid low by persistent high rates of unemployment, stagnating wages, and crappy jobs. All in all, the Democrats don’t have much on offer as an alternative. All they have is their much vaunted moderation. A moderation that can’t even make sense of the occasional political necessity of disruption.

But what is most striking about the present is not the virtues of moderation but of the potential power of conviction. One detects, behind all the anxiety about ‘extremists,’ ‘radicals,’ and ‘militant minorities ‘ a degree of envy. On the right there is a group with enough commitment to a shared project that is willing and able to disrupt the ordinary functioning of government. If only the Left had such wherewithal. We might, at the very least, get something more than than the economically stagnant, politically oppressive Mugwumpery of the Democratic Party.

Austerity Left and Right: Paul Ryan Redux

When Mitt Romney chose Paul Ryan as his running-mate the collective effervescence among various liberals was difficult not to notice. ‘Collective effervescence’ is the concept that the sociologist Emile Durkheim invented to describe those moments of ritualistic fervor that create feelings of group solidarity. Without these special moments, members of the group have no experience of their social being, solidarity weakens, and the group disintegrates. Durkheim had in his politically incorrect mind a bunch of Australian ‘primitives’ wearing masks dancing around a fire, but instapundits pounding out missives on the keyboard trying to whip up the listless liberal masses are just the same. For Durkheim, it’s not the flame that creates the fire, but the totem. And in this case, the Sacred totem of Obama now has its Profane counterpart in Ryan. Finally, the in-group knows its other! Ezra Klein, always ready to lead the dance, summed up the mood nicely: “Everyone always says they want an election focused on the issues. For better or worse, we’ve got one.”

There is just one problem with this, everybody is dancing around the same fire. The ‘issues,’ whatever exactly that means, are a narrow set of disagreements over one resounding consensus: how to reduce the deficit. As Michael Lind recently put it, “Obama will almost certainly run as the candidate of authentic deficit reduction, as Bill Clinton and Walter Mondale did before him.” After all, who pushed for the Supercommittee on deficit reduction? Who bragged about being tough on welfare and having “helped lead the welfare-to-work effort in the Illinois Senate in 1997”? Who proudly proclaims “I signed $2 trillion of spending cuts into law”?

Nor is this just a point about the presidential race between Obama v. Romney/Ryan. As we noted during last summer’s ‘debate’ over the debt-ceiling, the Democratic Party has been the party of balanced budgets for decades. In fact, for the Keynesians out there, one is far more likely to get deficit-spending out of Republicans than Democrats these days. In a way, Obama does not lie when he says Republicans “run up these wild debts” and says “I’m running to pay down our debt in a way that’s balanced and responsible.” It’s just that Republicans go for the most regressive and destructive deficit spending one can think of – war and tax cuts. Not all debts are wild, but those are. But of course, at the level of public debate, Republicans still beat the drums of austerity because they want to cut social services and public employment. A cause to which the Democratic Party has been increasingly willing to give its name.

The Democrats and Republicans are disputatious members of the same tribe. The collective effervescence of the election is, above all, the reconstitution of elite consensus around a very limited set of differences on political economy.

Obama and Financial Regulation

Over at Naked Capitalism, Yves Smith reposts an argument that, early in Obama’s administration, there was a “crucial window of opportunity” to seize on popular discontent and regulate the financial industry in a way that could have reduced the systemic risks that brought the economy to its knees. Instead, “Obama failed to act” and, even more problematically, turned to what appears rather disturbingly to be a propaganda campaign to promote his non-reform. The propaganda pivots on what Smith deems the “Theory of Positive Thinking,” or the theory that, so long as everyone’s expectations are optimistic, the market will continue to grow. The real economy doesn’t work that way, but Obama chose this path.

Smith’s indictment is powerful, but it under-estimates the magnitude of the problem involved in re-regulation. We are the last to let Obama off the hook, and he has received too many passes from supporters who think that, deep down, there is some kind of lefty who is simply stymied by the limits of American politics. In that argument, the wish is father to the thought. However, in the case of financial regulation, it is worth recalling some of the reasons why the issue can’t be reduced to the political will of a president willing to seize on the very amorphous and contingent discontent of the public.

First, it’s worth recalling that loosening the reins on finance and promoting the expansion of credit (especially mortgages), through low interest rates, Clinton’s decision to allow Fannie Mae/Freddie Mac to finance sub-prime mortgages (1995), de-regulations like the Gramm-Leach-Bliley Act (1999), Commodity Futures Modernisation Act (2000), and the 2004 SEC decision to raise debt-to-capital ratios, were all part of a particular kind of social compact. Various observers have noted that financialization of the American economy begins to pick up just as real wages begin to stagnate in the mid-1970s. Here is a graphic on stagnating wages:

Compare with various figures showing starting in the late 1970s. The Economist, for instance, observes that consumer debt went from 100% of household income in 1980 to 173% in 2009. Basically, the post-1970s downturn social model was to keep consumption levels high through the expansion of credit, rather than by maintaining the ability of workers to compete for their share of the actual social product. (It’s no accident that unionization and strikes – key methods for keeping wages and benefits high – have declined). For this kind of expansion of credit, especially in key areas like home loans and credit cards, de-regulation was required, not to mention lax oversight and a general social willingness to allow bankers to play.

To be clear, this is not a point about fairness, social justice or any other kind of moral judgement about whether this was a good way of dealing with the crises of the 1960s and 70s. It’s just a point about the way the actually existing accord appears to have worked. The upshot is that re-regulation implies a kind of transformation of American society not just the economy. It would require making a decision to go for a different kind of accord between the various interests in society, and that is not something that Obama can manage single-handedly. It’s evident he doesn’t have the stomach for even the first baby steps. The Employee Free Choice Act is tabled, Obama wants to talk about stock markets not job markets, and nobody wants to talk about real wages.

On top of everything, even if someone decided to tackle the problem of coming up with a different kind of social model, there are the global imbalances that would also have to be managed. An excellent paper by Anush Kapadia and Arjun Jayadev reminds us that the difficulty in dealing with the financial meltdown comes from the overlapping layers of financialization and risk. Over the past decade, what has made possible low interest rates, cheap consumer goods, and thus debt-financed consumption are ‘global imbalances,’ or the way the Chinese have suppressed their own financial markets, instead cycling their profits into US T-bills. This keeps the dollar strong relative to the renminbi, and allows the US to run trade deficits (alongside Chinese trade surpluses). Here again, balancing out this dynamic would involve some development of Chinese financial markets, alongside higher domestic consumption in China, and meanwhile higher American savings and investment, but lower consumption. It’s hard to imagine a move like that, especially a globally coordinated one, especially given the implications that would have for the already struggling majority of Americans.

So, in sum, Smith is certainly right to point to the abject failure of leadership by Obama and the Democrats, especially in the early post-election days when there was indeed some kind of critical juncture, or at least minimal opportunity. Even in the small window available to them, the Democrats took conservative options. And the major strategy seems simply to be to kick the can down the road. But it’s also important to note the magnitude of the social and political problem, because it means the fight to craft a new order will involve some major major losers and winners. In that battle, it’s going to take more than amorphous public opinion to overcome well-organized interests.