The Road Untraveled: Obama and the Middle Way

When Barack Obama was elected President last year, many public policy paths lay open to him. As a Democrat, Obama naturally did not turn to the laissez-faire right. To the far left, lay the trail of European-style socialism. Fellow travelers tugged at the President’s arm urging him to go this route, but the rocky political obstacles seemed too formidable. To Obama’s immediate left was the broad and open road of the Democratic status quo where many Congressional guides stood eager to lead the way. It must have seemed the path of least resistance, and so Obama took it.

In virtually all of the major legislative areas – fiscal stimulus, healthcare reform, and carbon-emissions reduction – President Obama picked the path Congressional Democrats liked best, allowing them to take the lead. Did he ever really consider that little-used post-partisan footpath in the center, the one that his campaign for President suggested he might take? It would have required the President to blaze the trail himself, and although a difficult journey, the view from the top could have been magnificent.

Now let us engage in a little imagination and counterfactual history. Instead of the pork-laden stimulus bill written by Congress, which dribbles out spending rather than giving the economy the necessary jolt, suppose the President had taken the lead by creating a more potent stimulus that was “green” and fiscally responsible. The total sum authorized was a staggering $787 billion, which is $2,556 for every man, woman and child living in the United States. What if all of this money had been given to Americans individuals, families and businesses to improve the energy efficiency of their homes and work places?

Imagine every house on the block installing new energy-efficient furnaces in the North, air conditioning systems in the South, thermopane windows, insulation, storm doors, fluorescent lighting, etc. Many of the negative effects of the depressed home building market would immediately end. Nearly everyone in the building trades would now have work. Manufacturers who produce energy-efficient products would have to add night shifts to keep up with demand. Importers and retailers selling such products would also see their business increase. The goal of a quick boost to the economy would have been met.

Such a program would have a powerful multiplier effect beyond that created by the short-term stimulus. Consider the economic power behind vast numbers of American households and businesses saving hundreds of dollars each year on reduced energy costs. A “green” stimulus would continue to pay dividends for the economy many years into the future.

The reductions in carbon emissions resulting from this radical conservation program embodied in the green stimulus would obviously be enormous, but the progress need not stop here. In outlying years, after the economy had recovered, the green stimulus could have been tied to and paid for by a gas tax and oil import fee. This tax reform would not only have made the green stimulus fiscally responsible, but as we suggest here , gas taxes and an oil import tariff would serve numerous public policy goals, including a reduction in American dependence on foreign oil which in turn would promote national security.

The green stimulus and carbon taxes would preclude the need for the convoluted “cap and trade” legislation currently slogging its way through Congress. Similar measures have not worked well in Europe, and the American version is full of goodies for politically connected utility companies.

On healthcare, Democratic Senator Ron Wyden had already cleared a path to all of the President’s stated objectives. Suppose the President had followed Wyden’s lead. According to the Lewin healthcare policy group, the Wyden – Bennett bill would have covered 99% of all Americans with healthcare equal to that which government employees receive. Odious practices like denying patients coverage with pre-existing conditions would be banned. The Congressional Budget Office’s preliminary calculations forecast the fiscally responsible Wyden-Bennett bill to be deficit neutral by 2014. Because the Wyden-Bennett bill would move the United States to a more competitive consumer-based (as opposed to employer-based or government-based) system, Wyden’s proposal had attracted Republican sponsors, including members of the Senate Republican leadership. Here was an out-of-the-box bipartisan healthcare solution begging for the President’s embrace. Instead, Obama walked the other way (For more, see here and here)

Had Obama chosen to lead along the center path, he would have encountered the resistance of many special interests, including various industries, trade and labor organizations that incumbent Democrats think they need to keep their precious offices. But as a result of doing business as usual, public approval of Congress is at an all-time low, and the President himself is slipping in the polls. Do they really not see that all of the pandering to special interests is in equal parts bad politics and bad policy? The results of Tuesday’s gubernatorial races in Virginia and New Jersey are likely an omen of things to come (Republicans characteristically shot themselves in the foot in the special House election in NY, but that is another story).

Even at this still-early point in the journey through the Obama presidency, it is not hard to imagine what might have been. The middle way, which eschews special interest politics, and comports with market incentives, would have achieved many progressive goals. Some political leader someday will wisely choose that seldom-trodden center path, and with the nation, will be richly and rightly rewarded.