The current New York cover story, by John Heilemann, is called The Next New Deal. It’s crystal ball-gaze (ew, ball-gaze) to the early days of an Obama administration, is kind of a catch-all, lots of horse-race stuff and inside baseball, but when he finally gets to policy (“A new energy economy,” a stimulating middle-class tax cut, amid “wars between deficit hawks and public-investment liberals”) Heilemann’s really compelling, and reminds me at least of things Obama has been frequently talking about, like energy and infrastructure, in the context of a growing consensus that his will be an FDR-style presidency. Infrastructure and energy, coincidentally, are things discussed in the current Harper’s cover story, a forum with the eye-catching title How to Save Capitalism.
The contributions are arranged from specific regulatory realignments into big-thinking economic overhauls dependent on New Deal-style policies, with a Rooseveltian understanding that the right kind of debt isn’t a deficit, it’s an investment. Most heartening is the idea, also suggested by the Obama campaign, that the twin crises of energy dependence and economic freeze could actually be most effectively solved if treated as the same problem.
Our Conscientious Objector, who’s talked about the Obama campaign’s awareness of localization as a necessary economic and environmental policy, will be most interested in the final piece, from everybody’s favorite pop-unified-theorist-of-everything Bill McKibben, but let’s look, per Heilemann’s assessment of Obama’s likely priorities, at a couple of proposals that seem to make a lot of sense. James K. Son of John Kenneth Galbraith begins:
The problem is not how to save capitalism but how to save the unique and successful mixed economy built in the United States over the eighty-five years since the New Deal. Our system is not capitalism. Our economy has a large public sector, which at its best was competently concerned with research, defense, financial stability, environmental safety, social security, and large measures of education, health care, and housing. Today, after thirty years of attack on government, all these functions are damaged and in peril.
The rot comes from predators posing as conservatives and mouthing the rhetoric of "free markets." They are not actually interested in free markets. Their goal is to use the government to build monopolies, to control resources, to block regulation, to crush unions, to divert as much as possible from taxpayers into private pockets. They have a reckless attitude toward war-making and they put the financial system in peril by failing to enforce standards of ethics and transparency. As a result, they imperil the country’s credit in the world. True conservatives recognize this, which is why they defected from Bush and McCain long ago.
He then suggests that energy could be a way of restarting this kind of economy, and concludes:
Imagine a Federal Department of Energy and Climate with real independence. It could make an honest evaluation of ethanol. It could review the prospects and assess the dangers of next-generation nuclear power. It could make a judgment on carbon capture. It could consider all the serious conservation proposals, such as Joe Kennedy’s program to retrofit housing in the snow belt. It could fund new research centers in the major universities, so that in a decade the country will have trained the experts we will need to implement the plans we make.
Planning is not coercive, but it should be privileged. Once Congress approves a plan, budgeting and appropriation rules should favor public capital spending that implements the plan. For instance, such investments would not be subject to "pay-go" restrictions; as long-term improvements, they properly should be funded by issuing long-term debt. The planning process would thus parallel the budget process, superseding it in the areas of infrastructure, technology, and environmental management that would be the main arenas for the plan. Dealing with the energy and climate crises will require direct public action and the cooperation of the private sector, which will be achieved in part by regulation and standards. Clearly, the challenge is daunting. But itnot hopeless. If the country gets it right, all of us can have work for a generation, a better living standard afterward, and leave the planet more or less intact. And in addition, we stand a chance, otherwise improbable, of persuading the rest of the world to keep our line of credit open.
Eric Janszen, who earlier this year in the same magazine presciently explained about how all our wealth was, in fact, fake (yup!), who says:
Rather than allowing our government to engineer another bubble (all our bubbles since the 1980s have involved the government creating—through tax subsidies, loan guarantees, and loose regulatory policy—an initial market for speculation that then metastasizes), we should use the government to lay the foundations for a reindustrialization of America. We can do this in two ways. First, get government out of the way of progress by removing subsidies for uncompetitive companies. We can’t expect private capital to compete with, for example, the current proposed $95 billion tax break for the dinosaurs of the American auto industry. Second, and more important, we should remove government subsidies of FIRE industries. This means not just ending the mortgage-interest deduction but also breaking up Fannie Mae and Freddie Mac into parts and selling them on the open market. By removing our structural support for the FIRE sector, we would free up billions of dollars of capital for both the private and the public sectors.
That capital, in turn, could be invested in American infrastructure. We need high-speed railways, ubiquitous high-bandwidth wireless, and nuclear energy, but we currently have a dysfunctional market dynamic that is stopping us from making these improvements. It’s a chicken-and-egg problem: private industry can’t bring more efficient cars (say) to market without significant infrastructure funding to build alternative fueling stations, but meanwhile the delay in these technologies prompts the government to lavish ever more money on the old, inefficient industries in order to preserve jobs. To break that cycle, we need government to actively envision the infrastructure projects we need and then arrange their funding by private investors as well as by public money. The right approach here is one that has already been used to great success in Europe: "public-private partnerships"; i.e., corporations owned partly by private investors and partly by the government, created for the purpose of developing and executing large-scale public works. For each major project announced by the federal government, multiple public-private partnerships could bid competitively for the business (much like prospective Olympic host cities do). Progress on projects, public information reported quarterly, would create incentives for efficiency through the stock price. The best PPPs would be rewarded with the highest stock price for producing the best infrastructure "product" on time and on spec.
Once a bid was accepted, individuals could invest money in the partnerships directly, in a fashion similar to how the Treasury Department and certain states (Massachusetts and California) currently sell bonds to Americans over the Internet, cutting out rent-levying banks. Moreover, citizens’ federal taxes could be deferred, up to a limit, so that they could purchase infrastructure securities. These securities would become a bedrock investment for federal and state governments, as well as for foreign governments, which at present have trillions invested in U.S. Treasury bonds: these infrastructure securities would earn a better rate of return at only a marginally higher risk, and a shift toward them would allow the United States to pay down its debt more productively.
Finally, funding of these infrastructure projects would enable thousands of new private companies, whether bootstrapped by entrepreneurs or backed by venture capital, to develop new technologies. New, organic light-emitting diodes that produce as much illumination as current sources with one tenth as much energy; ceramics that allow next- generation nuclear reactors to run safely; biotech-modified microorganisms that convert nuclear waste into harmless materials; nanotech paints that reflect sunlight to make the insides of cars cooler—the list is endless. Such new American technologies would be in demand worldwide, exports would boom, and within ten years the U.S. current-account deficit would reverse. Instead of creating asset bubbles, the nation that invented the Internet—with the help of government, as one must always remember—would finally invent a New Economy deserving of that name.
The congruencies between these broadly considered, specifically outlined policies, and the way Obama talks about the issues (and is said to think about them), is really heartening. (As is Heilemann’s accounting of the tightness with which he’s planning his transition.) And so, for that matter, is the sense the guy’s running for president because he actually has ideas about how the country should be run, rather than because his party had to nominate someone and he wanted it to be him.