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May 17, 2009
David Warsh, Proprietor


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The Next 500 Days

Now that the flurry of appraisals of Barack Obama’s first hundred days are behind us, what of the next five hundred?  That’s the length of time before the 2010 midterm elections are at hand.  The new president’s success or failure in increasing his Congressional majority in 2010 will determine the way his presidency enters the history books. Whether the Republican opposition is ready or not, the midterm election will be a referendum on his policies.  

 

New York Times reporter Peter Baker last week took note of the frequency with which the president has been speaking of a “new foundation.”  On Monday he said that health care reforms would “lay a new foundation for our economy.” On Wednesday, graduating college seniors at Arizona State University were urged to “build a new foundation.”  On Thursday, consumer protection was vital “to the new foundation we seek to build.”  For a month now, the White House Press Office has been capitalizing the phrase.

 

True, as a slogan, the catchphrase is cumbersome – as Baker noted, it has twice as many syllables as “New Deal.”  Its advantage is mainly descriptive.  It emphasizes the extent of the adaptations that are underway in American life.

 

The economic news last week was that the global downturn had “bottomed out,” at least according to European Central Bank chief Jean-Claude Trichet. Great uncertainties remain about the pace of the recovery, especially in the United States. The decision to reappoint Federal Reserve chair Ben Bernanke next January must be made, and monetary policy charted for the future. An extensive overhaul of the financial system soon will begin in Congress. Meanwhile, the specter of a global depression is fading rapidly, and the likelihood that the economy will be stuck in neutral as the election approaches next year is considerably reduced.

 

Meanwhile, the promised health care reform seems sure to go forward, though few seem to expect it will do much in the near-term to control costs. The same logic of try-it-and-see-if-it-works applies to the administration’s plan to establish a “cap and trade” program of carbon dioxide emissions permits. The Congressional Budget Office estimates that the measure will raise around $80 billion a year.  Harvard University professor Martin Feldstein, who entered national politics as an adviser to Ronald Reagan, warned last week, that such new taxes could “kill any chance of an early and sustained recovery.” Feldstein had nothing to say about climate change, however. Just over the horizon are necessary and even thornier compromises on Social Security and Medicare.

 

Even the fate of newspaper industry is somehow bound up in this “new foundation” business. My friends are reading sociologist Paul Starr’s  The Creation of the Media: Political Origins of Modern Communications (2004), happy to be reminded that since colonial times, the news business has been as much a political invention as a matter of  technological advance. True enough:  just look at the Internet and the World Wide Web. I am more encouraged to learn that Rupert Murdoch intends to introduce a system of micro-payments for The Wall Street Journal’s website this fall. Other good newspapers will follow.  Reports of their imminent demise have been greatly exaggerated.

What are the chances that Obama’s presidency is going to end in insolvency – “fiscal suicide,” in New York Times columnist David Brooks’ colorful phrase? Not very likely, I would judge.  In contrast, what if government spending, mostly on health care and retirement security, but with a significant supplement for greenhouse insurance, gradually climbs to 25 percent of GDP from its present 20 percent?  What if it remained there, with no great diminution of vitality in the American economy, and perhaps even a gain?  That wouldn’t surprise me at all.  “New Foundation” may not be mellifluous. But it has a better emotional valence than 25 percent. It probably amounts to the same thing

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