Today, political columnist E. J. Dionne lays out the central conundrum to Barack Obamaâ€™s economic policies:
Describing what Obama is up to leads quickly to sentences freighted with contradictions. He wants to regulate the market more tightly in order to save it. He thinks big government is required now if we are to return to a less-restricted economic system later. You might say that he is using collectivist means to capitalist ends.
Obama, I think, understands the importance and superiority of the free market system, but he consistently gravitates towards solutions which rely on the powers of big government. Part of that is because you use the tools you have. As president, Obama has the hammers of state at his disposal. But I also think he is preconditioned by his liberal ideology to believe all problems have a government solution. He is thus left balancing his instincts with his intellect, and that has confounded many of us on the sidelines.
Dionne goes on in his column to write specifically about Treasury Secretary Geithnerâ€™s plans to save the banks, noting that the administration is wielding a lot of federal power but is still placing a lot of confidence in the free market by not nationalizing the banks like some liberal economists believe is necessary (Paul Krugman being the most vocal):
[T]he core question of whether the banks are insolvent is maddeningly difficult to resolve. If Geithner is correct, he will move us to recovery with less disruption. If he’s wrong, he will waste a lot of taxpayer money before eventually reaching the Krugman solution.
That’s the Obama enigma: boldness wrapped in caution rooted in an ambivalent relationship to the status quo. This is why Obama will, by turns, challenge not only his entrenched adversaries but also his natural allies.
If Obama fails, the right will say he reached too far to the left will say he didnâ€™t reach far enough. Even though I think Obama has been cavalier on the deficit and too intransigent on cutting back his pet projects, I do appreciate that his administration has made an effort keep the free market viable, rather than running roughshod over it.
Thatâ€™s why Obamaâ€™s â€œfiringâ€ of the CEO of GM was not socialism. Socialism would be the government seizure of GM. Like with the banks, what Obama is engaged in is statist-directed free market recovery. Sounds like an oxymoron. But I believe thatâ€™s what Obama is trying to achieve, even though Iâ€™m not sure itâ€™ll work. As such, Obama is likely continue to confound me and others with each new response to the economic crisis. Whether or not thatâ€™s a bad thing depends entirely on whether or not the plans work.