The Bain Economy and What to Do About It

by Jonathan Cohn | July 17, 2012

President Obama has made Bain Capital's brand of cold, bottom-line capitalism a focus of the campaign against Mitt Romney. But does Obama have any standing to criticize Bain's practices? David Brooks, writing in the New York Times today, doesn't think so:

Over the years of his presidency, Obama has not been a critic of globalization. There’s no real evidence that, when he’s off the campaign trail, he has any problem with outsourcing and offshoring. He has lavishly praised people like Steve Jobs who were prominent practitioners. He has hired people like Jeffrey Immelt, the chief executive of General Electric, whose company embodies the upsides of globalization. His economic advisers have generally touted the benefits of globalization even as they worked to help those who are hurt by its downsides.

Brooks has at least half a point here, one that plenty of liberals have made before. Obama's views on economic policy are pretty typical for what qualifies as the center-left in American politics, which means he has a healthy appreciation for the free market and at least some skepticism of excessive regulation. He has not pushed for protectionist trade policies, for example, and he has not questioned the necessity of reducing the federal deficit. Particularly during the early years of his presidency, he was also a lot nicer to Wall Street than most liberals would have liked. (See, for example, this critique from James K. Galbraith, the University of Texas economist.)

But that's not the end of the story. Conservatives talk and act as if capitalism is an all-or-nothing proposition: Either you accept the free market or you reject it. And they think Obama is now rejecting it. But there is a vast middle ground between these extremes. As I wrote yesterday, government has at its disposal myriad ways of managing the free market and mitigating its unappealing effects. The former can include anything from tariffs on imported products to regulations on the financial industry. The latter typically involves a combination of tax policy, to bolster incomes for the poor and middle class at the expense of the rich, as well as programs that provide financial security or produce public goods on which the majority of Americans depend.

The central debate in this presidential election is which, if any of those, tools government should use—and to what extent. And here Obama has been entirely consistent.

Yes, he's supported free trade, preached the virtues of deficit reduction, and relied upon advisers who, in their own business dealings, engaged in the same sorts of practices as Bain. But he's also fought for more regulation of Wall Street, to prevent the kinds of abuses that destroyed the economy in 2008; for a more progressive tax code, so that the rich give back a little more of their money and government programs have revenue to operate; and for a guarantee of health insurance to all Americans, so that low-income, unemployment, or poor health doesn't lead to financial catastrophe.

Whether or not you believe in the impetus for these initiatives—and whether or not you think the initiatives themselves are any good—they are evidence of a worldview that Obama, like most moderate liberals, has always espoused. And Romney's worldview is very different.

Like Obama, Romney is a free-trader, preaches the virtues of deficit reduction, and relies upon advisers who engage in practices like Bain did. But Romney thinks regulating Wall Street is a bad idea: He wants to give bankers more leeway, not less. Romney wants to reduce income taxes on the rich, in ways that will widen inequality and require vast cuts to existing government programs. Most dramatically of all, Romney wants to weaken protection against medical bills, not just for those who would receive insurance from the Affordable Care Act but also those who already receive insurance from Medicare and Medicaid.

One more thing: If the terms of the debate have changed in the last few years, it's not because Obama and his supporters have moved to the left. It's because Romney and his supporters have moved to the right. Conservatives have never liked Medicare and Medicaid, but it was only with the ascendancy of Newt Gingirch and now, more definitively, with Paul Ryan that ending the programs' guarantee of benefits became the dominant, mainstream position of the Republican Party. As Paul Krugman noted the other day, tax rates on the wealthy are already lower than they've been in fifty, possibly eighty years. If Romney and the Republicans get their way, the rates will go even lower. 

The radicals in this debate aren't the ones who want to keep managing capitalism, more or less in the way we have for generations. The radicals are the ones who want to turn back the clock and let capitalism run amok.

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