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10.22.08

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Phaedra

The Money Candidate

How Barack Obama will fix the economy and heal the nation

By Eric Johnson


I think all of you here would today acknowledge that we've lost a sense of our shared responsibility. We've failed to guard against policies that all too often rewarded financial manipulation, instead of productivity and innovation, policies that favored Wall Street over Main Street--and hurt both.

"Our free market was never meant to be a free license to take whatever you can get however you can get it."

When Barack Obama uttered these words, at a much-heralded speech in which he announced his plan to rescue the American economy, he received a huge ovation. That was itself remarkable, given that he delivered the speech on March 27, more than six months ago, when many of us--including the man who is now his opponent for the presidency--were paying much less attention to the economy than we are now. The ovation was more remarkable because he delivered the speech on Wall Street, to a throng of financiers.

The 30-minute talk began on a historic note, with a look back at the foundations of the American economic system that offered a glimpse at the candidate's fundamental economic philosophy. He described the tension between letting the so-called "free market" operate on its own and forcing regulations on the market--and how the debate on that topic that was waged by Thomas Jefferson and Alexander Hamilton.

"The task before our founders," Obama said, "was putting into practice the ideal that government could simultaneously serve liberty and advance the common good. "Our free market has been the engine of American progress. But the American experiment has worked in large part because we've guided the market's invisible hand with a higher principle--that each American does better when all Americans do better."

It's striking to look back at the video of this speech. When Obama mentions this idea about shared responsibility, the crowd erupts. It was the biggest applause line of the day. And remember: This was an audience made up of Wall Street fat cats. They cheered because they knew the economy was in serious trouble, and they believed that the guy they were listening to might just be able to fix it. There are a lot of lies being told about Barack Obama--that he's a secret Muslim, that he's a friend of terrorists. Lately McCain supporters have been calling their opponent a socialist. They are doing so because Obama wants to put the government back in charge of the economy, instead of letting unelected corporate officials call the shots.

Somehow, the nation has fallen sway to an ideology that sees government oversight as un-American. Talk of basic fairness can get someone called a commie. But the fact is, Wall Street wants someone to be in charge.

At his speech last March, Obama was introduced by Michael Bloomberg, who, before he became the Republican mayor of New York, was himself a super-successful businessman and financial analyst. (He became an Independent last year.) In attendance for the speech were former U.S. Treasury Secretary Larry Summers, former Securities and Exchange Commission chairman Arthur Leavitt, former Federal Reserve chairman Paul Volker and former Fed vice chairwoman Alice Rivlin.

These people have served Republican and Democratic presidents, and represent the kind of bipartisan support Obama is receiving from financial professionals.

Last month, The Economist magazine conducted a poll of leading economists that delivered startling results. "A majority--at times by overwhelming margins--believe Mr. Obama has the superior economic plan, a firmer grasp of economics and will appoint better economic advisers."

The respondents said they saw the election as crucial. And 80 percent said Obama has a better grasp of the situation. Among Republicans, 46 percent of professional economists said they trusted Obama and 23 percent favored McCain.

And, of course, Obama has been endorsed by the richest man in the world. A highlight of the second presidential debate came when Tom Brokaw asked the candidates to say who they'd appoint to take over the Fed if they were elected. McCain's first answer was Warren Buffett, "the Oracle of Omaha," who, according to polls, may be the most trusted man in America when it comes to money matters. (McCain revised his answer to mention eBay's Meg Whitman.)

When it was his turn to respond, Obama conceded that he too likes Buffett. And, he couldn't help but add, "I am pleased to have his support."

Buffett has said of Obama, "I would let him run my company." In the world of business there is no higher praise.Obama also has a lot of friends in Silicon Valley. Marc Andreessen, founder of Netscape and himself a kind of Oracle of Silicon Valley, recently surprised his pals by endorsing Obama.

"I'm hugely pro-Obama," Andreessen said in an interview in Wired magazine. His reason? "The other guy admits he doesn't know anything about economics," he said. "I run into my friends in the Valley who say, 'How on earth can you support a Democrat?' I think Obama is much more centrist, especially on economic issues, than people think."

Andreessen credits Obama's connections with the University of Chicago, which, he points out, "is not known as a radical leftist school. It's like the heart of free-market ideology."

"He knows what he's talking about. He gets it. He's not some raving, liberal lunatic who's going to come along and try to Hugo Chavez everything."

Andreessen, it turns out, is a fan of Obama's chief economic adviser, a University of Chicago professor named Austin Goolsbee. Writing in The Guardian, Daniel Koffler says Obama's "language of personal choice and incentive" derives mostly from Goolsbee, who calls himself a "behavioral economist."

"Goolsbee agrees with the liberal consensus on the need to address concerns such as income inequality, disparate educational opportunities and, of course, disparate access to healthcare," Koffler writes, "but breaks sharply from liberal orthodoxy on both the causes of these social ills and the optimal strategy for ameliorating them.

"Instead of recommending traditional welfare-state liberalism, Goolsbee promotes programs to essentially democratize the market, protecting and where possible expanding freedom of choice, while simultaneously creating rational, self-interested incentives for individuals to participate in solving collective problems."

Still, Goolsbee sees the fundamental problem at the heart of the American economy as the gulf between the superrich and the middle class. Over the last six years, Goolsbee has said, "The typical worker had seen income grow hardly at all, while the cost of education, health care and energy have all gone up."

That is not merely a moral problem for Goolsbee and his follow-thinkers, but also a practical one, because an economy cannot flourish in a society thus constructed. And his solution, the one that will drive the economic plan of the next president of the United States, God willing, is to bridge that gulf.

"Despite Obama's reputation for grandiose rhetoric and utopian hope-mongering," says The New Republic's Noam Scheiber, "the Obamanauts aren't radicals, far from it. They're pragmatists."

The first stage of Obama's pragmatic plan was announced last week. Rep. Barney Frank, chairman of the House Financial Services Committee, is already at work on an economic stimulus bill. Rep. Roy Blunt, the Republican from Missouri and House minority whip, has said he will support a stimulus plan. U.S. House Speaker Nancy Pelosi announced last week that this $150 billion economic stimulus plan would help bring some movement to our paralyzed banking system and stock market.

And once the patient is out of intensive care, Obama will be able to put in motion the heart of his economic plan--the creation of a new economic engine driven by millions of new "green-collar" jobs.

Key to this plan is the restoration of trust--in the credit markets on Wall Street, and in the homes of Main Street. In strictly pragmatic terms, the return of fairness seems secondary. But it's built into the program. In Obama's view, that's the way Hamilton, Jefferson and their associates designed the American system. Without it, the economy can't function. And his plan will bring it back.


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