Is Obama's Plan Naive?

Paul Krugman is a brilliant Princeton economist and fine columnist for The New York Times who was far ahead of the pack in asserting that George W. Bush is a total disaster as president. His clarity in explaining what academics call "political economy" is without peer. But his attack on Barack Obama on December 17 was wrong on history, wrong on politics and wrong on what the future holds for Obama's "big table" idea.

Krugman calls Obama "naïve" and an "anti-change candidate" because he favors bringing all of the players in the health care debate around a "big table" and rejects the populist message of John Edwards, who is apparently Krugman's choice for president. "Anyone who thinks the next president can achieve real change without bitter confrontation is living in a fantasy world," Krugman writes, endorsing Edwards's view that the insurance and drug industries should be excluded from any talks on health care reform because they stand to lose profits.

The columnist and his candidate both believe that Franklin D. Roosevelt succeeded by being a polarizing figure. I studied FDR for four years while writing a book about him, and this is simply untrue. It's also untrue of other successful Democratic presidents and for a simple reason: "Bitter confrontation" simply doesn't work in policy-making.

Bear with me for a brief history lesson: The so-called "First New Deal" of 1933-34 came after Roosevelt won a landslide victory over Herbert Hoover in 1932 in a campaign devoid of any populist message despite an unemployment rate of at least 25 percent. First, FDR worked with Hoover treasury officials from the other party to rescue the banks under a conservative plan that included steep budget cuts. The rest of his famous "100 days" agenda-which included unprecedented jobs programs, agricultural reform, labor rights, and regulation of financial markets—was achieved with much more compromise than Krugman recognizes. Social Security came in 1935 after a big Democratic mandate in midterm elections and was enacted piecemeal and cooperatively (to the disappointment of many New Deal liberals) with everyone at the table.

During and after his 1936 reelection campaign, FDR—angry at the ingratitude of the rich Americans whose fortunes he had saved—adopted class-based politics. In 1937, with a big victory under his belt, he tried confrontation with his court-packing scheme. It failed badly. So did his effort to "purge" the opposition in 1938. The rest of his second-term was far less productive legislatively than his first. By the end of it, he turned to foreign policy. FDR's third-term success, dominated by World II, was dependent on his unifying the country.
Similarly, Woodrow Wilson's big legislative triumphs over entrenched interests in 1913 (for example, an income tax), Lyndon Johnson's in 1965 (Medicare and the Voting Rights Act) and Bill Clinton's in 1993 (painful tax increases) were achieved with legislative skill, not brute force and a populist message.

Krugman is a populist. He writes that if nominated, Obama would win, "but not as big as a candidate who ran on a more populist platform." This is facile and ahistorical. How many 20th Century American presidents have been elected on a populist platform?  That would be zero, Paul. You could even include Al Gore, who won the popular vote in 2000. Instead of exploiting the peace and prosperity of the 1990s, Gore ran on a "people vs. the powerful" message. It never ignited.

Krugman says that pundits like me who reject sharp anti-corporate rhetoric and prefer cooperation are "projecting their own desires onto the public." We'll see. But last time I checked, millions of Americans still work for corporations or aspire to do so and bashing them wholesale is a loser politically. It works sometimes in Democratic primaries with a heavy labor vote (though not for Dick Gephardt). But not in general elections. The last two Democrats elected president-Jimmy Carter in 1976 and Bill Clinton in 1992-also campaigned during recessions. Both were smart enough to reject populism in favor of a responsive but upbeat message.

Krugman is an economist and I trust his forecast that things are going to get even worse for working-class Americans in the months ahead. The middle-class squeeze is real. Predatory lenders and CEO greedheads should be called out. So should insurance and drug companies. But it needs to be done in a way that produces results, not just spleen-venting.
How? Just after Clinton was elected, he convened a meeting of economists, CEOs, labor leaders and many others in Little Rock. The purpose of the meeting was to argue out what should be done about the ailing economy, with many of the ideas expressed there later becoming part of Clinton's successful 1993 economic recovery package. The whole thing was on television.

Sound familiar? This is essentially what Obama is proposing for health care after he's elected. If Hillary Clinton had done this on health care in 1993—instead of convening a secret task force—she might have been able to build a stronger public case for reform.

Edwards and Krugman think that's naïve. They want the evil drug and insurance industries excluded from any of these conversations. Edwards surely knows better than this. The drug industry that he seeks to bar from a seat at the table is the same industry working to save his wife Elizabeth's life and that of anyone else with a serious disease, including me. The answer to price-gouging is to force these companies to negotiate drug prices with the government, a reform any Democratic president would quickly enact.

Ideally, health insurance companies should be eliminated altogether. But a single payer plan isn't viable politically, as Edwards readily admits. The only option is to curb their power and expand coverage through more regulation.

When I asked Edwards how any agreement could be reached without at least talking to these players in the system, he said he would offer a seat at the table to members of Congress who represent their interests. In other words, it's OK to have the congressional stooges there, but not the interests that pull their strings?

Obama's idea is a better one: Get every special interest out in the open on television, where the new president can cross-examine them and expose their phony rationalizations for charging $100 a pill or denying coverage to sick people (and Edwards, the former trial attorney, would be especially good at this). Then, having triumphed over the drug and insurance companies in the court of public opinion, the legislative victories will follow. It is, indeed, a fantasy to think these interests will roll over entirely, but they will get a much worse deal.

The Edwards alternative-to simply overrun them-is unrealistic. Even a 1932-style mandate at the ballot box (highly unlikely) wouldn't make them capitulate. Look what happened when New York Gov. Eliot Spitzer, elected in 2006 with a huge mandate, tried to "steamroll" a bunch of hacks in Albany. He got his head handed to him.

To call Obama "anti-change," as Paul Krugman does, is anti-common sense. Leadership requires a mixture of confrontation and compromise, with room for the losers to save face. "They have to feel the heat to see the light," LBJ liked to say. That heat is best applied up close. In public. Across the big table.