President Obama will leave behind plenty of populist rhetoric, but his record on economic policy is eight years of corporatism.
For two terms, Obama grew the government’s role in the economy, often in concert with big business, and usually to its benefit. If President-elect Trump was aided by the perception that Washington rigs the game in favor of the big guys, Obama’s consistent corporatism is a key culprit.
The phrase “crony capitalism” became popular on the Right during the Obama years, but it’s a little off-target as a criticism of Obama. Crony capitalism connotes doing favors for friends and hurting enemies. Did some of that go on under Obama? Of course. (See the Clinton Global Initiative, for instance.)
But mostly, Obama wasn’t doling out quid-pro-quo goodies as much as he was creating an economic system — of more regulations, more mandates, more subsidies — that favored the big guys.
Obama’s corporatist streak revealed itself early with his pick of Tim Geithner, a chief author of the Wall Street bailouts, as treasury secretary. In crafting the Troubled Asset Relief Program under President Bush and implementing it under President Obama, Geithner wasn’t simply trying to stop panic and ward off a meltdown. He was trying to make sure the post-crisis financial sector looked a lot like the pre-crisis one. That is, Geithner wasn’t just trying to save the economy, he was trying to save the big banks.
Big banks have many virtues. An economy without Bank of America and Wells Fargo, and with a smaller JP Morgan would lack some things. It also might be a financial sector less in danger of systemic meltdown, and with more competition. Geithner probably saw that trade-off, but he thought the liquidity and the particular type of stability provided by the big guys was too important to give up.
Obama and Geithner’s bailouts and regulations helped widen the moat that protects the big guys from competition, and helped make the big banks more or less immortal. It would be easy to call it Wall Street cronyism, but financial corporatism is more precise.
Obama’s stimulus, in his second month, was a giant raft of subsidies for everyone from the concrete pourers to the computer makers to the solar-panel peddlers. The U.S. Chamber of Commerce endorsed this massive spending bill.
Obamacare was another exercise in corporatism. Hammered out in the back room with the drug lobby and the hospital lobby, Obamacare directly (and perhaps deliberately) has driven consolidation among hospitals and insurers. The law includes subsidies for hospitals, mandates to buy private insurance, plus protections and subsidies for drug companies. No wonder the drug lobby celebrated the law’s passage and pledged money to re-elect Democratic senators who voted for it. No wonder insurers and hospitals defended it in court.
Obama in 2012 ran for re-election with a mantra “General Motors is Alive and Osama bin Laden is Dead.” This was a striking embrace of corporatism and militarism from a Nobel Peace Prize winner who had originally run against “the special interests.”
That election, Obama’s economic platform was called “Economic Patriotism,” a phrase that may ring a bell these days. Unlike Trump, Obama’s “economic patriotism” didn’t involve tariffs. Instead he promised a nickel-and-dime tax hike: ending the deductibility of moving expenses for companies that offshore jobs. And Obama was at least as generous as Trump promises to be with the goodies for U.S. manufacturers, including bailouts, loan guarantees and special tax breaks.
Obama’s biggest legislative victory of his final two years was the reauthorization of the Export-Import Bank. This is a federal agency that subsidizes U.S. exporters by extending taxpayer-backed finance to foreign buyers of U.S. goods. Obama pitches this as a small-business agency, but Boeing sales get twice as much Ex-Im financing as exports by all U.S. small businesses combined.
It wasn’t just give, give, give by Obama. These subsidies and protective regulations empowered Obama to ask a lot, too, and to steer the economy. Obama used Ex-Im and the stimulus to reward “green energy” firms and punish coal companies. Giving hospitals bigger profit margins allows the government to grab more of that money. Forcing everyone to buy what Blue Cross is selling allows Obama to turn these companies into appendages of the Health and Human Services Department.
This will be Obama’s legacy: A bigger federal government more entangled with big business than before, with more ability to pick winners and losers. I wonder if any future president might abuse that increased power.
Timothy P. Carney, the Washington Examiner’s senior political columnist, can be contacted at [email protected]. His column appears Tuesday and Thursday nights on washingtonexaminer.com.
