Carnegie Endowment for International Peace
With the economy in crisis, Tim Geithner has been plunged into the center of politics. His poor performance on the bank bailout could now undermine the passage of Obama's entire economic program.
Had a popular movement succeeded in shifting the American political center toward the left, Obama might not have experienced his early stumbles on the economy.
When the economy goes south, one name invariably surfaces on the lips of pundits and economists: John Maynard Keynes. That is because the twentieth century's greatest economist is generally associated with the idea that markets require government intervention in order to function properly.
Barack Obama announced today that the chair of his Council of Economic Advisors will be Christina Romer, an expert on government fiscal and monetary policy. Obama has appointed someone whose views place her well to the right of mainstream Democratic economic opinion, consistently focusing on monetary rather than fiscal policy and calling for deficit reduction when we need fiscal expansion.
The United States has long relied on a financial system that intertwines its economy with China and Japan, allowing us to run huge trade and budget deficits. Now, as this ad-hoc system may be leading the world toward a global depression, most policymakers agree that the U.S. should reduce its trade deficit with Asia, while Asian countries should abandon their strategy of export-led growth.
Obama’s election marks the culmination of a Democratic realignment that began in the 1990s, as the core of the Democratic party has shifted to include more professionals, more women, and a wider array of minority groups. In the face of an economic downturn not unlike that which spawned the New Deal, Obama can consolidate this new majority if he acts swiftly to deliver on his promises.
Barack Obama's success in the 2008 presidential election is testimony to the "post-racial" campaign he ran and to voters' preoccupation with a sinking economy. But it also shows the extent to which race is no longer the great dividing line in American politics.
Amidst an economic crisis that should give the advantage to democrats, McCain has kept the race close by stressing the importance of a candidate’s character, drawing focus away from policy issues. McCain has branded himself as an American hero, and regardless of who wins in November, the "hero" strategy has already succeeded in giving McCain a critical boost in a tough year for republicans.
Barack Obama's campaign often claims that his years as a community organizer shaped the person--and the politician--he has become. But closer examination reveals that Obama may have been more of a disillusioned activist who fashioned his political identity not as an extension of community organizing but as a wholesale rejection of it.
Evidence shows that racial considerations could reinforce whatever doubts voters have about Barack Obama's ability to govern, yet his campaign tactics still show signs of overconfidence. Moving forward, he must focus his campaign on the economy, and he must assuage voters' fears by avoiding proposals that could be interpreted as irresponsible acts of tax-and-spend liberalism.
