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Obama's Economic Go-to Guy

A self-described 'centrist' is minding Barack Obama's economic policy store.
 
 
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How progressive a President could Barack Obama be? Could he be as transformational as Franklin Roosevelt, whose dozen White House years downsized America's rich and helped usher onto the global stage the first mass middle class in world history? Or will the Obama years more likely end up, as Bill Clinton's did, as a timid intermission between two plutocrat-friendly acts of conservative Republican dominance?

Austan Goolsbee, outside Obama himself, just might have more of an impact on the answer than any other individual in the Obama camp. Goolsbee, a 39-year-old University of Chicago business school prof, has emerged as Obama's top economic adviser.

With Senator Obama closing in on the Democratic nomination -- and the U.S. economy tottering on the brink of big-time trouble -- progressive analysts have begun looking Goolsbee's way. And many don't particularly like what they see.

Are these analysts seeing clearly? Or might Goolsbee, the odds-on choice to chair the Council of Economic Advisers in an Obama administration, actually nudge public policy in a decent direction?

Goolsbee's brief public policy career, at first glance, appears to offer precious little reason for progressive optimism. Goolsbee defines himself as "a centrist market economist," and everyone else seems to have locked in on that exact same characterization.

The Chicago Tribune , for instance, describes Goolsbee as a business prof "with centrist Democratic views" who's firmly "anchored in dominant market-oriented economic thought." U.S. News and World Report last month discussed how Obama "has surrounded himself with centrist economic advisers, like the frustratingly reasonable Austan Goolsbee." Business Week , also last month, labeled Goolsbee the leader of a Obama economics brain trust packed with "generally careful technocrats."

The thought of a centrist technocrat whispering sweet mainstream nothings into a President Obama's ear has already begun generating waves of angst among veteran progressive observers. American Prospect editor Robert Kuttner, for one, considers Goolsbee and his fellow centrist advisers " free-market guys who want to use markets to somehow solve social problems, which is like squaring a circle."

Much of what Goolsbee has written over recent years supplies ample fuel for such angst. Goolsbee can come across as remarkably ivory-towerish.

One example: In a 2006 New York Times column, Goolsbee marked the death of Milton Friedman, the patron saint of free-market fundamentalism, with a profile that saluted this right-wing hero for bringing "his brashness and his love of debate" to the University of Chicago. Not a word, in that column, about Chile, where Friedman acolytes -- the "Chicago boys" -- forced hyper free-marketism down the throats of a populace brutalized by the dictatorship of General Augusto Pinochet, a Friedman favorite who expressed his "love of debate" by having debaters tortured.

Last year, in another New York Times column, Goolsbee hailed subprime mortgages as a market innovation that can help people in need -- and dismissed fears that unscrupulous lenders would ever exploit this innovation "fool people into thinking they can afford homes that they cannot."

Five months later, the Times would document that very exploitation, in a report that exposed how the nation's top mortgage lender, Countrywide Financial, had been manipulating borrowers into "high-cost" loans that "made Countrywide executives among the highest paid in America."

So do we have, in Austan Goolsbee, an academic unwise in the ways of the world whose eagerness to achieve change "through market-oriented policies" will lead a President Obama down some dead-end primrose path?

Maybe not. Goolsbee may not be as excruciatingly centrist as his reputation suggests. In fact, on the central economic issue of our time -- the intense and unrelenting concentration of wealth at America's economic summit -- Goolsbee has often been downright good.

Over the past decade, both as an academic and as a commentator, Goolsbee has repeatedly challenged America's reigning plutocrat mindset. He has helped unmask policy proposals that speed the accumulation of grand private fortunes. He has skewered research that purports to prove the rationality of these policies. He has even challenged the rationality of private grand fortunes themselves.

That challenge came last March in a Goolsbee column that went over the latest stats on philanthropic giving by America's super-rich. The nation's billionaires, he showed, "are accumulating money much faster than they are giving it away."

Indeed, Goolsbee continued, the super-rich are accumulating money faster than they can ever possibly spend it. Case in point: Oracle software CEO Larry Ellison and his $16-billion personal fortune.

Ellison must spend, Goolsbee calculated, over "$30 million a week -- $183,000 an hour -- on things that can't be resold, like parties or meals, just to avoid increasing his wealth."

Apologists for extreme inequality love to argue that any attempt to shave fortunes as whopping as Larry Ellison's -- by upping tax rates on the rich -- will always fall flat. Wealthy people taxed at high levels, the argument goes, will merely maneuver to report less income to tax collectors. The government, as a result, will collect fewer overall tax dollars.

As proof, these apologists point to the 1993 federal legislation that raised the top income tax rate from 31 to 39.6 percent. Despite a growing economy, they note, taxpayers in America's top brackets reported less income in 1993, after the tax increase, than they reported in 1992.

Upper-bracket taxable income, Goolsbee has countered, did drop off dramatically in 1993, but only because corporate executives, in 1992, had rushed to cash out stock option windfalls before the newly elected Clinton administration could raise tax rates. Taxable income did not disappear. Instead, this income merely showed up in a different year.

The taxable incomes of the rich, Goolsbee concluded after analyzing upper-bracket incomes throughout the 20th century, do not increase when tax rates become less progressive and do not diminish when tax rates become more progressive.

But government action in other spheres, Goolsbee would point out in 2004 as George W. Bush began maneuvering to privatize Social Security, can make an enormous impact on the size of rich people's incomes. Privatizing Social Security, a Goolsbee analysis made plain, would shift $940 billion in financial fees into Wall Street pockets.

These fees, Goolsbee noted, would add up to "the largest windfall gain in American financial history" and leave "the ultimate retirement value" of an average worker's privatized Social Security account down by 20 percent.

Goolsbee has, over recent years, explored multiple other aspects of the plutocrat agenda. He has shown how pharmaceutical and finance company execs are manipulating programs ostensibly designed to help consumers -- the Medicare prescription benefit and the tax breaks for "529" college savings accounts -- into subsidies that have taxpayers footing the bill for higher drug prices and investment fees.

And Goolsbee has also taken on one of the most basic plutocrat sacred cows, the notion that any Americans who work hard enough can work their way up to the top of the economic ladder. His work has explored how much sheer chance determines how economically fortunate individuals can go on to become.

In short, Goolsbee may be a centrist. But rich people don't impress him. And their academic hired guns don't impress him either. FDR and his economic advisers shared that same sort of skepticism about grand fortune. They also had something else: grand popular movements, out in the streets, demanding real progressive change.

Those movements turned skeptics about grand fortune into crusaders against it. That could happen again. In Austan Goolsbee, we'll have a skeptic whispering in a President Obama's ear. Now we just need a loud enough progressive movement.

Sam Pizzigati edits Too Much , the online weekly on excess and inequality.

 
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