THEMES, Atlande, The presidency of Obama, a New New Deal in US Economic policy?

Question 1

2008 election and central ideaological debate in US economic policy

Answer 1

• what is the proper scope of government intervention in a market economy?
• shifts from one period to the another generally emerge when the dominant paradigm seems incapable addressing new economic challenges
• window of opportunity offered by the financial crisis
• usually arise after a severe economic crisis // Great Depression, New Deal
• from “laissez-faire” to restoring social justice
• 1980, Reagan’s election
• to restore growth by freeing markets from government intervention
• FDR and Reagan: transformational presidents because they inspired Americans to embrace major shifts in US economic policy

Question 2

Beinart, “The New Liberal Order”, Time

Answer 2

A “new New Deal”

Question 3

A “new New Deal”

Answer 3

Beinart, “The New Liberal Order”, Time

Question 4

Laisser-faire, 1920s

Answer 4

• competitive market self-regulate according to natural laws and cycles that governments should refrain from interfering in
• taxes and regulations that inhibit business during a recession should be reduced to a minimum
• government should let the crisis run its naturl course to purge the system of its weaknesses
• foster the survival of the fittest
• Andrew Mellon’s point of view (Herbert Hoover’s Treasury Secretary)
• tax increase: all categories affected

Question 5

FD Roosevelt

Answer 5

• Americans ready to test FDR’s government
• end the Great Depression
• ensure decent living conditions for all Americans by affirming its democratic authority over private economic power, regulating business activities and promoting social values

Question 6

FDR adressing the financial crisis

Answer 6

• Banking Act, 1933 (Glass-Steagall Act)
• restructured the banking system
• investment banking separated from retail

Question 7

FDR addressing the housing crisis

Answer 7

• Federal Housing Administration, 1934

- to develop homeownership

Question 8

FDR addressing working conditions

Answer 8

• National Labor Relations Act, 1935, to expand union rights

- Fair Labor Standards Act, 1938, introduced a minimum wage

Question 9

FDR addressing unemployment

Answer 9

• Social Security Act, 1935, created a national insurance system

Question 10

Reagan: the Conservative-Neoliberal Reorientation of US economic policy

Answer 10

• “In this present crisis, government is not the solution to our problem: government is the problem”
• to break with New Deal liberalism
• free market principles
• to him, government intervention responsible for the economic troubles of the 1970s
• income taxes were reduced on all groups
• reducing federal social spending, but popular programs such are Medicare and Social Security reinforced
• spending > tax cuts = deficit rose

Question 11

Neoliberals

Answer 11

• younger generation
• Bill Clinton “New Democrats”
• offered a “Third Way” between Reaganism and New Deal liberalism

Question 12

The Third Way

Answer 12

• no fiscal and regulatory barriers to market growth // Reagan
• to invest in people “human capital” to be able to compete in global markets
• balancing the federal budget and reform welfare // Republicans
• “end welfare as we know it”
• tax fairness ≠ Republicans
• environmental protections to create sustainable growth ≠ Republicans
• repeal the New Deal-era Glass-Steagall Act
• critics accused Clinton of betraying the left
• to steer the US economic away from its New Deal heritage

Question 13

The financial crisis of 2007-2008: Hopes and fears of a New New Deal

Answer 13

• fiscal stimulus package in February 2008

Question 14

The economic thought of the Obama Administration

Answer 14

• Geithner and Summers (repeal of the Glass-Steagall Act)
• Hamilton Project (Robert Rubin, central figure of the Clinton Administration)
• economic policy think tank that produces research and proposals on how to create a growing economy that benefits more Americans
• Obama believed in a moderate, bipartisan consensus
• market’s abaility to bring growth and prosperity
• but also the need for pragmatic government action to make the market work for everybody in the long haul

Question 15

Thaler & Sunstein, Nudge

Answer 15

• “petit coup de coude”
• “choice architects”
• “We are not for a bigger government, just better governance”

Question 16

• “petit coup de coude”
• “choice architects”
• “We are not for a bigger government, just better governance”

Answer 16

Thaler & Sunstein, Nudge

Question 17

Policies to recover from the Great Recession

Answer 17

• TARP fund
• proximity of Geithner and Summers to the financial community limited the administration’s will to punish financial greed and irresponsibility
• and the government’s bailout measures remained unpopular
• Fed: lowered short-term interest rates near 0% and quantitative easing (QE)
• central approach which disappointed left and right

Question 18

Policies to recover from the Great Recession: TARP

Answer 18

• to bail out GM and Chrysler to avoid massive job losses in the automobile indutry
• to bail out 1000 troubled firms

Question 19

Quantitative easing

Answer 19

Fed directly injected liquidity into the economy

Question 20

Policies to recover from the Great Recession: Règle Volcker

Answer 20

• dispositif du Dodd-Frank
• vise à limiter les activités spéculatrices des banques commerciales afin de protéger les épargnants et stabiliser le système bancaire

Question 21

Policies to promote inclusive, sustainable growth

Answer 21

• plan for “middle class economics”
• homeownership, car, college education, health and retirement security and occasional family vacations
• these aspirations fulfilled by postwar policies
• late 20th: prices of housing, health care, college tuition had risen 2 to 8 times faster than income gains
• ACA

Question 22

Policies to promote inclusive, sustainable growth: education

Answer 22

• ESSA
• Hamilton Project: Pay As You Earn (PAYE): monthly payment requirements on federal students loan were contingent upon income

Question 23

Assessing Obama’s economic legacy: sustained but ambiguous recovery from the Great Recession

Answer 23

• GDP growth
• federal budget
• financial markets
  => better state at the end of the prisdency
• GDP pre-recession level in 2014 (// 10 years in Euro Area)
• unemployment: 10% October 2009 // 4.7% January 2017
• fewer Americans were looking for employment: retirement age of the baby boomers, women who chose family over work
• underemployment: part-time workers and highly skilled workers with low-skilled
• “bullshit jobs” David Graeber, Bullshit Jobs. A Theory
• Housing prices continued to decline until January 2012 but grew back to their pre-recession level by late 2016
• stock market indexes recovered quickly (Dow Jones, NYSE, NASDAQ)
• bank sector recovered to pre-crisis levels by 2015
• not a single banking executive faced imprisonment for their responsibility in the crisis
• government protected Wall Street more than Main Street

Question 24

Assessing Obama’s economic legacy: between continuity and change in long-term economic trends

Answer 24

• GDP growth 1.8% 2010-2018: consistent but low
• unemployment under 5%
• decline in manufacturing jobs: resentment among blue-collars
• investing in health, education and social security: largest increase in federal intervention on these areas since the pre-Reagan era
• tax policy: raised taxes on the wealthiest, progressive but nowhere close to New Deal
• bolder than Clinton, but less bold than New Deal

Question 25

2016 election

Answer 25

• Hillary Clinton embodied continuity with the Third Way
• progressives were lacking enthusiasm
• rise of Sanders: more Democratic voters wanted a bolder shift in economic policy
• $15 minimum wage
• stricter equal pay legislation
• stronger union rights
• a single-payer “Medicare for All” health care system
• tuition-free public universities
• a new Glass-Steagall Act to regulate Wall Street
• infrastructure and environmental protection program