“I can’t think of another presidential candidate in history who has ever tried to win the presidency by running against capitalism.” So said Rush Limbaugh of President Obama last week. Asked for a response during a Fox News interview, Governor Mitt Romney said, “There’s no question but that [Obama is] attacking capitalism.” Romney has also described the Obama presidency as a “debt-and-spending inferno.”
This is overheated election-year nonsense. President Obama is pushing back at the Romney claim that leadership at private-equity firm Bain Capital has taught him how jobs are created, and that a President’s stewardship of the economy consists mainly of maximizing profits for investors. But he is not arguing against capitalism.
Nevertheless, many Americans — and not just hardcore conservatives — believe that this President does indeed reject capitalism. And what’s ironic is that Obama himself is largely to blame: the President is not hiding a hatred for capitalism, but he is hiding what is surely a deep respect for its paramount importance.
Let’s be clear, Obama has not governed as a tax-and-spend liberal, let alone as a socialist. The federal government will spend less this year than before Obama took office. Before Inauguration Day 2009, annual spending, agreed upon by the previous President and Congress, was projected at 24.9% of GDP. In 2012 it is expected to be 23.4%. In fact, federal spending has grown more slowly on Obama’s watch than at any time in more than half a century.
In addition, a significant portion of the Obama Administration’s 2009 stimulus package took the form of tax cuts, for individuals and for businesses large and small. Taxes as a percentage of GDP are lower today than when Obama became President. The nonpartisan Congressional Budget Office (CBO) projected taxes would reach 16.5% of GDP for 2009, and they total 15.8% now.
The deficit is lower too. The CBO projected it would hit 8.3% of GDP in 2009, and today it’s at 7.6%. The President’s opponents will make much this election year of the country’s growing debt burden, but that is largely a matter of the sharp economic slowdown (and the lower tax revenues it has generated) that began well before he took office. Nor is Obamacare the socialist monstrosity its opponents claim. Wouldn’t a “government takeover” of the health-insurance industry at least have included a “public option”?
But as his first term, and perhaps his presidency, draws to a close, Obama has failed to explain why he believes that, despite this sharp economic slowdown and a painfully slow recovery, market-driven capitalism is essential to the restoration of America’s economic dynamism and vital to its future.
Yes, his race with Senator John McCain came to a head just as heavyweight U.S. financial institutions had begun to implode and the country began hemorrhaging jobs. He inherited an economy already mired in the deepest recession in 75 years. But as leader of a party portrayed (fairly or not) as protectionist and, much more important, as President of the United States, his commitment to continue to empower market-driven capitalism will be crucial for the nation’s near-term success.
Market capitalism is worth defending because it has generated prosperity through cycles of boom and bust for hundreds of years. Between 1980 and 2007, global GDP rose by almost 150%. Already prosperous countries saw sharp increases in their standards of living. Hundreds of millions within developing states moved from poverty into the global marketplace. The global recession has taken a toll, but expectations have been created that, over the longer term, only market-driven capitalism can fulfill.
When Obama entered the White House in January 2009, the still-developing market meltdown left him without appealing options. Unfortunately, he began his presidency by treating large-scale government intervention in the U.S. economy less as a necessary evil than as an unwanted burden. On his 100th day in office, he told reporters: “I don’t want to run auto companies. I don’t want to run banks. If you could tell me right now that when I walked into this office, that the banks were humming, that autos were selling and that all you had to worry about was Iraq, Afghanistan, North Korea, getting health care passed, figuring out how to deal with energy independence, deal with Iran and a pandemic flu, I would take that deal.”
Instead of implying that political officials are simply too busy to run car companies and banks, he should have made clear that though an extraordinary short-term government intervention was necessary, long-term commercial success will continue to depend on the private sector and not on officials who weigh the political implications of every decision. Similarly, he should avoid comments like the one he made recently in reference to Romney that “there may be value for [private sector] experience, but it’s not in the White House.” In fact, he should make clear that a flourishing private sector is as core an American value as any constitutional principle. Failure to properly regulate markets is not a failure of markets themselves, a point Obama should have made in 2009 and that he should be making now, forcefully and often.
Over the past year, in cities across the country, the Occupy movement has staged protests aimed at policies and a political culture that they say benefit the wealthiest 1% at the expense of everyone else. As the movement has drawn new followers, some members have moved from attacks on capitalism’s excesses to an assault on capitalism itself.
Obama should seize the opportunity to explain why this is foolish. Growing public unease with globalization’s progress and its effects on middle-class livelihoods leave politicians of all stripes more ready to defend a free lunch than a free market — and more eager to build barriers to try to protect their constituents. But since the onset of the Industrial Revolution, in all but the most extreme circumstances (like the Great Depression of the 1930s), wealth creation in the U.S. and other capitalist democracies has depended on government’s willingness to allow free markets to flourish. The worst downturns have served as commas, not periods, in a longer-term success story.
Over time, political power in industrialized democracies tends to alternate between center-left social-democratic parties that favor relatively more activist government and center-right conservative parties that favor a smaller, less interventionist model. Their acrimonious debates, particularly during election season, hide the extent to which they agree on fundamental free-market principles. Despite the apocalyptic rhetoric of this President’s political enemies, this formula holds true for America today.
That’s why it’s time for President Obama to make the case for capitalism. Doing so might help him win over crucial swing voters nervous about his economic policies. Much more important, it would bolster public confidence in the President’s commitment to a system that has made America the most prosperous nation on earth.
Ian Bremmer (@ianbremmer) is president of Eurasia Group and author of Every Nation for Itself: Winners and Losers in a G-Zero World