That's a question that's buggered a lot of economists recently. He's either a socialist revolutionary or a Wall Street poodle depending on whom you read. But this excellent piece from the New Republic is the best I've read explaining why he's neither -- why we're about to embark on four years of an economic policy that is unlike any other this country has ever seen, and why he could introduce a new American paradigm: boyfriend-economics.
The authors track a detailed history of Democratic economics through the blissful Clinton years to the formation of a new economic theory, hardened in the cauldron of the financial crisis. Here's their argument in a nugget:
Obama has set out to synthesize the New Democratic faith in the utility of markets with the Old Democratic emphasis on reducing inequality. In Obama's state, government never supplants the market or stifles its inner workings--the old forms of statism that didn't wash economically, and certainly not politically. But government does aggressively prod markets--by planting incentives, by stirring new competition--to achieve the results he prefers.
The authors trace this softer capitalism approach back to behavioral economics, the cozy nook of the dismal science that manipulates incentives to guide flawed human instincts. Obama, they say, doesn't want to proclaim his policies over a rapt body politic. He wants to tweak incentives to nudge Americans -- bankers, home owners, patients -- toward his policy goals. Four big examples:
--Banks: Obama could nationalize the banks; instead he tinkers with incentives to get private investors to buy the toxic assets themselves.
--Mortgages: Obama could have the feds rewrite troubled mortgages; instead he "gives lenders financial incentives to lower monthly payments for borrowers at risk of default."