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Leftists, liberals, and neoliberals share a problem: Congress

Congress, not neoliberalism, hamstrung Obama’s presidency.

A 2010 picture of President Obama walking with his six-person economic team behind him.
President Barack Obama stands with his 2010 economic team.
Mark Wilson/Getty Images

What are we talking about when we talk about neoliberalism?

In its simplest form, neoliberalism refers to a general preference for market mechanisms over state interventions. But since almost everyone sometimes prefers market mechanisms to state interventions, and sometimes prefer state interventions to market mechanisms, the conversation quickly gets confusing. Ronald Reagan and Margaret Thatcher were neoliberals. Bill Clinton is often seen as a neoliberal. Barack Obama is sometimes considered a neoliberal. Elizabeth Warren is occasionally called a neoliberal.

A label that can describe everyone doesn’t usefully describe anyone. In recent years, neoliberal has reemerged as political slander, meaning something like “corporatist sellout Democrat.” Kean Birch, author of an intellectual history of neoliberalism, argues that the term has collapsed into incoherence, with too many people using it to describe too many things for the conversation to remain constructive. Jon Chait argues that the word neoliberal has become an all-purpose insult, “an attempt to win an argument with an epithet.”

I think we need the term neoliberalism. At its most useful, neoliberalism describes what happens when capitalism mutates from an economic system to a governing and even moral philosophy. That’s a more pervasive and destructive phenomenon than we tend to realize, and the idea of neoliberalism is the closest we have for a word that describes it.

But for that reason, I’ve become more frustrated with the lazy ways the term is tossed around — and, particularly, how it becomes an all-purpose explanation for any political outcome someone doesn’t like.

Farhad Manjoo’s latest column in the New York Times is an example. Manjoo argues that “Barack Obama’s biggest mistake rhymes with ‘schneo-liberalism.’” But his examples, for the most part, have less to do with Obama administration ideology than congressional vote counting.

This is confusion with an agenda. If, say, the stimulus was too small because Obama was a market-fetishizing neoliberal rather than a far-sighted leftist, simply replacing him with a leftist will solve the problem.

But that wasn’t the problem.

Why wasn’t the stimulus bigger?

Obama and his administration were market-oriented progressives. They were, and are, well to the right of Bernie Sanders. But they were well to the left of what Congress was willing to pass on literally any day of the Obama presidency.

Take Manjoo’s first example: the stimulus. He writes:

By the time Obama took office, job losses had accelerated so quickly that his advisers calculated the country would need $1.7 trillion in additional spending to get back to full employment. A handful of advisers favored a very large government stimulus of $1.2 trillion; some outside economists — Paul Krugman, Joseph Stiglitz, James Galbraith — also favored going to a trillion.

But Obama’s closest advisers declined to push Congress for anything more than $800 billion, which they projected would reduce unemployment to below 8 percent by the 2010 midterms.

The argument here took place between Christina Romer, who led Obama’s Council of Economic Advisors, and Larry Summers, who directed the National Economic Council. In an early memo presenting various goals for the stimulus, Romer listed, as her shock-and-awe option, a stimulus that would “eliminate the output gap by 2011–Q1,” which she estimated would require a “package costing about $1.8 trillion over two years.”

Obama never saw that option. In the final memo Summers crafted, it was deleted as politically impossible. But here’s the thing: Summers and Romer are both, in the popular definition of the term, neoliberals. They’re both economists who believe strongly in markets. Krugman and Stiglitz are also lumped in as neoliberals. Correctly calculating the size of the output gap wasn’t a question that divided neoliberals from leftists. The disagreement was political. Congressional leaders had told the Obama administration that the price tag had to fall under $1 trillion if the package was to have any hope of passing, and the administration listened.

You can argue, as a political judgment, that they shouldn’t have listened. But the Obama administration didn’t want a repeat of the TARP experience, where Congress voted down the bill and sent markets reeling. The economy was far weaker by the time Obama took office, and the fear was that another shock would prove catastrophic. They believed, wrongly, that if the downturn deepened and more stimulus was needed, Congress would approve it.

“If you’re at the barber and they don’t cut your hair short enough, you can always ask them to go a little further,” Jared Bernstein, a left-leaning economist who served in the Obama administration, told me in 2011. “That’s sort of how I thought about stimulus policy. I don’t think we could have done more in February of 2009 based on political and implementation constraints. But I probably didn’t recognize how hard it would be to go back to the barbershop.”

It’s worth remembering that even the $787 billion stimulus barely passed, and the three Republicans who provided the crucial votes insisted on $30 billion in cuts and a substantial shift from direct spending to tax breaks. In 2011, with the recession grinding on, the Obama administration proposed another $447 billion in stimulus but Congress ignored the request.

The idea that a $1.8 trillion stimulus was possible is fantasy, and the reason for that was Congress, not neoliberalism.

Why didn’t Obama do more on inequality?

The stimulus isn’t Manjoo’s only example. Take this passage:

It is true that Obama succeeded in passing a groundbreaking universal health care law. It’s also true that over the course of his presidency, inequality grew, and Obama did little to stop it. While much of the rest of the country struggled to get by, the wealthy got wealthier and multimillionaires and billionaires achieved greater political and cultural power.

In 2013, Obama called inequality “the defining challenge of our time” and proposed a raft of policies for curbing it. Remember the Buffett tax? Or closing the carried-interest loophole? Obama’s 2015 budget included $1.3 trillion in tax increases on the wealthy and corporations, and it intended to spend those funds, in part, on universal pre-k. That budget went nowhere in Congress. The blockage wasn’t a neoliberal ideology that considered soaring inequality just or beneficial. It was Republicans.

You can argue, fairly, that the Obama administration’s proposed solutions would not have driven America toward anything even approaching economic equality. I’d agree with that critique, but it doesn’t explain how a yet larger package would’ve had more success in John Boehner’s House.

The Affordable Care Act is a more interesting example. Manjoo writes:

Obama’s biggest ideas were neoliberal: The Affordable Care Act, his greatest domestic policy achievement, improved access to health care by altering private health-insurance markets.

I think it’s correct to see the ACA as a neoliberal approach to expanding health insurance coverage. But the particular reason that Democrats embraced it wasn’t because most of them preferred it to all possible alternatives. I covered that process extensively, and literally no Democrats I spoke to framed the ACA as their ideal policy. But, after decades of watching health reform fail in Congress, Democrats saw Mitt Romney’s reforms succeed in Massachusetts and decided to copy them at the national level in a bid for Republican support.

It’s worth remembering that this was the strategy favored by, among others, Sen. Ted Kennedy, who brought John McDonough, who’d worked on the Massachusetts plan, to the Senate as his top health care adviser. The idea that a Romney-style approach would garner Republican votes proved wrong, though the idea that it could pass proved right. Even here, though, the plan was pushed far to the right during congressional negotiations, with Sen. Ben Nelson, among others, killing the public option, and Sen. Joe Lieberman knifing the proposal to expand Medicare to age 55.

Ideology matters. But it’s not all that matters.

The Obama administration made plenty of mistakes, some of them purely ideological. They bought into the deficit-hysteria of 2010-2011 in a genuinely damaging way. Their housing policy was weak, and while the politics of housing were much harder than is now remembered — it was the administration’s tepid HARP proposal that led to the Tea Party revolt — the administration should’ve put their back into passing “cramdown” and used more TARP money directly on homeowners.

There are places where a left president would’ve differed dramatically from Obama, starting with personnel. A leftist wouldn’t have nominated Timothy Geithner as treasury secretary, kept Ben Bernanke on at the Federal Reserve, or been as personally conciliatory toward Wall Street. Manjoo also mentions deploying antitrust laws to break up Google and Facebook and Amazon, though he admits that he, like virtually everyone else during the Obama era, loudly opposed anything of the kind.

But you can’t blame everything on neoliberalism. If the Obama administration had been able to get what it wanted, there would have been far more stimulus, a public option in Obamacare, larger subsidies for health insurance, higher taxes on the rich and corporations, hundreds of billions more in infrastructure investment and social spending, universal pre-k, a cap-and-trade plan to curb climate change, comprehensive immigration reform, and much more.

The agenda the Obama administration passed isn’t the agenda it wanted. The agenda the Obama administration passed is the agenda they could pass. It was congressional Republicans (and, sometimes, Democrats), not neoliberalism, that curbed their ambitions. It’d be interesting to compare an idealized neoliberal agenda to an idealized left agenda, but you can’t do that by looking at the few policies that survived the filibuster.

Manjoo waves this away. “If he’d been in the mood to press the case, Obama might have found widespread public appetite for the sort of aggressive, interventionist restructuring of the American economy that Franklin D. Roosevelt conjured with the New Deal,” he writes.

Even ignoring the actual evidence we have on public opinion, the fact is that FDR entered office years into the Great Depression, and the agony of the suffering swept him in alongside a massive Democratic wave. Unemployment was above 20 percent when Roosevelt took office, rather than 7.8 percent, as was true for Obama. That misery didn’t just hand Roosevelt the White House in 1932, it gave Democrats 313 House seats to the GOP’s 113, and 59 Senate seats to the GOP’s 36. It was those huge congressional majorities, operating in a time of less polarization and far more economic suffering, that made Roosevelt’s agenda possible.

That’s not to argue that Obama shared Roosevelt’s outlook or would have mimicked his administration even if he could have. I genuinely have no idea what Obama would’ve done if he took office in the midst of 23 percent unemployment and nearly total control of Congress, just as I don’t know what Roosevelt would’ve done if he took office with 7.8 percent unemployment and slimmer majorities. But the case that the two men’s records were separated primarily by ideology and ambition is thin.

The right question, the wrong conclusion

Toward the end of his column, Manjoo poses a question. “What’s the point of returning to this history now, a decade later?” he asks. His answer:

Think of it as a cautionary tale — a story that ought to rank at the top of mind for a Democratic electorate that is now choosing between Obama’s vice president and progressives like Bernie Sanders or Elizabeth Warren, who had pushed Obama, during the recovery, to adopt policies with more egalitarian economic effects ... not only did Obama’s policy ideas produce lackluster economic results (at least in that they failed to hit their stated goals), they failed politically, too. The sluggish recovery in Obama’s first years led to a huge loss for Democrats in the 2010 midterms.

Manjoo has the right idea here and the wrong conclusion. This is a cautionary tale. The results of the Obama administration’s legislative failures were catastrophic in both human and political terms. But replace the Obama administration with a further left administration in Manjoo’s story. What changes, exactly? How would President Bernie Sanders or Elizabeth Warren have changed Sen. Joe Lieberman and Ben Nelson’s minds on the public option? How would they have gotten the Republican votes they needed in the Senate to support more stimulus spending?

These are questions not of neoliberalism versus leftism but of political strategy and institutional constraint. Many on the left are, like Manjoo, loading neoliberalism with a weight it cannot bear. Condemning neoliberalism becomes a way of hiding from the harsh strictures of America’s polarized, paralyzed political process, in which geography and gerrymandering gives Republicans a constant congressional advantage and Fox News spins an alternative reality on the daily.

The truth is that Obama-style liberals and Sanders-style leftists face a similar problem: both are well to the left of the median member of Congress, and both want to pass agendas far more ambitious than anything Congress has done in decades. How do they do it?

The hard choices here were underscored by another piece the New York Times published on Wednesday, profiling Rep. Alexandria Ocasio-Cortez’s efforts to modulate her approach to better fit the constraints of the institution in which she serves:

After nearly nine months, with her eyes now wide open to the downsides of her revolutionary reputation and social media fame, Ms. Ocasio-Cortez has tempered her brash, institution-be-damned style with something different: a careful political calculus that adheres more closely to the unwritten rules of Washington she once disdained.

“I think I have more of a context of what it takes to do this job and survive on a day-to-day basis in a culture that is inherently hostile to people like me,” Ms. Ocasio-Cortez said in an interview.

Ocasio-Cortez isn’t losing her ideological fire. She’s adapting to the institution that surrounds her. She’d like a policy and political approach well to the left of what exists now. But if she’s going to get anything done, she needs to find ways to work with the members who are already there, members who are to her right ideologically but whose votes are necessary if she’s going to pass anything.

There are real differences between neoliberals and leftists, and those debates are healthy to have. But the fundamental constraint on Democratic administrations is not how far left they are, but how far left Congress is. If Bernie Sanders is elected president in 2020 but he’s facing Senate Majority Leader Mitch McConnell, he’s going to end up passing a more compromised policy agenda than if, say, Michael Bennet wins the presidency and Democrats take back the Senate. That’s not because Bennet is to Sanders’s left, but because it’s Congress, not the president, that writes and passes laws.

“Only now, in the age of Sanders and Warren and Alexandria Ocasio-Cortez, are we beginning to relearn the lessons of the past,” writes Manjoo.

Unfortunately, I’m not sure we are learning them. If you look back on the Obama administration’s shortcomings and see a purely ideological story, then you’ve missed the political institutions that not only constrained him, but will act with as much or more force against Sanders, Warren, or AOC.