IF ONLY HE WERE "SOCIALIST":

It Can't Happen Here: Why Obama won't bring European social democracy to America. (Jacob Weisberg, March 7, 2009, Slate)

The familiar downside to the trans-Atlantic model is less economic flexibility and social dynamism. Western European countries have higher taxes, lower growth rates, more unemployment, and less class mobility. Powerful trade unions, rigid bureaucracies, and heavy regulation make them less conducive to entrepreneurship and slower to embrace technological change. The cradle-to-grave welfare state diminishes individual initiative and can breed a pervasive sclerosis. In places, it seems capable of breeding an American-style underclass.

In other words, our respective social contracts each have their advantages but are too ingrained in culture and tradition to imagine trading places. Americans are defined by a history of immigration in pursuit of freedom and opportunity. We are more individualistic, enterprising, and protective of liberties that most Europeans do not expect, such as owning guns, working 70-hour weeks, or appreciating nature as it goes by at 60 mph on a snowmobile. Founded in rebellion against colonial tyranny, our country is naturally suspicious of government intrusion, interference, and snooping. European systems, by comparison, grow out of a tradition of the state providing social benefits for workers that stretches back to Bismarck and Germany in the 1880s. To overgeneralize, Europeans have less suspicion of officialdom, don't view the right to get rich as sacrosanct, and demand stronger social safety nets. Their more homogenous and static societies place a higher premium on equality, security, and stability.

Such historically grounded differences explain why the European model of social democracy would be unlikely to find root here, even if the president favored it. But Obama shows every sign of instinctively resisting paternalistic and overarching public sector authority as much as most Americans do. Though the president's overall vision of government's role remains somewhat foggy, his approach to problem-solving reflects the national urge to rein in government even while one is busy expanding it.

This aversion to state control characterizes Obama's response so far to the financial crisis. When asked in an ABC interview why he didn't nationalize the damn banks already, Obama's telling response was to talk about how our "traditions" are different from European ones. "Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America's different," he said. "And we want to retain a strong sense of that private capital fulfilling the core investment needs of this country." Note that Obama's global-warming plan is a market-based cap-and-trade system rather than a more straightforward carbon tax or regulatory scheme.

Even in areas where Obama seems to be moving in a more statist direction, there are crucial distinctions. Like most Americans, he believes government should guarantee health insurance. And like most Americans, he believes the system should be privately run. He, and we, may be kidding ourselves in thinking that it's possible to have universal access and cost control without stifling innovation or limiting individual choice. But Obama is going to try to thread the needle. His college plan is for universal access to loans, not the essentially free ride that most students get in the European Union. And he looks poised to pare back Social Security benefits and Medicare spending, in addition to raising taxes, to constrain the overall cost of government. One way to describe Obama's program is a move toward cradle-to-grave opportunity, as opposed to the European model of cradle-to-grave security.

His refusal to nationalize banks and directly tax carbon consumption are significant economic mistakes, even if understandable in light of parochial Americanism. Meanwhile, whether he doesn't understand how to universalize health care funding while keeping the delivery private or just can't accept a Third Way solution -- HSAs -- for ideological or reactionary reasons, it's another area where he's too conservative.

MORE:
Nationalized Banks: Why They Might Work (STEPHEN GANDEL, 3/06/09, TIME)

"The fact that the government ownership of IndyMac is coming to an end in just eight months is successful," says Kevin Stein, a former associate director of resolutions at the Federal Deposit Insurance Corporation and an investment banker at FBR Capital Markets. "Nationalization is a tool that has been used in the past and can be effective in the future in certain situations."

A how-to model for nationalizations could prove valuable in the months ahead. The government is in the process of stress testing the nation's largest banks as part of Treasury Secretary Timothy Geithner's plan to fix the ailing sector. And many think the outcome of those tests could lead to more takeovers. So far, Geithner and other officials have denied they are interested in running banks. But in the past few weeks, a number of prominent Republicans and fiscal conservatives, most notably former Federal Reserve Chairman Alan Greenspan and Senator Lindsey Graham, have joined those who think the government should consider nationalizing the most troubled institutions. Bank of America, Citigroup and Wells Fargo could all be candidates for increased government ownership and control. (See the top 10 financial-crisis buzzwords.)

To be sure, many economists, and Americans in general, remain firmly against the idea. Some aversion relates to the very the word, nationalization, which evokes images of socialist regimes seizing private companies. A recent USA Today-Gallup poll found that 57% of Americans are against "temporarily nationalizing U.S. banks." Yet only 44% oppose a less politically threatening version, "temporarily taking [a bank] over."

Posted by Orrin Judd at March 7, 2009 7:56 AM