I very much enjoyed David Frum’s case against reelecting President Obama, which not too surprisingly resonates with my own assessments and instincts. The following passage struck me as particularly astute:
[T]he president is championing a more active government, not as a way to meet social needs but as a permanent and growing source of middle-class employment. Some of us will work directly for the public sector. Others will be contractors. Either way, many more of us will be working in jobs from which it will be difficult to fire us—and where the government sets more of the terms of employment.
Something like this approach was tried in Britain under the Labour governments of Tony Blair and Gordon Brown. Between 1997 and 2008, Blair and his successor Brown used rapidly rising government revenues to finance new public-sector jobs in depressed old industrial areas. Over the decade, the public sector provided more than half of all the net new jobs in three of the four main economic regions of England—and 80 percent of the net new jobs for women.
They piled more and more taxes on a smaller and smaller slice of the economy. Meanwhile, the expanded public sector did not spark the benefits it was supposed to. The depressed areas remained depressed. The gap between rich and poor grew instead of shrinking.
Obama becomes impatient when his policies are compared to Blair’s or Brown’s. But it’s hard to see the basis for that reaction. A reelected President Obama would want to see the Bush tax rates lapse, federal revenues rise, and the proceeds used to fund a permanently higher level of federal spending and government employment.
Britain is a very fair comparison, as there were successful aspects of New Labour’s leadership, e.g., rising social transfers did mitigate poverty. Yet its more ambitious efforts to redress regional disparities proved a failure, and may indeed have made matters worse by locking up human capital in low-productivity public sector work in low-productivity regions. One is reminded of how the U.S. housing boom of the 2000s may have led young American men to underinvest in education, as Kerwin Kofi Charles, Erik Hurst, and Matthew Notowidigdo have suggested.