Barack Obama, Historian and Hamiltonian

Mark Kleiman writes:

The Reality-Based Community: Barack Obama, Historian and Hamiltonian: Putting the substance aside for one moment, Obama's Cooper Union speech on the economy illustrates two points about his thinking that haven't been widely remarked on: 1. When he considers issues he tends to start out by thinking historically, and by starting with the period around the framing of the Constitution. This is a very unusual impulse among American office-seekers. 2. He identifies strongly with Hamilton as against Jefferson. In particular, he uses Hamiltonian interventionism to demonstrate that laisser-faire was not among the founding doctrines of the nation. Since Jefferson remains among the household idols of the Democratic Party, that's a fairly bold thing to do.

The same themes come through in The Audacity of Hope.

Comments

[andres]

Hmm. Kleiman misses the point, I think. The debate between Jefferson and Hamilton was not about interventionism vs laissez faire, but about the type of Republic each one wanted to create. Jefferson wanted an agrarian economy and a democracy where the landed aristocracy (in all but name) would lead by example. Hamilton wanted a mercantile/manufacturing economy and as its main guarantor, a democracy where the business elite would exert veto power by virtue of a very strong strong executive branch. Whether interventionism or laissez faire was used to reach either of the two goals was somewhat irrelevant to both men--Jefferson would have favored interventionism if he had seen it as a good tool to support southern planters and northern farmers, which he didn't at that point in U.S. history.

[anne]

The speech was excellent or so I thought until I read Mark Kleiman's pretentiously incomprehensible analysis and decided that James Madison was really right after all. Say what?

[John]

I would like to know a heck of a lot more about Hamiltonian politics and economics. I'm reading Ron Chernow's massive history of Hamilton, but it isn't much help or I'm dense.

My background is mostly literary, and one of the weird things a lit student stumbles across is the fevered politics of a national bank throughout American history. It's at least half of Ezra Pound's Cantos.

What the hell was the quarrel about over Nicholas Biddle and a United States Bank?

What was the politics about preventing a federal reserve for so long, and how did it lead to such a weird arrangement of districts instead of one centralized bank?

Can one of you economic gurus recommend some reading on Hamiltonian politics and economics?

[CMike]

Here's a ConsortiumNews piece from February:

http://consortiumnews.com/2008/022708a.html

...Though Superior Bank collapsed years before the current sub-prime turmoil that is rocking the world’s financial markets – and pushing those millions of homeowners toward foreclosure – some banking experts say the Pritzkers and Superior hold a special place in the history of the sub-prime fiasco.

“The [sub-prime] financial engineering that created the Wall Street meltdown was developed by the Pritzkers and Ernst and Young, working with Merrill Lynch to sell bonds securitized by sub-prime mortgages,” Timothy J. Anderson, a whistleblower on financial and bank fraud, told me in an interview.

“The sub-prime mortgages,” Anderson said, “were provided to Merrill Lynch, by a nation-wide Pritzker origination system, using Superior as the cash cow, with many millions in FDIC insured deposits. Superior’s owners were to sub-prime lending, what Michael Milken was to junk bonds.”

In other words, if you traced today’s sub-prime crisis back to its origins, you would come upon the role of the Pritzkers and Superior Bank of Chicago...

But this seven-year-old bank failure has relevance in another way today, since the chair of Superior’s board for five years was Penny Pritzker, a member of one of America’s richest families and the current Finance Chair for the presidential campaign of Barack Obama, the same candidate who has lashed out against predatory lending.

[CMike]

John,

This may offend the academics around here but take a look at these links.

http://en.wikipedia.org/wiki/First_Bank_of_the_United_States

http://en.wikipedia.org/wiki/Second_Bank_of_the_United_States

http://en.wikipedia.org/wiki/Nicholas_Biddle_%28banker%29

[anne]

The text of an excellent speech:

http://www.nytimes.com/2008/03/27/us/politics/27text-obama.html?hp

March 27, 2008

Renewing the American Economy
By Barack Obama

Cooper Union, New York

Thank you so much for being here.

Let me begin by thanking Dr. Drucker and Cooper Union for hosting us here today. I have to say that the last time an Illinois politician made a speech here it was pretty good. So...

(LAUGHTER)

... the bar is high. And I -- I want everybody to know right at the outset here that this may not be living for generations to come, the way Lincoln's speech did. I want to thank all our elected supporters who are here. I want to -- there are a couple of special guests that I'm very appreciative for being in attendance: Paul Volcker, the former chairman of the Federal Reserve Board...

[Shelby]

Is it reasonable for Kleiman to implicitly privilege Jefferson over Madison as "among the household idols of the Democratic Party"? I've always viewed the distinction between them as driven more by federalism (Jefferson) vs centralization (Madison), though there are many other fault lines. At least in the past sixty years, and arguably for the past hundred and forty, Madison's views have been more ascendant among Democrats, compared to Jefferson's.

[Shelby]

Is it reasonable for Kleiman to implicitly privilege Jefferson over Madison as "among the household idols of the Democratic Party"? I've always viewed the distinction between them as driven more by federalism (Jefferson) vs centralization (Madison), though there are many other fault lines. At least in the past sixty years, and arguably for the past hundred and forty, Madison's views have been more ascendant among Democrats, compared to Jefferson's.

[anne]

Andres:

"The debate between Jefferson and Hamilton was not about interventionism vs laissez faire, but about the type of Republic each one wanted to create. Jefferson wanted an agrarian economy and a democracy where the landed aristocracy (in all but name) would lead by example. Hamilton wanted a mercantile/manufacturing economy and as its main guarantor, a democracy where the business elite would exert veto power by virtue of a very strong strong executive branch."

Agreed.

[sm]

Madison as a centralizer? That's not what he said at Philadelphia.

[anne]

http://www.nytimes.com/2008/03/28/opinion/28krugman.html

March 28, 2008

Loans and Leadership
By PAUL KRUGMAN

When George W. Bush first ran for the White House, political reporters assured us that he came across as a reasonable, moderate guy.

Yet those of us who looked at his policy proposals — big tax cuts for the rich and Social Security privatization — had a very different impression. And we were right.

The moral is that it’s important to take a hard look at what candidates say about policy. It’s true that past promises are no guarantee of future performance. But policy proposals offer a window into candidates’ political souls — a much better window, if you ask me, than a bunch of supposedly revealing anecdotes and out-of-context quotes.

Which brings me to the latest big debate: how should we respond to the mortgage crisis? In the last few days John McCain, Hillary Clinton and Barack Obama have all weighed in. And their proposals arguably say a lot about the kind of president each would be.

Mr. McCain is often referred to as a “maverick” and a “moderate,” assessments based mainly on his engaging manner. But his speech on the economy was that of an orthodox, hard-line right-winger.

It’s true that the speech was more about what Mr. McCain wouldn’t do than about what he would. His main action proposal, as far as I can tell, was a call for a national summit of accountants. The whole tone of the speech, however, indicated that Mr. McCain has purged himself of any maverick tendencies he may once have had.

Many news reports have pointed out that Mr. McCain more or less came out against aid for troubled homeowners: government assistance “should be based solely on preventing systemic risk,” which means that big investment banks qualify but ordinary citizens don’t.

But I was even more struck by Mr. McCain’s declaration that “our financial market approach should include encouraging increased capital in financial institutions by removing regulatory, accounting and tax impediments to raising capital.”

These days, even free-market enthusiasts are talking about increased regulation of securities firms now that the Fed has shown that it will rush to their rescue if they get into trouble. But Mr. McCain is selling the same old snake oil, claiming that deregulation and tax cuts cure all ills.

Hillary Clinton’s speech could not have been more different.

True, Mrs. Clinton’s suggestion that she might convene a high-level commission, including Alan Greenspan — who bears a lot of responsibility for this crisis — had echoes of the excessively comfortable relationship her husband’s administration developed with the investment industry. But the substance of her policy proposals on mortgages, like that of her health care plan, suggests a strong progressive sensibility.

Maybe the most notable contrast between Mr. McCain and Mrs. Clinton involves the problem of restructuring mortgages. Mr. McCain called for voluntary action on the part of lenders — that is, he proposed doing nothing. Mrs. Clinton wants a modern version of the Home Owners’ Loan Corporation, the New Deal institution that acquired the mortgages of people whose homes were worth less than their debts, then reduced payments to a level the homeowners could afford.

Finally, Barack Obama’s speech on the economy on Thursday followed the cautious pattern of his earlier statements on economic issues.

I was pleased that Mr. Obama came out strongly for broader financial regulation, which might help avert future crises. But his proposals for aid to the victims of the current crisis, though significant, are less sweeping than Mrs. Clinton’s: he wants to nudge private lenders into restructuring mortgages rather than having the government simply step in and get the job done.

Mr. Obama also continues to make permanent tax cuts — middle-class tax cuts, to be sure — a centerpiece of his economic plan. It’s not clear how he would pay both for these tax cuts and for initiatives like health care reform, so his tax-cut promises raise questions about how determined he really is to pursue a strongly progressive agenda....

[Roger Bigod]

The controversy over Federalism can be viewed as part of a dialog over the limits of centralized authority going back to Magna Carta. The Barons won that round, establishing enduring curbs on the King's power such as, until recently, habeas corpus.

The arguments for Hamilton's view are compelling on abstract grounds of economic efficiency and military prowess, sometimes known as defense. The ineffectual reply of the Jeffersonians was that the strong institutions might occasionally be administered by fallible officials and the benefits of centralized efficiency negated by centralized mismanagement. The hereditary principle could cast up a sadistic nincompoop who would spy on the citizenry and send them off to torture in secret prisons. The central banker could be an overrated moron who would enrich his monied New York backers at public expense and destroy the currency in a deluded attempt to protect them. How fortunate we are that none of this came to pass.

Of course, these considerations are only of antiquarian interest, mentioned merely as footnotes, as it were, to Sen. Obama's splendid oration.

[Randolph Fritz]

Hamilton at one time advocated lifetime terms from the President and Senators. Not real big on democracy, Hamilton. It looks remarkably like Obama is a conservative. Are we out of our ever-loving minds, to consider another conservative?

[Jan]

Rather than identifiying Obama as a Hamiltonian, it might be more accurate to say that -- applying (and quoting loosely) Herbert Croly's description of Theodore Roosevelt -- he wants to use Hamiltonian means for Jeffersonian ends. This is the characteristic approach of 20th c. liberalism, which has -- at least until Reagan put it on the defensive -- argued for an active state that intervenes on behalf of the welfare of the ordinary person.

And yes, Obama often starts with the Founders. He did that too, and brilliantly, in his speech on rac.

[Jan]

Rather than identifiying Obama as a Hamiltonian, it might be more accurate to say that -- applying (and quoting loosely) Herbert Croly's description of Theodore Roosevelt -- he wants to use Hamiltonian means for Jeffersonian ends. This is the characteristic approach of 20th c. liberalism, which has -- at least until Reagan put it on the defensive -- argued for an active state that intervenes on behalf of the welfare of the ordinary person.

And yes, Obama often starts with the Founders. He did that too, and brilliantly, in his speech on rac.

[Maurice Lanselle]

It turns out that Mr. Obama has a genealogical link with Mr. Madison (but not with either Mrs. Hamilton or Jefferson):[http://www.newenglandancestors.org/press/default.asp]