Great Society Plan for the Middle Class

WASHINGTON (By David E. Sanger, NYT) March 2, 2009 — Opponents of President Obama’s proposal for a sweeping new government activism in the economy call it a return to a traditional tax-and-spend philosophy, a step back to the era of Lyndon B. Johnson.

It may also be a postmodern, post-Clinton form of liberalism.

Unlike the sweeping social programs of the 1960s, the Obama plan, with its talk of “green jobs” and energy efficiency savings, seems aimed more at a middle class that missed out on the boom than at the nation’s poorest, who would benefit to a significantly lesser extent. To be sure, there are some elements of Mr. Obama’s $3.6 trillion budget aimed at aiding the nation’s poorest — for example, turning Pell Grants for college into what amounts to a new entitlement program — but in his sales pitch, that has hardly been one of its biggest selling points.

Instead, the budget is advertised as a way of addressing the three issues that Mr. Obama talked about most often in his campaign: a far larger federal role in education, in providing near-universal health care and in energy policy. Its most expensive new provisions, like the $630 billion placed in reserve for the creation of a national health care fund and $250 billion set aside to bail out failing banks and fragile industries, are aimed a middle-class American workers who face the double threat of losing their jobs and their health insurance at one time.

And for the first time, an American president has moved to tax industries whose emissions trap greenhouse gases — a step that President George W. Bush argued would bring American industry to its knees.

Of course Johnson’s budgets were built when the nation was becoming increasingly aware of its crippling poverty rates, which was seen as one of the great social issues of the day, while Mr. Obama is responding to a sense that the middle class is falling behind the wealthiest Americans.

There is a boldness to the strategy — the kind of boldness that worked for Mr. Obama during the presidential campaign — that is breathtaking. He is gambling that the combination of his political capital and the urgency created by the economic crisis gives him a moment that may never come around again.

But along the way, he appears to have shed President Clinton’s fear of being labeled an old-fashioned liberal.

To deflect the criticism he is returning to an era of big government, Mr. Obama is relying on new packaging. He is being highly specific about how taxes on the wealthy would be redirected to programs that resonate with those who were listening to his campaign promises.

“There are striking similarities to Johnson and Great Society,” said Robert Dallek, the presidential historian who has written extensively about Johnson’s promise of an end to poverty, a commitment made in a State of the Union address 45 years ago, and one he was only able to deliver on in part.

“Obama’s rhetoric is not as grandiose,” Mr. Dallek said. But he sees risks as well — the risk Mr. Obama could reinvent Johnson’s mistake. “Vietnam proved, in a few years, you really can’t do guns and butter. And I worry Afghanistan could be the parallel for Obama.”

If Johnson’s rallying cry was an end to poverty in the world’s richest nation, Mr. Obama’s is an end to the Reagan Revolution. With the proposed tax increases on couples making more than $250,000, Mr. Obama has declared trickle-down economics — the theory the entire country benefits as the nation’s richest amass and spend — was a fantasy. He denounced it in moral terms, declaring in his budget “there is something wrong when we allow the playing field to be tilted so far in the favor of so few.”

Emphasizing the focus on the middle class, that same budget noted that from 2000 to 2007, the heart of the Bush presidency, “median income among households headed by those under 65” fell by about $2,000.

Moreover, as Eugene Steurele, the vice president of the Peter G. Peterson Foundation, points out, even the long-term spending in Mr. Obama’s budget does not have a tremendous effect on projected deficits. “In the long term, it’s existing health care spending and Social Security that account for these huge deficits, and he hasn’t addressed that issue yet.”

By contrast with Mr. Obama, Mr. Clinton was far more cautious. He came to office only four years after Ronald Reagan left Washington, and the rise of the Republican “Contract with America” in the mid-1990s kept the Reagan philosophy alive.

Moreover, Mr. Clinton was, of course, more beholden to the wealthiest Democratic donors. Mr. Obama’s wildly successful campaign strategy of raising hundreds of millions of dollars over the Internet from small donations gives him more political running room. It also raises the question of whether wealthy voters, who overwhelmingly supported him, will now begin to reconsider their support.

What begins now is the hardest part of the battle for Mr. Obama, the program-by-program debates that end up transforming and often times bloating a federal budget. It will be a battle Johnson himself, much more a creature of the Senate than Mr. Obama, would have relished.

But for the new president, legislative victory alone is not enough. Like Mr. Clinton, he will have to convince the markets, which have been singularly unimpressed by his stimulus package, that America can afford the changes he is making. He must persuade the Chinese, among others, to lend the money to pay for it. And he must convince Americans he can bring back more activist government without bringing back the worst aspects of big government.