We’ve all heard liberal speeches on the economy. The central concern is inequality. Power and wealth tend to concentrate at the top of society, so government must stand as a countervailing power. It must defend the people against the powerful to ensure fairness and opportunity for all.

It is interesting, therefore, that when President Obama summarized his economic policies in a speech at Georgetown University last week, he departed from this storyline and worldview. Obama’s chief concern was not inequality. It was irresponsibility. Obama didn’t sound like an economic liberal at Georgetown. He sounded like a cultural conservative.

America once had a responsible economic culture, Obama argued. People used to save their pennies to buy their dream houses. Banks used to lend by “traditional standards.” Fannie Mae and Freddie Mac used to stick to their “traditional mandate.” Companies like AIG used to limit themselves to the “traditional insurance business.”

But these traditions broke down, Obama continued. They were swamped by irresponsibility. Businesspeople chased “short-term profits” over long-term investments. Smart people spent more time manipulating numbers and symbols than actually making things. Americans consumed too much and saved too little. America became corrupted by “excessive debt,” “reckless speculation” and “fleeting profits.”

He vowed to end irresponsibility and the cycle of boom and bust. It’s time to get back to basics, he said. He embraced tradition, order and authority. He quoted the New Testament and argued it is time that the U.S. built its economic house on rock and not sand.

If Republicans aren’t nervous, they should be. Obama is positioning the Democrats as the party of order, responsibility and smalltown values. If he pulls this mantle away from the Republicans, it would be the greatest train robbery in American politics.


Obama then went on to describe his remedy in the soothing, understated manner of a country doctor prescribing a few small procedures. The country has been on an irresponsible bender, so his administration will have to “clear away” a few toxic assets, “reassess” the viability of Chrysler and General Motors and “create rules that punish shortcuts” on Wall Street.

His view was clear. The market is dynamic and important, but it makes people reckless, parochial and dangerously shortsighted. The market needs adult supervision — a leadership class made up of people who appreciate the market but who also have committed themselves to public service, and who therefore take the long view and are more conscious of the public good.

Obama is building this leadership class. When the members of this new establishment are confronted with a broken system — whether it involves hospitals, energy, air pollution or cars — their approach is the same. They aim to restructure incentives in order to channel the animal drives of the marketplace in responsible directions.

Obama is taking enormous risks. The first danger, of course, is that his teams of experts may not be as farsighted as they believe. It may not be so easy to out-think the market. His advisors are like jugglers who have thrown knives in the air. It’ll get harder when they start coming down.

Moreover, for an administration that puts responsibility at the centre, it is not itself very responsible. Federal spending is the leverage the administration uses to gain control over sector after sector, and yet this money is all borrowed.

Obama imposes hard choices on others, but has postponed his own. He presented an agenda that bleeds red ink a trillion dollars at a time. Now he seems passive as Congress kills his few revenue ideas (cap and trade) and spending cuts (agricultural subsidies). Huge fiscal gaps are opening this decade that can’t be closed by distant entitlement reform. They can’t be closed by cynical Potemkin cuts, a few million at a time.

This is not a matter of economics only, but credibility. Obama understands that this is primarily an authority crisis. A system Americans have trusted — the market — has failed in important ways. He has found a theme and bids to reassert authority. But he will seem like an impostor and a manipulator if he imposes responsibility on everybody but himself.