Obama’s Economic Policy

Note: this post started out as a comment to a post on the Iowa politics blog Bleeding Heartland. 

Obama’s critics from the left decry his adoption of the GOP frame on deficit reduction. I join them in this critique as a matter of economic policy; the best course right now is larger deficits to stimulate the economy, combined with a longer-term fiscal policy that aims to roughly balance the budget over the course of the business cycle (run surpluses during booms, deficits during during slumps). (Though I would note that as a sovereign issuer of currency the U.S. can comfortably run annual deficits in the 2% to 3% of GDP range indefinitely.)

Still, Obama refuses to follow the standard Keynesian course prescribed by sensible liberals. Why? Why does he adopt the economic policy that he does?

Here are some possibilities that occur to me:

• He genuinely believes that it is the right thing to do.
• It is part of a poll-tested strategy to retain enough independent voters in battleground states to enable him to win re-election.
• He is a blank slate on economic policy and is carrying out the views of various advisers.
• He is in the sway of shadowy special interests, say key Wall Street figures.
• He is basing his policies on a different set of data or assumptions than are his critics; in this case, both sides would call the other side "misinformed."
• He has a deep psychological need to please establishment figures such as the editorial board of the Washington Post, David Brooks, and the rest of what passes for a DC class of opinion leaders.
• He harbors resentment against liberals and wants to show them who's boss.
• He knows that government spending in this country is tied up inextricably with issues of race and that as a Black man he cannot activate those latent prejudices among the electorate.

I think the likeliest explanation is the poll-tested strategy one, but I think the race issue has been curiously underplayed. Which ones did I leave out?