Under President Obama, Big Government is Back

Three decades after Ronald Reagan declared that federal activism wasn't the answer to America's problems, big government is back. The evidence is everywhere. There's President Obama's $787 billion program to stimulate the economy, including massive investments in roads, bridges, and other infrastructure projects. There's his $275 billion plan to prevent home foreclosures, along with his $634 billion, 10-year proposal to improve healthcare. The administration's aggressive efforts to save the financial industry also represent big government in action, moving toward what Treasury Secretary Timothy Geithner says will be a "dramatically different" form of capitalism. And there is Obama's far-reaching campaign to cut U.S. dependence on fossil fuels, partly by taxing carbon emissions, to create what some administration officials call a "green society."

These new policies would alter the social and political landscape in a number of ways. They would, for example, shift away from deregulation of the financial industry to more government control. On energy, they would firmly steer the country away from its current reliance on foreign oil, which is a long-standing problem that can sometimes result in soaring gasoline prices ($4 per gallon a year ago), damage millions of family budgets, and cause inflation in the overall economy. Instead, Obama favors energy conservation, alternative fuels, and renewables such as solar and wind power.

It's all part of Obama's effort to use the current economic crisis to bring significant change to society. Georgetown University political scientist Stephen Wayne disagrees with Republican idealogues who have tried to cast Obama as a socialist but says, "He does believe government can play a role in a crisis where nothing else works and in terms of preventing a crisis, and he believes government can play a role—and this is a hot issue—in better equalizing wealth in society." Obama's plan to overhaul healthcare, for example, fits into both categories, crisis management and equalizing resources, Wayne adds, but his goal of redistributing wealth "drives Republicans bonkers." GOP critics say the best policy is to keep taxes low, including taxes on affluent Americans and companies that can use the additional money to make investments and increase economic growth.

All in all, Obama's agenda seems to represent the biggest surge in government activism since Lyndon Johnson's Great Society in the 1960s. And it is nothing short of a fundamental attempt to roll back the less-government objectives that have dominated debate in Washington since Ronald Reagan ushered in a conservative era in the 1980s.

Senior advisers to Obama say the administration has been forced by the economic meltdown to get ever more deeply involved in many phases of society that government has avoided for a long time. "There are things that we have put off for many, many, many years," says White House Press Secretary Robert Gibbs. "Instead of dealing with the problems that have been before us, instead of making the investments that we needed to, in things like healthcare and education, we ran up these amazing deficits and got nothing for them. So the president understands that he's going to have to ask people to take part in something that hasn't been done in this town in a long time, which is to look ahead and understand that we can't continue to kick these problems down the road."

Obama's budget proposal for next year is a good example of his move toward big government. He calls for cutting the current $1.7 trillion deficit in half within four years, which experts say is a very elusive goal. In the near term, his budget has $3.55 trillion in spending and a $1.17 trillion deficit in 2010 and is based on what critics call overly optimistic economic assumptions. He wants to impose penalties on polluting industries, make the nation independent of foreign sources of oil, and overhaul the healthcare system. Obama also seeks to redistribute wealth by increasing taxes on the rich and cutting taxes for the middle class and the poor in order to address growing income disparities.

The stimulus program enacted last month also contains a number of provisions designed to steer the economy in specific directions, something that many free-market conservatives abhor: $2 billion to foster advanced battery technology to save on fossil fuels, $5 billion for home weatherization, $11 billion to update the electrical grid and encourage the development of renewable energy, and $300 million for states and localities to buy electric and hybrid cars.

Criticism is rising that Obama and Democrats in Congress are overreaching and diverting attention from the economy to less urgent matters. The latest big name to join the chorus is billionaire investor Warren Buffett, who supported Obama in the election. Buffett told CNBC Monday that the economy has "fallen off a cliff" and that Obama's explanation of how he will end the meltdown remains unclear. He predicted a substantial rise in unemployment from the current 8 percent and an increase in inflation. Buffett said Obama and other politicians should focus on the economy and "defer most of the things that get people riled up." But he expressed confidence that Obama will eventually get the job done.