Saturday :: Aug 14, 2010

The Elites' Best Friend

by Steve

I've frequently complained about Obama's lack of spine in dealing with his political opponents, and his failure to hit the ground running after the election as a populist reformer, to take advantage of the public appetite for reform and real change. Frequently, I get pushback from some of you who think my criticism is nothing more than sour grapes from a Hillary supporter, and then I am told that Obama's problems are all Bush's fault.

A far better writer than me has penned the best summary so far of Obama's failings. John Judis, a senior editor of the The New Republic posted a piece for the magazine on Thursday (subscription required) that makes the same points, and reinforces my criticism of Obama's role in the failed stimulus package. But Judis goes farther and points out that Obama "has a strange aversion to confrontational politics", and has avoided hammering the GOP, Bush, Wall Street, and the bankers for their role in the near-depression Obama inherited. Worse yet, as I've commented before, Judis points out that Obama and his advisors feel he is above party politics, which leads to him being seen as detached from the real world and the need for political accountability.

Judis points out that the White House political operation saw the need early for Obama to pursue a populist tone while he had the political capital to push major financial reform and a strong stimulus package. Yet the pro-business cabal inside the White House argued that Obama couldn't antagonize Wall Street and that he needed them and the bankers.

The White House and cabinet officials he appointed have reinforced his aversion to populism. As Jonathan Alter recounts in "The Promise: President Obama, Year One," Geithner and Summers repeatedly blocked attempts to get tough on Wall Street on the grounds that doing so would threaten the recovery itself by upsetting the bankers. For most of his first year, Alter writes, “Obama bought the Geithner-Summers argument that the banks were fragile and couldn’t be confronted while they remained in peril.” Its reluctance to come down on the bankers crippled the administration politically, making it far more difficult for it to get its way with Congress on a second stimulus program that would have boosted the recovery and Democrats’ political prospects.
Bad politics can trump good policy.

The optics of such a capitulation to the same thieves who brought down the economy while bailout money was leading to more and more bonuses was fatal, especially when the stimulus critics like Krugman and Stiglitz have been proven correct about the package's timidity and ineffectiveness.

In January, when the White House debated how large a stimulus to propose, Christina Romer, the head of the Council of Economic Advisors, proposed a $1.2 trillion Keynesian jolt. David Obey, the chairman of the House Budget Committee, told The Fiscal Times that Obama’s Treasury Department asked initially for a $1.4 trillion bill.
But the administration finally proposed a stimulus between $700 and $800 billion that included large tax cuts that were more likely to stimulate saving than consumption–and spending that would be unlikely to produce many jobs until the end of Obama’s first term. In the stimulus’s first year, the administration spent only $17 billion of the $139 billion allocated for infrastructure spending.
Prominent economists, including Paul Krugman and Joseph Stiglitz, made the case that a much larger stimulus was necessary to reverse (rather than merely reduce) the rise in unemployment, and that, if a modest stimulus failed to reduce unemployment, Republicans would convince the public that the stimulus was toxic medication and would block additional Keynesian measures. That argument has been proven sadly correct. Some White House advisers appear to have underestimated the depth of the Great Recession. Others seem to have doubted the administration had the political clout to get more from Congress.
But the White House might have gotten more if Obama had proclaimed a national economic emergency (which it was); framed the issue in terms of rescuing the middle class from damage done by Wall Street speculators, short-sighted CEOs, and Chinese mercantilism; and directly attacked Republicans as heartless obstructionists. When Obama belatedly made this sort of case on the eve of the financial reform vote this year, he got a much stronger bill than anyone had anticipated. So it’s not clear that the failure to get a larger stimulus–which has ended up hurting the administration politically– wasn’t itself a result of political timidity.
The president has also suffered from an inability to explain to the public why he sought such a large stimulus and what he thought it could accomplish. Obama’s New Foundation speech at Georgetown was soon forgotten. Afterward, Obama, to the dismay of Democrats in Congress and some of his White House aides, pretty much dropped the jobs issue.
From then to Labor Day, he devoted a July visit to Buffalo and an August stopover in southern Indiana to the issue–at a time when the right wing was mobilizing against him. Obama didn’t just fail to develop a consistent narrative about the economy; he didn’t really try.
Contrast Obama’s attempt to develop a politics to justify his economic program with what Reagan did in 1982. Faced with steadily rising unemployment, which went from 8.6 percent in January to 10.4 percent in November, Reagan and his political staff, which included James Baker, Mike Deaver, and Ed Rollins, forged a strategy early that year calling for voters to “stay the course” and blaming the current economic troubles on Democratic profligacy. “We are clearing away the economic wreckage that was dumped in our laps,” Reagan declared.
Democrats accused them of playing “the blame game,” but the strategy, followed to the letter by the White House for ten months, worked. The Republicans were predicted to lose as many as 50 House seats, but they lost only 26 and broke even in the Senate.

My takeaway from the article is that Barack Obama is far from a reformer. He is in fact someone who has ultimate faith in the country's elites and the institutions that got us in this mess.

The article is behind TNR's subscriber wall, but it's a good reason to subscribe.

Steve :: 3:39 PM :: Comments (3) :: TrackBack (0) :: Digg It!