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Marshall Auerback

Marshall Auerback

Posted: August 18, 2009 12:36 PM

Is Obama the Change President -- or the Republicans' Best Manchurian Candidate?

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No more free passes. A number of the President's supporters who expressed concerns about the pro-Wall Street tilt of his early administration decisions were prepared to give him the benefit of the doubt so long as he came through on healthcare. Obama's statement over the weekend that the public option for insurance coverage was "just a sliver" of the overall proposal, and the suggestion by Health and Human Services Secretary, Kathleen Sebelius, that a direct government role in a system intended to provide virtually universal coverage was "not the essential element", appear to provide conclusive evidence of this administration's capitulation to corporatist interests. The "change you can believe in" President now looks more like a Manchurian candidate of the right.

The disturbing thing about Obama taking the Rubinite path is that he now leaves government exposed as the lightening rod for everyone's problems, rather than the solution. If he had taken a more populist tack, more public anger could have been directed at the right people from the start -- as occurred under FDR's administration.

Extending the Bush/Paulson bailout policies (and, indeed, expanding them) and ignoring the needs of the productive economy have largely discredited government fiscal activism. Obama no longer appears willing to let the fiscal position of the federal budget grow as needed to meet current challenges.

When one adds extreme income imbalances and a comparatively weak social safety net (in contrast to those supposedly horrible "socialists" in Europe), then one has the makings of major social unrest, manifesting itself most recently in town hall meetings across the country this August.

Growing social unrest is something we have warned about for months. It's not being taken seriously by Obama's people. The eruption over the AIG bonuses was the tip of the iceberg. The "experts" said it was "beside the point," but it wasn't. It was a basic issue of fairness that could be readily understood by the vast majority of Americans in a way that complex credit default swaps could not.

And the "experts," who derided the eruption over AIG as a sign of irresponsible populism, are now being similarly dismissive of the town hall protests ostensibly being directed against a "government takeover of health care" but in reality reflect so much more.

True, Obama has responded ineffectively to the absurd distortions of his plan (well, what we've seen of his plan, as he has delegated much of the writing of it to Congress). But when government is no longer perceived as an instrument serving the general good, one can understand the susceptibility to the gross distortion of today's healthcare proposals, however irrational they might appear to the "experts." The rage reflects a large, inchoate sense that the government is heading in a horribly wrong direction: At its most basic level, it looks increasingly as if the government is simply rewarding bad behavior, particularly given how the housing situation and banking bailout has been handled.

In a recent post, we discussed debt repudiation as one manifestation of American citizens' growing sense of helplessness. Could tax non-compliance be far behind? Certainly, it is a possibility (although one we would certainly NOT advocate), given the underlying perception of unfairness. Both debt repudiation and tax non-compliance come when citizens collectively arrive at the decision that the entire power structure has no legitimacy because it no longer serves the broader population's needs and interests.

To read the rest of Marshall Auerback's argument, including further insight into debt repudiation and "debtors' revolt" and a critical look at Obama's latest health care move, visit NewDeal2.0.