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Does Wall Street Win?

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The ironic thing was that I had been planning to write a positive piece this morning about Obama's remarks on housing in yesterday's Twitter town hall, as I was pleased he was acknowledging the mistakes of his housing policy, and was hopeful that this statement -- along with the outstanding news this morning of new Treasury rules forcing banks to give some mortgage relief to unemployed homeowners -- signaled a tougher stance on Wall Street. And I was hoping that Christine Varney's departure from the antitrust division at the Department of Justice might give an opportunity for someone more aggressive to be appointed there, so my mood was pretty good before I saw this morning's all-hope-dies-here headline on Social Security. Oh, well. This administration has specialized at raising progressive hopes one minute and crushing them the very next.

The question now on Social Security is what exactly is on the table and what isn't. The statement the White House put out this morning is this:

There is no news here. The President has always said that while Social Security is not a major driver of the deficit, we do need to strengthen the program and the President said in the State of the Union Address that he wanted to work with both parties to do so in a balanced way that preserves the promise of the program and doesn't slash benefits.

That not slashing benefits part of the statement sure sounds good and makes me feel better, but what does working with the Republicans in a balanced way mean? They want to cut benefits, not raise the payroll tax. And Social Security -- unlike Medicare and Medicaid which include a lot of payments to providers that can be tinkered with in different ways to potentially lower costs -- is all benefits. So is it on the table or isn't it? The White House says the President is opposed to cutting benefits, which is wonderful, and I'm grateful for them reiterating that in the wake of the news reports this morning. But if you put it on the table, that means benefits might get cut, which is a disaster for the middle class, and a disaster for the Democratic Party. It would break the Democratic coalition into pieces, do more to alienate the base than any other thing the President could do, alienate seniors, who have never been too crazy about Obama anyway and who we need to move toward us in 2012, take away the political high ground Democrats seized because of the Ryan budget's attacks on Medicare and Medicaid.

It is the high rollers on Wall Street and their friends in the media and D.C. establishment who want to put Social Security on the table. The funders of the "we can solve our budget problems by cutting Social Security and Medicare and Medicaid" PR campaign are people like Wall Street billionaire Pete Peterson. Billionaires and multimillionaires demanding that retired people getting an average of $14,000 a year in Social Security get their benefits cut has always struck me as just a little wrong. Especially when these wealthy and powerful elitists figure out how to shelter their own income so they can avoid paying the same rate as their secretaries. But these hypocritical powerbrokers are exactly the ones for whom the entire Republican Party is fighting so hard. The question now: will Obama join them in screwing the middle class?

When it comes to government policy, there is no way to avoid the question of who wins and who loses. And over the last three years, in this massive economic crisis America has faced, it is the Wall Street big boys, the overgrown banks who own assets equal to 64 percent of our country's GDP, who keep winning. When they blew up the economy and taxpayers bailed them out with no strings attached, Wall Street won. When the biggest banks swallowed up their competitors and got even bigger, Wall Street won. When bonuses and profits returned to record levels a year after they were bailed out, in the midst of the worst recession since the 1930s, Wall Street won. When the legislation allowing judges to force them to negotiate on mortgage writedowns failed, Wall Street won. When their carried interest tax loophole failed to get repealed, Wall Street won. When the amendment to force the break-up of the biggest banks lost, Wall Street won. When loopholes were added to derivatives regulations, Wall Street won. When the antitrust division at DOJ refused to lift a finger against the huge mega-banks, Wall Street won. When none of the top executives at these banks that had manipulated the economy went to jail, and few of them even lost their job, Wall Street won.

The biggest question of our times is this: in spite of the naked greed, corruption, and excess exposed in the 2008 panic, will the win streak keep going? Will they succeed in taking Social Security money away from low and middle-income seniors? Or will, just maybe, the Obama administration stand up to Wall Street corruption this time? If Obama knows he needs to change his policy on housing, and starts doing more truly great things like the announcement today in terms of helping unemployed people keep their homes, that would be a major victory for the middle class over the Wall Street titans. If Obama were to replace Christine Varney with a head of antitrust who was more aggressive at breaking up huge companies who have too much market power, like the Too Big to Fail banks, that would be a blockbuster victory for both the economy and our democracy. If Obama finally does the right thing and gives Elizabeth Warren a recess appointment to the new Consumer Financial Protection Bureau, that would be an exciting victory for the middle class over the big banks who have been trying to stop her.

These issues are all tied together in the same question: does the middle class win, or does Wall Street win? If Obama chooses Wall Street, gives into the banks on all these issues, and hurts senior citizens with Social Security cuts, he will break apart the Democratic coalition and doom his re-election chances. If he challenges Wall Street and fights for the middle class, he will win the 2012 election in a landslide. No matter what Obama does, though, progressives need to keep fighting for what we believe in: we need to fight with all our strength to preserve Social Security benefits, and we need to take on the Wall Street banks on behalf of homeowners and consumers.

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