03/21/2010 05:12 am ET | Updated May 25, 2011

Time for a Reset: Obama and Dems Must Take on Wall Street and Create Jobs or Lose

There will be two main narratives explaining the Democrats' loss of Ted Kennedy's former seat. Washington insiders will argue that Obama and the Democrats moved too far too fast with a "liberal" agenda and must now trim their sails, tack to the corporate center, and focus on deficit reduction. Others will argue that Obama and the Democrats have been too cozy with Wall Street and have followed in George W. Bush and Hank Paulson's footsteps to shovel hundreds of billions of taxpayer dollars at Wall Street banks and gotten nothing in return as far as lending to create jobs and save homes. I'm going with the second narrative.

Martha Coakley may have run a poor campaign. But if the Massachusetts Senate election were taking place on November 7, 2008 instead of January 19, 2010, a donkey could have held onto the Democratic seat. What's happened since then is that Barack Obama won on a promise to change the cozy insider game between Washington and big business but instead has done little to challenge the power of America's corporate oligarchy. After promising to negotiate health care reform on C-Span, he made a series of insider deals with big pharma and the insurance industry in exchange for campaign cash. He appointed Wall Street insiders like Larry Summers and Tim Geithner to his top economic posts and did little to challenge the power of big Wall Street banks or to make them recycle the hundreds of billions given them by the taxpayers by lending to job-creating businesses or restructuring the mortgages of struggling homeowners. He proposed a too-small stimulus package and then negotiated too much of it away in the name of a false bipartisanship. Despite his rhetorical powers, he never effectively made the case of the need in a Great Recession for government to stimulate demand in order to create jobs; as a result job-creating stimulus money and bank bailouts got conflated in voters minds as one big deficit-creating waste of their money by a profligate government.

In short, he opened himself up to faux-populist attacks by Republicans like Sarah Palin and Scott Brown. I believe that most Americans do want a government that helps solve their problems, encourages job growth, takes on the big banks, and leads to greater economic security. But if Democrats are seen as using their tax dollars to subsidize big banks, then voters will turn back to the tired old Republican tax-cut message that got us into this mess in the first place.

Obama and the Democrats need to fight faux-Republican populism with real populism. And a little bit of anti-bank rhetoric from Obama won't do the trick. It requires strong policies that rebuild a sustainable economy and creates jobs. Here are some the things they should be proposing:

  • Support, and fight for passage, of the McCain-Cantwell bill that restores the Glass-Steagall Act's wall between commercial banks and investment banks/hedge funds which protected the financial system from collapse from 1933 until it was repealed in 1997 by a coalition of Congressional Republicans and corporate Democrats like Robert Rubin and Larry Summers. This would break up the power of the financial supermarkets like Citigroup (which then paid Rubin126 million), Goldman Sachs and JP Morgan Chase and make them choose whether to be banks or hedge funds; prevent their gambling consumer's deposits in the global financial casino; and make clear that while the deposits or ordinary consumers and businesses in commercial banks will be protected by the Federal government, taxpayers will never again be called on to bail out "too big to fail" Wall Street behemoths. As I've previously written, since this move is supported by the likes of McCain, Alan Greenspan, and The Wall Street Journal, let Republican Senators try to filibuster it.

  • Join our British and French allies in imposing a 50% tax on 2010 bank bonuses. After bailing out the banks with hundreds of billions in taxpayer dollars, taxpayers will not easily forgive an administration that does little about the big banks rewarding themselves with over200 billion in bonuses. And Obama's newly proposed9 billion a year bank tax is way too puny to do the trick.
  • Support, and fight for passage, of the bills introduced by Ron Paul and Dennis Kucinich to let the General Accounting Office audit the Federal Reserve's funding facilities. This shouldn't be allowed to politically interfere with the Fed's independence on monetary policy, which would spook markets. But the American people are sick of the lack of transparency behind the taxpayer-funded bank guarantees being dished out by Ben Bernanke's Fed and Tim Geithner's Treasury Department. A majority of House members, both Democrats and Republicans, are now co-sponsoring this measure--With White House support, it could pass. Without White House support, the Democratic leadership will probably block a vote.
  • Fire Tim Geithner and Larry Summers and replace them with economic policymakers who've demonstrated that they understand and care about the problems of ordinary Americans more than Wall Street.
  • Focus like a laser on policies that create jobs. Leo Hindrey has suggested some of these policies in The Huffington Post here and here. Among his suggestions:
  • "Fund a 10-year program of significant public investment to upgrade and rebuild our nation's major infrastructure, which would immediately create 18,000 new jobs for each $1 billion we spend. This program should include a new National Infrastructure Bank, incentives for private funding of public infrastructure, a multi-year green transportation program funded through an increase in gasoline taxes, and targeted federal government spending in improving energy efficiency."

    • What to do about Obama and Congressional Democrats' botched efforts at health care "reform" is a subject that I'll be thinking and writing about more in coming days. But it's clear, after the Massachusetts election, that it would be a disaster for Democrats to ram through the current corporate-friendly "comprehensive" health care bill that polls show is now opposed by 48% of voters and supported by only 33%. Most likely, the best solution would be to offer a series of bills incorporating the most popular elements of health care reform and challenge the Republicans to filibuster these measures if they choose to. Among these are: banning insurance companies from rejecting people for pre-existing conditions or cancelling their policies; providing subsidies for working and middle class Americans to voluntarily buy health insurance, but without a mandate; creating a public option (which was supported by a majority of Americans) that citizens can choose to buy into; allowing Americans to purchase cheaper drugs from Canada and other countries; ending the ban on Medicare negotiating lower prices with pharmaceutical companies; abolishing the insurance companys' exemption from anti-trust laws; and allowing people over 55 to buy into Medicare. In the long run, Democrats need to make the case for Medicare-For-All-- As Lawrence O'Donnell has pointed out, if Democrats had done so after the defeat of Hillarycare, we might have it by now.

    If Obama and the Democrats can reset their compass in a genuinely populist direction that shows they support policies which help the American people instead of Wall Street, they can regain the mantle of change which is being stolen by the faux-populist Republicans and reclaim the 2010 elections. If not, the Democratic Party and Barack Obama, not to mention the country, is headed for disaster.