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Robert Kuttner

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Obama's Mixed Messages

Posted: 01/22/2012 9:39 pm

Many Democrats are congratulating themselves that the final two in the 2012 Republican field are a stuffed shirt who can't motivate his own base and a wild man who seems to inspire only fundamentalists and Tea Party fanatics. But let's not pop the champagne quite yet.

According to a video sent to supporters Saturday, President Obama is planning to strike a "populist" note in his Tuesday State of the Union Address and in the themes he sounds in his re-election campaign. Obama will pledge "an America where everybody gets a fair shot, and everyone does their fair share and everybody plays by the same set of rules."

"We can go in two directions. One is towards less opportunity and less fairness," Obama declared in the video, "Or we can fight for where I think we need to go: building an economy that works for everyone, not just a wealthy few."

Obama, say widely reported White House leaks, will double down on promises of tax breaks for manufacturing, job training and education initiatives, other help for the unemployed, and stronger efforts to deal with the foreclosure crisis. All of these, except for the tax breaks, by definition require activist government.

So despite Obama's fervent desire throughout his presidency to surmount ideological divisions, 2012 promises to be a great ideological debate.

If the Republican nominee is Mitt Romney, the general election will pit a president invoking the interests of the 99 percent against a man who for Democratic purposes is the ideal face of the one percent.

Alternatively, if the Republicans nominate Newt Gingrich, we will have a less predictable and more volatile far-right populist invoking cultural resentments to challenge a rather feeble center-left economic populism that seems to be reserved for electoral emergencies.

God knows, we need to re-elect Barack Obama. If the Republican nominee wins, he will probably take with him the House and Senate, as well as the Supreme Court. Today's Republican Party is more reckless, ruthless, and nihilist than anything we've seen in mainstream U.S. politics perhaps ever.

But Obama's new-found economic populism would be a lot more credible if it had been the consistent message and program of his presidency.

Since populism is used to mean different things, including jingoism, let me be clear about how I mean it. To me, populism represents the activist use of government to help the non-rich get a foot on the economic ladder. Populism entails a constructive politics of class, so that the broad majority is mobilized as a counterweight to the political influence of concentrated wealth. In policy terms, economic populism offers a managed form of capitalism necessary to keep a market economy on the rails. Progressive populism, as both a successful economics and politics, was epitomized by Franklin Roosevelt.

Obama's election-year populism is a confession that a message that champions the 99 over the one is good politics. But we needed populist deeds as well as words, beginning January 20, 2009. Instead, we got a continuation of policies to prop up and bail out the banks that caused the financial collapse.

Obama's original team of economic advisers, including Paul Volcker, was shoved aside in favor of set of protégés of Robert Rubin. His newly appointed treasury secretary, Tim Geithner, had worked intimately with Republican Federal Reserve Chairman Ben Bernanke and Republican treasury secretary Hank Paulson to design the bank bailout and put off fundamental bank reform. Imagine Franklin Roosevelt in 1933 turning to Herbert Hoover's economic team, and you get the idea.

Once the key decision was made to bail out rather than break up Wall Street, it became impossible to provide the necessary relief for the mortgage crisis, for fear that bank balance sheets would have to acknowledge their true losses. The economy was condemned to a slow bleed.

As the result of his failure to embrace the reality of economic populism from day one, Obama's election-year rhetorical populism is now in danger of falling flat. Obama would have much more credibility as a populist now if he hadn't surrounded himself with Wall Street advisers and done so much of Wall Street's bidding.

To be sure, there is massive dishonesty and demagoguery in the rhetoric of Gingrich and Romney branding Obama a food-stamp president or blaming Obama for the huge job losses set in motion under George W. Bush. But with the economy still stuck in second gear, this rhetoric will nonetheless resonate with a lot of voters. All it will take is a deepening of the crisis of the Euro, or a spike in the price of oil, and the economic "green shoots" that are finally appearing will be crushed.

Republicans in Congress will block whatever Obama offers. But even if they were to let his program become law, tax breaks, job training programs and greater investment in education are not likely to alter fundamentally what ails the economy and the economic horizons of ordinary people.

Take the case of the crisis in defaults, foreclosures, and housing prices. The administration has lately been working with several state attorneys general to trade a contribution of mortgage relief from the banks in the range of $20-25 billion for a one-time cleanup of the legal mess made by the same banks when they were on their subprime binge. The problem is that the amount of mortgage relief needed to put a floor under the collapse in housing prices is well into the hundreds of billions.

To solve the problem would require a New Deal-scale break-up and recapitalization of several large banks. But the people making economic policy for this administration will not touch that idea with a rake.

Or consider the real manufacturing crisis. As a must-read piece in Sunday's New York Times reports, Apple does nearly all of its manufacturing in Asia because the United States has lost the capacity to provide many of the advanced industrial processes that Apple needs. This is not about education or even about wages, but about entire production systems.

If those jobs were done in the United States at decent wages, according to the Times, the shift would cost consumers about $65 more in the price of an iPhone. But each manufacturing job would generate more than twelve other jobs, and the country would be that much richer.

If the U.S. government were serious about manufacturing, it would be exploring a strategy to bring manufacturing back. China has been taking the United States to the cleaners, with government subsidy of factories, repression of labor, coercion on U.S. companies to transfer sensitive technologies. Companies like GE are only too happy to oblige, thanks to the subsidies and the captive labor force. The administration has belatedly identified China as a potential geo-political threat, but resists acknowledging the economic threat.

Instead, the Administration has proposed a Trans-Pacific Partnership with nine mostly smaller Pacific nations such as Malaysia and Vietnam -- which on balance would make it easier for American companies to outsource production to law-wage countries, easier to ship those products back to the United States, and harder for all participating countries to regulate finance.

China does not figure in the proposed deal, which is modeled on NAFTA. This is a politics in which government serves economic elites and blows off the national interest. It is about as far from economic populism as you can get.

Obama's sometime populism reminds me of the old joke about the man who
prays to the Lord, asking: Why can't I ever win the lottery? And the Lord sends back a message: It would help if maybe you bought a ticket.

This president would be far more believable with a populist message if he had been walking the talk since he first took office.

We are all the political hostages of Obama's mixed messages. We have no choice but to go all out for his re-election. If he fails to win, we will inherit a country in which the Right completes the destruction begun under Reagan and furthered under both presidents Bush. We will have a country with less liberty, less social justice, more extremes of inequality, and democracy itself will be increasingly at risk.

But we also need Obama to win and to govern as a true economic progressive. His failure to do so thus far not only denies the country the broad-based recovery that we need, but blunts a populist appeal that is a natural public response to the hosing that regular people have taken from financial elites. That failure permits cultural anxieties to displace economic ones. As a result, Obama's re-election is only a 50-50 proposition, even against an unstable carnival pitchman like Newt Gingrich or a glass-jawed fraud like Mitt Romney.

Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is A Presidency in Peril.