Economic Policy Could Scuttle Obama's Good Start

Only a week into the new administration, and yet there is this nagging thought that Barack Obama's legacy already hangs in the balance. Sounds absurd, I know, given the brief time, but his early response to the financial meltdown is just that important. Despite a terrific start in so many directions, Obama is up against an economic crisis that, although not of his making, will, if handled improperly, spell his -- and the nation's -- undoing.

Obama is in these early weeks making trillion-dollar decisions that will cast the die for the rest of his promising agenda. Unfortunately, while the new president has already proved to be a brilliant and super-competent agent of change in so many ways, in matters of economic policy he has relied excessively on the financial "experts" who helped get America into this mess.

Treasury Secretary Timothy Geithner and top White House economic adviser Lawrence Summers are retreads from the Clinton years who sided with congressional Republicans in unraveling the regulatory regime created by Franklin Roosevelt that had served the nation so well. Perhaps they have now come to their senses, given the financial horrors that their deregulatory mania unleashed, but it gives one pause to see these folks back on center stage performing with the same arrogant aplomb as they did when they had it all wrong.

We can only hope they are now prepared to make amends, although Geithner and Summers often seem to be pushing for more of the same: bankers first, women and children later. The good news is that the message coming from the mouth of the new president is that he intends to make a significant departure from the Bush bailout, by placing emphasis on preventing foreclosures, curtailing bank lobbying and holding the recipients of federal funds responsible for opening the tap of loans to the public. The structure of the stimulus package is also reassuring, with its emphasis on spending money in ways that will improve the quality of life for ordinary Americans and its ban on bonuses for corporate execs who utterly failed in their responsibilities. Imagine how much better off we would be if we had just taken the first $350 billion of TARP funds and used it to help teachers, cops, nurses and firemen buy homes in the communities they serve.

We certainly should give Obama the benefit of the doubt. In every other area his early performance has been stellar. Certainly so with respect to human rights and protection of civil liberties; in his first week in office, he reversed many of the atrocious Bush-era policies. With an urgency unmatched by any other modern president, Obama has sharply countered America's tainted image by acting to close the Guantanamo Bay detention center, ban the CIA's "enhanced" interrogation tactics and restore the power of the Freedom of Information Act to ensure public access to the information required for an informed democracy.

In other important instances, Obama has been refreshingly true to the promises of his campaign by taking the first steps toward ending the U.S. occupation of Iraq, by moving toward energy conservation and by ending punishment of international health organizations that have been severely undermined by the dictates of anti-abortion zealots. His early actions on global warming and the Mideast show a clarity of commitment absent from the executive office over the past eight years.

In these areas, Obama has acted with an informed confidence not always evidenced in his initial moves on the economy. Why, in the management of the economy, do we hear so little from the Chicago community organizer concerned with the pain of the average person and instead perceive so much of the sensibility of the Harvard business and law school elite, preoccupied with the well-being of the denizens of Wall Street?

As Obama stated in his inauguration speech, "A nation cannot prosper long when it favors only the prosperous." That is the problem with the Bush bailout, which Obama asked to be extended and which has resulted in little more than a rearranging of the chairs, not to mention the commodes, of the first-class passengers on a sinking ship. It has been the biggest corporate welfare program in history, enabling Wall Street hustlers to cut themselves lucrative deals while so many millions lose their jobs and homes. I'm betting that Obama will try to put a stop to all of this, but he needs to hear from ordinary folks who are hurting and outraged.

Robert Scheer is editor in chief of Truthdig and author of The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America.

 

Comments

[WeTellTheTruth]

Robert

I like your blog and I quote your writing often........hope you dont mind.

Barack Obama's economic team

Rahm Emanuel - Wall Street insider [ worked on wall street 2 1/2 years made $18 million]
Lawrence Summers - Wall Street insider
Timothy Gienther - Wall Street insider [cant even pay his own taxes]
Mary Shapiro - Wall Street insider
Robert Rubin - Wall Street insider [close Obama advisor, made $115 million on wall street]
Steve Rattner - Wall Street insider [named car czar, raised $100,000 for Obama campaign]

[Joe Myers]

I think we're beginning to get a glimpse of President Obama's style; the stuff that impressed people who were looking for a speaker for the 2004 convention, who came on board long before that announcement on the old Illinois statehouse steps....

Politics is, after all, a People Business. And this guy gets people.

This week with the Republic Party's congressional delegation has been "You're likable enough, Hillary" moment played on a grand scale. There were moments in the debates when Obama knew he was making McCain want to tell Barack to stop playing on his lawn.

I realize we're dealing with congressional Democrats and they're like herding cats. But I get vibes President Obama is playing the Republicans like a harp.

[vinny]

I am not seeing a lot of discussion about 10-year energy independence meme Obama campaigned on. With a stimulus package this big, you would think that would be built in, yes? The proposal that did come forth from representatives were rolled back to placate Republican interest. Given the size of this package, I wonder what happens to all the other priorities O said he would pursue in office?

[PhilipTaylor]

The Banks are at the HEART of this Crisis in many ways, beyond the $400 Trillion in Toxic Paper and $10's to $100's of millions in Executive incomes:

1. In history Banks withheld credit to cause prices to go down to gain a "Buying Opportunity for them" and often causing recessions and even depressions.
2. Now Banks are again withholding CREDIT! When will they feel they have taken enough from us? Will they cause a Depression this time?

While we need the Stimulus Plan we need to FORCE the ELITE Bankers to stop "Strangling America" and start funding small business and consumers.

It is time to Federalize the FED so the Banking System is under the control of the Government instead of the Elite Secretive Bankers. Support the proposed Kucinich Bill to put the FED under the control of the Treasury Cabinet Seat reporting to the president and subject to the Laws and Regulations of Congress.

[jeanrenoir]

The best answer to the concerns of this blogger is this: Obama is either a fool, or he isn't. So far, anyone betting against Obama's brain has lost. Personally, I can't believe that Obama doesn't get it that his whole political future depends on "saving Main St." If he fails to do that, the Dems will be toast in 2010, and Obama will be toast in 2012. Does anyone believe, seriously, that Obama is so politically suicidal that he will do things to help Wall St. which will hurt Main St.? If Obama succeeds on Main St., he doesn't need a dime--not a dime--from Wall St. And if he gets unpopular on Main St., there's not enough money on all of Wall St. to keep him from being eviscerated at the polls in 2012. Once again, does anyone--anyone--actually believe Obama isn't smart enough to GET this, and ACT on it? If not, let's just drop all the "left" posturing, and "concern," and sit back and watch Obama save Main St., thereby basically wiping out the Republican Party in this country for a generation.

[SoupKitchen]

First Gentlemen let me say. I am a member of the middle class and to me this all just alot of bs. We here at ground zero want real answers to real problems like real jobs. not talk of real jobs coming in the future. real jobs coming before we starve......talk and discussion and more talk does not mean anything ? let's get real about these issues before we start talking about issue like real volution !...that could be not too far away if some one does not get real about these issues real fast.

Everyday the news informs us more Americans are losing their jobs, houses, and Dreams.... Then unless you are one of those affected you just go on with you life... How much longer do you have before this happens to you ? No one is safe now !

I might even see you at the Soup Kitchen ! I'll save you a seat .

[IForgotMyName]

Maybe it is because he is addressing all problems and this includes the banking problem.

[edwcorey]

What no one is saying is that the U.S. has scammed the world. When it's not sending armies and agents into third world countries and destabilizing them, it gyps the developed nations (and its own citizens) with a bag of financial tricks that it doesn't regulate because American businessmen are "upstanding, lantern-jawed, Judeo-Christian" honest brokers. Bernie Madoff would look appropriate dressed as Uncle Sam--because he and his methods embody U.S. actions and morality. Obama has already been sat down and spoken to by the CIA. Now he's surrounded himself with all the economic nincompoops who greased the chute into this calamity.

[Eclectic Radical]

One of the great weaknesses of the modern American economy is the degree to which the financial markets have become the wheel that drives the rest of the economy. This is a natural process, sadly, as an economy grows. Profits from other markets cause the financial markets to grow to a degree beyond what is necessary to provide the capital to support production. Financial markets then become an industry into themselves rather than a support structure for industry. We have followed the British Imperial model, in which our population is supported by imports while our domestic industries are primarily service and finance. As a result, in order to rebuild our economy, our financial markets need to be put back on a sound footing.

That said, we need to return to an older economic model. The nation needs to return to a production-based economy rather than a finance-based economy. It was a production-based economy that allowed the United States to win WWII. We could not repeat that feat today.

There's a national security issue politicians don't talk about.

[texanna]

Why, you ask? I suggest you check the amount of money that the Wall Streeters contributed to Mr. Obama's primary and then to his general election campaign funds. I believe you'll see the IOU in there.

[research]

it's not going to wall street. go read it.

[research]

Please read about the bill, then go read the actual bill:

http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Plan

http://www.rules.house.gov/111/LegText/111_hr1_text.pdf

Except for the unnecessary tax cuts of 250B$ all that money goes to people and infrastructure investment.

Obama promised those tax cuts for the middle class, and compromised with the conservatives on the business taxes, already the lowest "effective" business tax in the developed world.

Bush just said GIVE ME THE MONEY.

We're punishing Obama for telling us what he will do with the money.

The GOP use it as a fishing expedition to look for distractions.

[kassandrasduplex]

"Why, in the management of the economy, do we hear so little from the Chicago community organizer concerned with the pain of the average person and instead perceive so much of the sensibility of the Harvard business and law school elite, preoccupied with the well-being of the denizens of Wall Street?"

A very good question. We await an answer. Of course I'm still waiting for Lieberman, who Obama recently embraced, to prosecute an investigation into the Bush failure in New Orleans.

While I disagree with the otherwise rosie view of Obama's early actions, thank you sir for this essay.

[AnnfromCA]

If Obama didn't already have a fully-formulated response, then the "smart" answer would be to only present a stimulus bill that is obviously directed to generating jobs in the moment.

This is a spending bill. This pays back ACORN, tosses out campaign promises like dog treats, etc.

And that was his choice.

If it's not selling too well, he had PLENTY of advisors in advance.

Geitner isn't remotely a part of this story,

[Eclectic Radical]

A 'stimulus bill obviously directed to generating jobs in the moment' is an interesting idea. What form do you suggest such a bill take? Infrastructure, the most practical way the government can generate jobs and the most beneficial for the country even after the economy turns good again, is a highlight of this package. Infrastructure requires spending.

Health care spending has a direct effect on the economy. Money spent on health care is not spent on other goods or services, sick people do not work as often or productively as healthy people, and tax credits for COBRA make perfect sense in difficult times. More, they are tax credits, exactly the kind of 'stimulus' conservatives claim to want.

Sound, scientific economic theory (as opposed to the religion of Austrian school economics to which conservatives devote themselves against all empirical evidence) says that one spends during times of economic crisis and saves during times of economic prosperity. We have gotten into this mess by failing to act reasonably. We need to act reasonably to get out of it.

[socalsue]

Amen. This is what I've been saying and I'm no economist. I hope those people (Summers and Geithner) have learned from their mistakes and will not repeat them.