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Obama's Economic Sermon on the Mount
As President Obama approaches the 100-day mark of his presidency, he delivered a speech Tuesday at Georgetown University in which he laid out what he sees as the foundation of a new economy. Using this crisis--and his gift of oratory--Obama signaled that the fight for the next economy begins now.
He alluded to the Sermon on the Mount to describe the stronger, more fair economy he envisions: "There is a parable at the end of the Sermon on the Mount that tells the story of two men," he said. "The first built his house on a pile of sand, and it was destroyed as soon as the storm hit. But the second is known as the wise man, for when '...the rain descended, and the floods came, and the winds blew, and beat upon that house...it fell not: for it was founded upon a rock.' We cannot rebuild this economy on the same pile of sand. We must build our house upon a rock."
I think the speech is important for what it reveals about Obama's understanding of the task ahead--building a new economy out of the ashes of our failed one.
But real and grounded concerns about the administration's bank bailout plan remain. As Nobel prize-winning economist Joseph Stiglitz wrote recently in a New York Times op-ed the Obama administration's plan is "far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses...the kind of Rube Goldberg device that Wall Street loves -- clever, complex and nontransparent, allowing huge transfers of wealth to the financial markets...." Other good thinkers share this view, including Paul Krugman, Simon Johnson, William Greider and Robert Reich.
While Obama's speech lays out some strong principles for a new foundation, the administration's financial team remains unwilling to understand that we're not just going through a financial crisis or a panic, but the failure of a whole model of banking. We are living amid the blowback of an overgrown financial sector that did more harm than good.
As The Nation's Greider has argued we need a new banking system--smaller and more diverse and responsible to the public interest. Creating this new system is where public resources should be committed, not to saving banks that are "too big to fail". We should create public banks and non-profit savings and lending cooperatives to serve as an important check on private commercial banks. We need to make banks the servants--not the masters--of our economy. Only when we do that will a new regulatory framework do what's needed; it would be a mistake to simply re-regulate the shadow banking system which got us into this mess.
If this realization begins to sink in through the failure of the current plan--and Obama's commitment to pragmatism and experimentation suggests he might be willing to move to Plan B with sufficient pressure from mobilized citizens and thinkers who envision a different model than the Summers/Geithner approach--then we're on the road to laying the foundation, the rock, for a new economy.
But creating that new economy will require what Obama himself might call "tough choices"--and some different "pillars" from the ones he outlined today. We need affordable health care; pensions above social security; and sustained public investment in areas vital to high wages in a global economy--affordable colleges, world-class public schools, and a 21st century infrastructure. We need to restructure--not just re-regulate--the financial sector so that banking is once again a "boring" occupation devoted to making loans to the real economy, not peddling exotic and (as we now know) toxic instruments. We need to break-up and restructure major banks that are on life support and "too big to fail." And we need to fight for the Employee Free Choice Act--so that workers are able to organize and bargain collectively, and the middle class is rebuilt and strengthened.
The mother of all fights lies ahead--beyond the first 100 days--as lobbies mobilize to halt the reforms needed to rebuild and reconstruct a new economy of shared prosperity. The drug and insurance companies, the business lobby, multinationals that seek to retain tax havens -- they will all warn ominously of massive job losses, failed businesses, and much suffering for each and every needed reform offered.
Despite the flaws of the bank bailout, President Obama has signaled that we can work toward a new economy. But it will require a massive mobilization of citizens. We've had thirty years of the markets-know-best-and-are-self-correcting, government get out of the way, let CEOs rule, maximize executive profits--dogma. The catastrophic results are in. Now begins the fight to rebuild a balanced economy in which government is on the side of the people, corporations are held accountable, and workers are empowered.
Long-term challenges should be seized, not ignored--lest we remain on shifting sands.