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New Year's Resolution: Clean House
President Obama's own instincts on how do deal with the economy seem to be somewhat better than those of his most senior advisers. At the White House jobs summit in December, he sounded less like Larry Summers or Tim Geithner and more like the man we heard on the campaign trail.
But Obama is under immense political pressure from the center and the right, and from some of his own top aides such as OMB Director Peter Orszag, to put deficit reduction ahead of job creation. Last month, the House Democratic leadership decided to jump the gun on the administration to create some salutary pressure from the left, and put forward a $154 billion jobs package, which included $50 billion in public works plus emergency aid to the states and extension of unemployment benefits.
On December 16, the bill just barely passed, 218-214 -- with several defections of conservative Democrats, and no help whatever from the White House. Had the bill failed, that would have doomed any Obama jobs program as politically unrealistic. Why didn't the president weigh in with wavering Dems?
We will soon find out, in the State of the Union Address, whether Obama will deliver on his promises to do something more about jobs, or whether his more conservative economic advisers will prevail.
If you are a congenital optimist about this president, your story goes something like this: Now that health care is almost wrapped up, and the decision about how to proceed in Afghanistan has been made (like it or not), Obama can turn more of his laser-like attention to the economy. As time passes, the health bill will look better than it does now, because at least it represents the beginning of federal regulation of the insurance industry, and the beginning of the end of employer-provided insurance.
Also, say the optimists, Obama may be losing some public support, but just look at the lunatic Republicans; they have even less support. Finally, some of the greatest presidents looked pretty feeble after just a year. Lincoln was losing the Civil War. John Kennedy couldn't get Congress to act and Nikita Khrushchev had adjudged him a weakling. Give the guy a little more time.
I happen to think that this comforting talk is mostly delusional. The path that Obama is on, unless he alters it fast, will lead to prolonged economic stagnation and Republican champagne next November. If you think a lunatic-fringe Republican party is any protection, look at the blowout victory of Pat Robertson protégé Bob McConnell in the Virginia governor's race two months ago. And this in a blue-trending state.
As Obama famously said when Senator McCain tried to use the financial crisis as a pretext to back out of the debate scheduled for Oxford, Mississippi, a president needs to be able to do more than one thing at a time. This president did not lift a finger as Congress gutted his bill on financial reform. That was the same week that Obama gave a rather calculated interview to Sixty Minutes, in which he blasted the bankers for not doing more about mortgage relief. But he didn't walk the talk. Despite brave rhetoric, the administration's mortgage program is a failure.
A financial industry that is alive thanks only to taxpayer bailouts continues to use its political influence to block reform and the president takes it while his Treasury Department keeps spooning out the help.
One problem is Obama's own penchant for consensus and compromise. As Matt Bai observed in Sunday's Times, Obama's line in the Sixty Minutes interview, "I did not run for office to be helping out a bunch of far cat bankers" just didn't sound like Obama. It "gave the impression of a man trying on an ill-fitting suit." But the next day, when the president sat down for an amiable chat with the same bankers, opined Bai, that was the real Obama.
True enough. But where Bai has it totally wrong is to insist that Obama would be ill-advised to strike a more populist set of rhetoric or policies. Bai contrasts failed "populists" such as Huey Long and William Jennings Bryan with successful "progressives" such as the Roosevelts. But of course FDR sided with the people against the banks. His entirely populist brand of progressivism delivered for regular people. Bankers hated FDR. Obama has yet to earn Wall Street's enmity.
Obama's professorial caution, Bai insists, reflects a leader who is "serious and methodical" about reforming the banks, and that beats hot rhetoric. If only Bai's fantasy were true. All that Obama's conciliatory caution has produced so far is legislation that sells out to the bankers.
What will it take for Obama to recover his footing? Some key personnel changes might be a start. As investigative reporters did deeper into the mess that Larry Summers made of Harvard's finances, you have to be thankful that the man isn't running the nation's economy (oh, whoops, he is.)
Summers reinforces all of Obama's conservative instincts and none of his progressive ones.
Tim Geithner, who was in charge of relations with Congress for Obama as the House deliberated the financial reform bill, weighed in mostly on the wrong side. If Obama is truly to signal a change of course and mean it, one constructive sign would be replacements for Summers and Geithner.
Fed Chairman Ben Bernanke may pay for these sins. Bernanke, needlessly appointed by Obama to a second term, has become the lightening rod for popular frustration at the Wall Street bias of this administration, and there could easily be 35 or 40 Senate votes against his confirmation -- the most in the history of a Fed chairman. A majority of Republicans on the Banking Committee voted no and most Republicans, attuned to this backlash, will likely vote no on the floor. Democrats must decide whether to save him. You can bet Obama will be personally be working this vote.
Thus far at the Obama White House, unfortunately, it's only progressives who get thrown under the proverbial bus. White House Counsel Greg Craig was forced out for the sin of taking Obama seriously when the president promised to close the prison at Guantanamo and end CIA complicity in torture. This could have opened several former top CIA people to acute embarrassment.
Sources tell me that CIA chief Leon Panetta, who as Clinton chief of staff saved Rahm Emanuel's bacon when Emanuel was nearly fired, called in an IOU.
But isn't prolonging the recession by propping up insolvent banks rather than emphasizing jobs and mortgage relief as serious a sin as embarrassing the CIA?
To replace Summers, how about his old nemesis, Joe Stiglitz, author of the superb new book Freefall? And to succeed Geithner, maybe Geithner's most astute critic, Elizabeth Warren of the Congressional Oversight Panel? Or the courageous FDIC Chair who keeps standing up to Geithner, Sheila Bair?
Let's not give up on the promise of Barack Obama. There is just too much at stake, and there is a part of him that has decent progressive instincts. But he is being led to ruin both by the insularity of a circle of advisers too wired to Wall Street, and by his own habitual temporizing. It will take a lot for Obama to change his operating style. Turning to a broader circle of advisers would help.
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20 Comments so far
Show AllUntil the Obama faithful start criticizing Obama's supply-side philosophy and action every day and start boycotting the corporations Obama panders to at every opportunity, the right wing will continue to control the agenda.
While the teabaggers and Palins of the world may be radical right wing nuts, many swing voters perceive them as the only populists in a sea of corrupt government.
Neither the Dubya faithful or the Obama faithful determine the outcome of most elections, the swing voters do.
True enough.
The so called "teabaggers" are a tiny minority. Around 2 or 3%. They do not pose a threat. They are used by the media so that we think there's a backlash against Obama and his "socialist agenda." Wish it were true. But the strategy is this: accuse Obama of socialism, malign him and supporters will protect him even more. It's basic psychology. Don't fall for it.
Republican approval rating is in the toilet. Polls show over 56% of Americans want a public option on health care, they want out of the wars! They are against the bailouts of the richest among us.
Stop worrying about MSM's teabaggers - of course, unless you're a Democratic Party apologist.
The Dubya faithful and the Obama faithful are two sides of the same coin, imho.
"..Let's not give up on the promise of Barack Obama."
Yet we gave up on the "promise" of Ted Bundy. Ted did a lot of good things for people ... before he started his power-kills. Why, he worked at a crisis center, he was a law student, seemed to be a caring individual, according to his friends and acquaintances. But no, unless you're the darling of the progressive left, you get a bad rap for being a heartless killer.
I always wonder how grown up people, like this author, can be so uplifted about someone who would order the killing of children and apparently not see the utter evil in that.
Sorry Mr. Kuttner, but you're dead wrong.The 2-Party System is owned lock, stock and barrel by the corporate state. so ANYONE replacing ANYONE in any "house cleaning" would be dumped right into the rotten system.
Are you blinded by your Business Week connections?
Kuttner: "Give the guy a little more time.- I happen to think that this comforting talk is mostly delusional."
Wasn't this guy just on Moyers saying Obama needed another 9 months before we'd know if he's the catastrophic failure he appears to be?
Obama is the creature from banking. For all practical purposes, the merger between banking and government is complete. Today, we have people paying a dollar on each bridge toll in Boston to pay off a derivatives contract, and across the country school district and municipalities taxing their districts for the same reason. We have people in short sales who live in debtor's prison without the benefit of prison's three hots and a cot (and healthcare). Their wages are garnished Instead of the house being the mortgaged security and the owner's down payment being the bank's protection. There has been no requirement for finance companies to only loan as much as was prudent, but instead an ability to raise already usury rates to ruinous. We have towns with tens of millions of dollars in debt to build prisons as an income scheme. And all across the country we have new schools that we can't staff, new libraries we can't keep open and new healthcare facilities we can't afford to use.
Think about your own community. I'll bet you have a whole new complex of medical offices within the last decade. All of that expense is part of the healthcare bill. According to Clare Bailhe, investors used to be able to get 20 to 25% or more return on their healthcare investments. Nice, eh? It's hard to imagine what risk was being made for those returns when Obama's administration makes our paying for this a function of the IRS.
Who is Claire Bailhe? She is the cofounder of MidCap Financial LLC, which was formed by taking the entire Merrill Lynch team of which she was the group's president of their leveraged lending team. Leveraged lending, indeed. We earn less than 1% in savings accounts and these guys get 25% and bailouts as needed... for the "risk."
"Why didn't the president weigh in "
Obama is an empty suit....the Toastmaster in Chief...what a HUGE disappointment.
He had the people behind him, and the opportunity to really make a break with the past, and make significant change to the USA.
Too bad he is a liar and a fraud and a chickenshit.
"Too bad he is a liar and a fraud and a chickenshit."
You forgot to add, "war criminal." Am I wrong?
I want to be a swing voter--first I'm gonna swing--then I'm gonna vote.
RichM already summed it up: "Ugh, glug, barf".
I won't repeat the long comments about Kuttner I wrote after his embarrassing performance on Bill Moyers' Journal. I actually feel bad for the guy.
He's still playing the "half-full" contortionist though: he creates a straw-man version of the "congenital optimist" to skewer, but it's really more of a ventriloquist's dummy.
Kuttner himself IS that inane and fatuous "congenital optimist". He puts ridiculous arguments in the straw-dummy's mouth that are only slightly more ludicrous than his own.
Once he's finished stomping the straw-dummy, Kuttner incredibly reverts to his own natural congenital optimism.
It's obvious that con-Obama still has Kuttner by the congenitals.
· Yr Obd't Servant
"he sounded less like Larry Summers or Tim Geithner and more like the man we heard on the campaign trail."
Yes, that's what he's good at. In reality, it's the Reagan method: get the P.R. right, and you can get away with almost anything. For a while. Lincoln was only partly right: in reality, with the MSM helping out, you can fool enough of the people enough of the time. "All of the people" is beside the point.
Kuttner should read Ian Welsh's article, just above. It's only part of the story, but it does explain a lot. Of course, there's a simpler way to put it: the Democrats have sold themselves to the highest bidder, and they're the kind of "honest politician" who stays bought. Such integrity.
Poor Kuttner isn't quite there yet, and I doubt he's reading these comments. He's been such a committed DP apologist that he may never get it; but you can help him out by writing to him directly.
BALLS! For those of timid sensibilities or (false) historical sentimentality, translation: NUTS! The man does NOT Keep HIS PROMISES!
He has made too many promises that simply cannot BE kept. But about 'deficit reduction' - that is like making the hole in the Titanic a bit smaller. We need to stop all this wholesale plunder of our birthright and start bailing out this ship of state by paying off the debt rather inflating it out of the savings of the elderly.
-"he sounded less like Larry Summers or Tim Geithner and more like the man we heard on the campaign trail."
I love it! He(Obama) SOUNDED more like the man we heard on the campaign trail. LOL
If speeches were legislation, Americans would be close to getting out of the wars and close to having a decent medical system by now. But speeches are...speeches.
"There is just too much at stake, and there is a part of him that has decent progressive instincts."
So, Kuttner can now see into a person's very soul! I'll stick with what can be discerned through one's behavior, and that proves to me that Obama is a reactionary no different than Cheney.
What Kuttner doesn't elaborate on is what effect "deficit reduction" will have on the Great Recession as opposed to job creation; it will prolong and deepen the Recession while promoting the chances of populists of all stripes come November.
We will soon find out, in the State of the Union Address, whether Obama will deliver on his promises to do something more about jobs, or whether his more conservative economic advisers will prevail.
I have no interest in listening to yet another of Obama's high school valedictorian speeches with each word leaving his mouth and falling with a loud thud to the floor. Anything that endangers Obama's reelection, including more employment that presses for wage increases, will be overwhelmingly rejected by "his more conservative economic advisers".
"My fellow Americans, as we move forward to face the challenges of the future, we know that the future will be challenging. Are you challenged by these challenges going forward? For we are going forward, make no mistake about it. Only yesterday I received an email from an 86 year old woman in Pasadena, California named Ethel Muldoon. Her home has been foreclosed on, her medical insurance revoked, her life savings gone, wiped out, by a sudden and unforseen bank failure. Nonetheless, this woman wrote, 'God bless you, President Obama. I still believe in you. I still believe in hope and change you can believe in and hope you can believe in." (Obama slowly, dramatically, pretends to wipe away a tear. The camera cuts to the gallery where the First Lady slowly, dramatically, pretends to wipe away a tear. Obama pauses, then), "God bless you, Ms Muldoon and God bless the United States of America!"
We all missed rerun of "The Dukes of Hazzard" for this?
I have an extremely limited tolerance for exposure to Elected Misrepresentatives, directly correlated to its status.
So I will not be watching the State of the Union Address.
However, I ought to circle the date on my calendar, because it might not be a bad idea to drape necklaces of garlic cloves over each teevee in case I forget and turn one on during the appointed hour.
· Yr Obd't Servant
Get rid of them all, all three houses.
Elect common people, not pro politicians.
Anybody could do better.
Farmers, plumbers, refuse collectors.
Crack heads have lesser wants and needs.
Put names on ping pong balls and hold a lottery.
Anything anyone but them.
Hey, let's clean the Senate, too.