The Reckoning: Obama Between A Rock and A Hard Place

How Will He Transform an Economy In Free-Fall

After Barack Obama's inspirational
address to the adoring minions in Sweet Home Chicago, the loudspeakers
erupted with Bruce Springsteen's prayerful post-911 anthem, "The

Yes, he had risen, but now
he has to steer clear of a threatening cruxifiction on the cross
of an economy in free fall.

The sound track to this chapter
might be called "The Reckoning."

It must be said that both parties
had denied the primacy of the financial tsunami. Neither political party's
convention or platform took much note of our imploding financial system
until it could no longer be ignored.

All the talk of tax cuts was
a sideshow to the real elephant in the room--falling markets, growing
unemployment, rising inflation, disappearing retirement funds,
frozen credit and the crash in consumer demand which is bringing down
the auto industry and so many others.

The failures of the Bush Administration,
along with, it must be said, both houses of Congress, had enabled this
disaster driven by Wall Street greed, regulatory inaction and media

It gave the Obamacrats the
issue they needed to triumph. A campaign that started with a debate
over ending the war in Iraq morphed into a referendum on a cataclysmic
war on our economic well-being. In the end, once again, it was the economy

There is no doubt that our
next President realizes he must turn this around. There is no doubt
that he also recognizes that unless he does, many of his other goals
including tax cuts and healthcare reforms (not to mention a second term)
will go by the wayside. He said as much in his first post-election press

Coming as he does from the land of Lincoln, his message was initially to be one of healing and hope. Honest Abe may be his spiritual grandfather, but now FDR has to become his practical role model. Aspire as he does to the Tao of change, he now has to confront the Dow of reality.

Please realize that the government has been trying to "fix" what's wrong--oh, have they ever--with monetary changes, interest rate cuts and massive infusions of capital. However you regard these "stimulus" measures, as sincere or as scam, we know they are not working. Certainly they are not working for the people who need help the most. Strengthening big banks is not the same as helping the unemployed or millions facing the loss of their homes.

The reckoning that he faces was not one of his making. It is structural, systemic, a product of decades of policies that undermined the social safety net, deepened inequality, kept wages in check and was based on debt. The Economic Policy Institute noted:

For roughly
thirty years, with the exception of the late 1990s expansion, there
has been little wage growth for the vast majority and increased
economic insecurity, primarily related
to health care and retirement security. The last
business cycle from 2000 to 2007 failed to generate
any growth for middle class working families - on average,
they lost over $2,000 a year in inflation-adjusted
income. . . Our economy has been a huge skimming operation
for the well-to-do"

Reversing this may not be easy
especially because much of our growth and prosperity was funded with
trillions in debt.

As a website in Australian
called the Daily Reckoning explained, "eternal verities still apply;
Barack Obama is not going to change them. And that means that a slump
caused by too much debt cannot be made to disappear. You can disguise
it. You can delay it. You can push the losses onto someone else. But
you can't escape it."

But that doesn't mean he
won't try, and try he is, with an elite team of economic advisors,
many from the very industry that caused the problem. Sure you need knowledgable
economists and experienced businessmen and financiers on your side,
but you need more than that.

On Friday, he met with this
high-powered group even as journalist Doug Ireland observed:

You will
note that it is composed entirely of current or former government officials
and bureaucrats and corporate types. There is not a single representative
of the labor movement, not a single labor economist, not a single representative
of progressive or economic watchdog groups, not a single representative
of consumers.....guess what kind of economic policies and appointments
we'll get out of this crowd! "

Let's also not forget that
many of these wise men and experts did not foresee the crisis as economist
James Galbraith (son of the late/great John Kenneth Galbraith who wrote The Great Crash about the depression of the l930's) revealed in an exchange that was reported onGreg Mankiw's blog:

But there
are at least 15,000 professional economists in this country, and you're
saying only two or three of them foresaw the mortgage crisis?

Ten or 12 would be closer than
two or three.

What does that say about the
field of economics, which claims to be a science?

It's an enormous blot on the
reputation of the profession. There are thousands of economists. Most
of them teach. And most of them teach a theoretical framework that has
been shown to be fundamentally useless.

What will Obama do? For starters,
he's moving in a conventional way; a centrist way, surrounding
himself with big names to build a consensus for more engaged government

Fortune already calls him a
CEO-in chief. (Clearly he's not "paling around with terrorists.)
Even McCain's economic advisor says he's impressed. But Fortune
wonders as should we, about this all star big-name team asking, "Do
they have the answers?

So far the "conventional
wisdom" a phrase coined by Galbraith years ago and favored by these
hot shots is not working. We need to know how they will they stop foreclosures
and create fairness in a lop-sided economy. Is there a plan for
debt-relief and a moratorium on excess profiteering and foreclosures?
Will they prosecute the subprime criminals?

The American people can't
trust the business leaders who enabled this crisis. Clearly, if
"real change" is to come, there will need to be more grass
roots, bottom up activism for economic justice. If you like Obama, if
you want him to succeed, make some noise and push him from below because
his advisors and all the special interests they represent are,
sho' nuff, pushing him from above.

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