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 Timesop-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.