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Tuesday, November 02, 2010

"It Looked and Felt Like an Insider Job"

Robert Reich on the politics of the financial bailout:

SPIEGEL ONLINE: ...it is no surprise that candidates opposing government spending appear likely to win many of the open Congressional seats.
Reich: This is one of the areas that are very easy to demagogue. By accusing government of being the enemy and promising people that if we simply shrink government they will be better, some politicians and ideologues are attempting to improve their own positions of power. They are misleading the voters. We know that when the private sector is unwilling or unable to spend and when consumers are under a huge debt load, government is the last remaining spender, at least in the short term. Long term deficits do have to be reduced, but unless we get the economy growing in the short term through government spending, we're all going to be experiencing a much longer and more painful so called recovery. We need a bigger stimulus now.
SPIEGEL ONLINE: Why then is President Barack Obama's Democratic Party so wary of considering an increase in government spending?
Reich: It started with the bailout of Wall Street. The so called Tea Party movement that's gradually taking over the Republican Party began when President George W. Bush and, after him, President Obama provided Wall Street with $700 billion. It looked and felt like an insider job, a rigged deal to many Americans. In the US, when there is a sense that government and business are in cahoots, the tendency is to blame government rather than business. Had Obama put very strict conditions on that bailout, requiring for example, that Wall Street firms lend to small businesses, that homeowners be allowed to reorganize their mortgage debts under personal bankruptcy, that they limited their own pay, I don't think we would have had the kind of reaction we did. Obama also failed to connect the dots, showing America that the financial reform bill, the health care bill, and the jobs bill, the stimulus package, were all part of a broader effort to restore the middle class and fairness in the American economy.

The administration was warned about this contemporaneously, but refused to listen. Anyway, is there a way out? Robert Reich thinks there is:

Why Obama Should Learn the Lesson of 1936, not 1996, by Robert Reich: ...For the next two years Republicans will try to paint Obama as a big-government liberal out of touch with America, who’s responsible for the continuing bad economy.
Obama won’t be able to win this argument by moving to the center — seeking to paint himself as a smaller-government moderate. This only confirms the Republican’s views... On the Republican playing field, Republicans always win.
Obama’s best hope of reelection will be to reframe the debate, making the central issue the power of big businesses and Wall Street to gain economic advantage at the expense of the rest of us. This is the Democratic playing field, and it’s more relevant today than at any time since the 1930s.
The top 1 percent of Americans, by income, is now taking home almost a quarter of all income, and accounting for almost 40 percent of all wealth. ...
With Republicans controlling more of Congress, their pending votes against extended unemployment benefits, jobs bills, and work programs will more sharply reveal whose side they’re on. Their attempt to extort extended tax cuts for the wealthy by threatening tax increases on the middle class will offer even more evidence. As will their refusal to disclose their sources of campaign funding.
The relevant political lesson isn’t Bill Clinton in 1996. It’s Franklin D. Roosevelt in 1936.
By the election of 1936 the Great Depression was entering its eighth year. Roosevelt had already been President for four of them. Yet he won the biggest electoral victory since the start of the two-party system in the 1850s. How?
FDR shifted the debate from what he failed to accomplish to the irresponsibility of his opponents. Again and again he let the public know whose side he was on, and whose side they were on. Republicans stood for “business and financial monopoly, speculation, and reckless banking,” he said over and over.
And he made it clear they wanted to prevent him from helping ordinary Americans. “Never before have these forces been so united against one candidate as they stand today,” he thundered. “They are unanimous in their hate for me – and I welcome their hatred.” ...

I have a hard time picturing Obama as the hard-hitting, combative, no retreat, I'm on your side type Reich envisions (and this is reflected in the people around him, they have not, for the most part, engaged the battle either). People want to know who's fighting for their interests, and the administration has not convinced them that it is willing and able to take on the entrenched powers that are standing in the way of the change they desire.

    Posted by on Tuesday, November 2, 2010 at 12:42 AM in Economics, Financial System, Politics | Permalink  Comments (68)


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