A Presidency in Peril: Warnings from Robert Kuttner
by Dean Baker
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer ( www.conservativenannystate.org) and the more recently published Plunder and Blunder: The Rise and Fall of The Bubble Economy.
May 5, 2010
Like most progressives, Robert Kuttner had great hopes following President Obama's election in 2008. However, Kuttner also has been around long enough to realize the risk that President Obama might not live up to his potential in bringing about progressive change. His new book, A Presidency in Peril, documents how the Obama administration has been falling short.
The basic story is both straightforward and depressing. President Obama surrounded himself with advisers that were close to Wall Street and business in general. This undoubtedly reflected his disposition; he had always been a political moderate. However, it was also partly determined by his political backers. Wall Street's generosity with campaign contributions was an essential part of his rise to the top of the Democratic field in the presidential primaries. This guaranteed that Obama would pursue a cautious business-friendly path.
Much of the book focuses on the response to the economic crisis, in particular the bank bailouts and the stimulus. In both cases Obama took a centrist path that that largely protected the interests of the wealthy. This is most clear in the case of the bank bailout. In the closing weeks of the presidential campaign Obama took time out to push for the TARP, a huge wad of money for the banks that came largely without strings. After TARP, the bailouts continued, with Citigroup and Bank of America nursed back to life thanks to the generosity of the taxpayers.
By contrast, the government could have taken a hard line, temporarily taking over insolvent banks, including these giants. This would have wiped out shareholders. It also would have meant giving bondholders a haircut, and sending the top executives packing. While this route was derisively termed "nationalization," including by some top Obama officials, the point was not to have the government own the banks. Rather the point was to do a quick clean-up operation that would involve selling the banks, possibly in smaller pieces, back to the private sector as soon as possible.
Kuttner points out that the stimulus was woefully unambitious and inadequate. The amount that they requested from Congress was only a bit more than half as large as Obama's top economists felt was necessary. Of course, they ended up with even less as Congress pared back the request. The result is that the unemployment rate is still close to 10 percent and is not projected to return to near full employment until 2016.
Kuttner also attacks the administration's strategy on health care. He argues that there were major failings of both timing and approach. On timing he argued that Obama would have been better off waiting until he established a record of accomplishment to give him the standing to press his case. On approach, he criticizes Obama's chief of staff Rahm Emanuel for taking an approach that involved cutting deals with the major business interests at the onset. This limited the opportunity for cost savings and therefore meant that the resulting health care plans would still be expensive for middle-income families.
Kuttner's book does not give much cause for optimism. We are sitting in the middle of the worst downturn since the Great Depression listening to Robert Rubin lecture us about the need to cut Medicare and Social Security. Given that Rubin earned more than $100 million from the mortgage games that sank Citigroup, and set the economy on a glide path to disaster as Treasury Secretary, there is something seriously wrong with this picture.
Please read the full article at:
http://www.commondreams.org/view/2010/05/05-1And next up will be severe cuts in Medicare, Medicaid and Social Security benefits that will be proposed by President Obama's deficit commission. The commission is weighted down with conservative "deficit hawks" from both political parties. Their "deficit cutting" proposals will be similiar to the wage, pension and other social welfare cuts being proposed across Europe in order to bring down government deficits. BBI
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