Could Obama have fixed the economy?
I’m hearing “Obama couldn’t have fixed the economy. Wage stagnation is not his fault, it’s been going on for decades!” (For the record it’s been going on for at least 34 years, probably 39, and for some parts of the population, for 46 (that’s when wages for working class white males peaked. Which is why they’re pissy.))
This argument is, to give it more courtesy than it deserves, bullshit. I wrote about this back in 2010, and you can read that article, but let’s run through this one more time, because you will never get good leadership if you keep excusing your leaders for betraying you.
Part of the argument is that Obama couldn’t do almost anything because Obama only controlled the House, the Presidency and didn’t quite have 60 votes in the Senate in his first two years. Because this is the case, I’ll deal with this argument in two parts. In the first we will discuss something that needed Congressional approval.
The Stimulus: Negotiating 101, people, is that you always ask for more than you want. Obama asked for too little, and a huge part of his stimulus was tax cuts. Worse than this, his stimulus was structured terribly. What you do with a stimulus package in a recession and financial collapse is you use it to restructure the economy. That means things like moving the entire federal package of buildings over to solar, and buying from American companies. (Don’t even try to natter on about trade deals, the US is more than happy to ignore trade rulings it does not like.) That means putting aside a huge amount of money to refit every American house to run on renewable energy, which are jobs which cannot be offshored or outsourced, they must be done in America.
That means building high speed rail, and using eminent domain to get it done. It also means moving money off the sidelines which would otherwise sit there by providing a clear direction for the economy so that private actors invest hire and invest.
Note that Obama did not negotiate properly, he did include a huge amount of tax cuts (right wing ideology), and he produced a stimulus which did not restructure the economy or get private money off the sidelines. I wrote extensively about this at the time. None of this is post-facto judgement:
January 5, 2009: The day the news leaked that 40% of the stimulus was tax cuts, I wrote it wouldn’t work.
January 17, 2009: The full details are out, I write: “For ordinary people however, there will be both wage deflation and real asset deflation…”
Now, all the things Obama could have done which DID NOT require Congressional approval:
Prosecute the Bankers: This is an executive decision. Entirely an executive decision. There was widespread fraud, and no senior executive on Wall Street could credibly claim to not know of it. Seize their emails, indict them under RICO statutes (ie. take away all their money and force them to use public defenders), and throw them in jail. Do not let them get off with fines that are less than the profits made, effectively immunizing them. This means they will keep doing fraudulent and destructive things, because doing so made them personally rich.
Oh, also, there are now fewer, bigger banks.
Take Over and Break Up the Banks: The Federal Reserve had trillions of dollars of toxic sewage on its books which it borrowed at par, which could not sell on the market at par. But Ian, you cavil, “the Federal Reserve is independent of the President.” No. The President can fire any member of the Board of the Federal Reserve except the Chairman for cause and replace them. Letting the financial collapse happen might qualify as cause. Even if Bernanke refused to leave, he would be outvoted on every issue by Obama’s people. Once you control them, you return all the tosic sludge to the banks. They go bankrupt. Which leads to:
Make Stockholders and Bondholders Take their Losses: Yes. This will wipe them out. That’s the point. The problem with the rich isn’t primarily that they are rich, it is that wealth allows them to largely control the government (I trust this is non-controversial. If it isn’t, I hope you’re on the payroll and paid to believe such sewage.) Making them take their losses breaks their power. Once their power is broken, it’s a lot easier to get everything else done. This is also a popular move. (There are ways to fix the pensions which go bankrupt, another time on that.)
Using the Banks you Took Over and Broke Up, Lend! These banks are now under Federal control. They do what the President wants, when the President wants it done. They start lending to create small business, rebuild the nation’s infrastructure, move to renewable energy, and so on and so forth. (Read THIS, for what the US needed to do at the time. Again, written at the time.)
This article is not exhaustive
There are many other things Obama could have done, that he chose not to do. It is entirely fair to judge Obama on the economy because not only did he never do what was needed to fix it, he did not even try. Everything he did that was supposedly to fix the economy was insufficient and he was told so at the time by people who had been right about the oncoming financial crisis, in advance.
Even in small things, like aid for homeowners, the Obama administration, even when it had both the authority and the money (which it did), chose to do as little as it could.
Obama is a Right Wing President. That is all. He is a Reaganite, and to the right of Reagan, but somewhat to the left of the Tea Party, which puts him in spitting distance of Atilla the Hun (his record on civil liberties is, according to the ACLU, substantially worse than George W. Bush’s. He deported more Hispanics than George Bush ever did, etc…) Obama had plenty of power to make more of a difference than he did, and he chose not to. In the small things, in the big things, when it came to economic policies and to non identity based civil liberties, he virtually always did the right wing thing.
Obama is the first President in post-war history (and maybe all of history) whose economy gave more money to the top 10% than the entire value of all productivity gains in his Presidency. Even George W. Bush didn’t manage that.
Yes, stagnation of wages and wealth, and even the drop of both in many sectors while it concentrated in the hands of the rich is something which has been going on for decades. It is hard to stop.
But, because of the financial crisis, Barack Obama had the opportunity. Calls against TARP were running, according to my sources, 200:1 to 1200:1 against. It failed to pass the first time. Nancy Pelosi said she would not pass it if an equal proportion of Republican House members would not vote for it also. They refused to do so. It would have died except for one thing: Obama twisted arms to make it happen. As the Presidential candidate (and likely future President), he had the ability to do that, and he did.
Again, Obama did not fix the economy because he did not want to. Or rather, keeping rich people rich was more important to him. You can argue, if you wish, that he was not willing to break up the banks because it would have been catastrophic. That argument cannot be dealt with fully here, without doubling the length of an already long essay, but I will be gauche and quote myself, once more, from 2008:
Now it’s the US. America can try and sweep this crisis under the carpet and pretend there isn’t a huge overhang of bad loans and worthless securities. If it does so, the best case scenario is that the next twenty years or so will be America’s Bright Depression (Stagnating economy). Best case.
I will tell you now that the best case has not happened. As the charts in this post show, the economy stagnated for ordinary people through the recovery and boom of this business cycle. During the recession there will be job losses again. Most of them will not come back in the next recovery and boom, and neither will wages.
This is Barack Obama’s legacy. Those like Paul Krugman (what happened to Paul?), who pretend that Obama is a great president are laughable. History does not grade on a curve “well, we aren’t all chewing on our boots”. Obama had a historic opportunity to be the next Franklin Delano Roosevelt. Instead, he chose to save the rich, and let them eat everyone else. This was a choice, he could have done other things.
Nor is this a noble failure: he did not try. He did not use the real tools he had at his disposal.
I note, finally, again, because I know most readers will have heard over and over again that Obama saved you from armaggedon, that the US economy cannot be fixed until the wealth, and therefore power, of the very rich is broken. It can not be done. However bad you think it would have been if that had been allowed to happen, this economy will continue to get worse because it was not done.
The Federal Reserve has printed trillions of dollars, and given them to the rich. Imagine another world, where it had printed that money and used it to restructure the economy for prosperity and growth again.
That, my American friends, is the future Obama stole from you. Indeed, as the rest of the developed world would have followed his lead, stole from all of us.
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from → Barack Obama, Class Warfare, Economics, How to think, Power, Stimulus
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Not any more than he can find his anus with two hands, a flashlight and illustrated instructions.
That is not his job. Obama’s job is to deceive. Obama is very good at his job. You can hardly tell he is at work, unless you see his lips moving.
Great kudos to the Republicans. They stated their only purpose was to destroy the Obama administration. They gained control of the House and turned obdurate. Then they convinced the voters to give themselves complete control of Congress to complete that purpose. They were assisted by the gormless Democrats who proved that party could not govern. This all goes to show that you get what you are willing to support. Democracy was not on that list.
Brilliant. I keep trying to make these exact points to my Democrat friends. I now call them Dems for short. Short for demagogue.
The intractable, fundamental reality is, people are not educated well enough to understand much beyond having a credit card makes it easier to go shopping.
We had the choice between:
1) Taking a lot of pain in a short time and then have a sound recovery
2) Taking less pain by diluting it for 20 years
We only have 14 more years to go.
A little harsh, but accurate.
Excellent post! I do inspire to one day, having a job again. If that happens I will contribute.
Best Regards,
Bruce
Obama could have attempted those things, but he would have been publicly executed the same way the last President who stood up to Central Bankers was. Its time to wake up and realize the people who are elected are carefully chosen puppets and the voters are only given the illusion of choice.
My breaking moment occurred in summer 2008 when Obama broke his word and voted to retroactively immunize the telecoms for spying. I knew then he was a repulsive sellout. But even so I figured however bad he might turn out, he had to be better than Bush.* I abhorred Bush and still do. But I never imagined Obama would make look Bush look like the good old days!
This might be a painful comparison for those who cheer for Team D, but nevertheless:
1) Bush when confronted with financial crisis and fraud prosecuted the execs and sent them to prison! (MCI, Enron)
2) Bush when facing a severe recession after 9/11 sent checks to every household in the country!
3) Bush when facing a financial crisis in 2008 cut payroll taxes for every worker!
4) Under Bush pre-2006 the Democrats actually fought him over things and pretended to care about civil liberties and governance (Katrina).
5) Bush didn’t give a shit about the deficit (his VP said so flat out) and certainly didn’t alter a whit of his domestic policy over it
6) Sure it ended badly but at least under Bush there was an economic recovery in which the middle class participated (and not only via home equity loans). As opposed to a recovery only for the rich, in which 99% of Americans grew poorer than before. Unforgivable.
7) Obama cut food stamps for hungry families. Unforgivable. SNAP rolls boomed under Bush but he didn’t care. Times were tough but hey people had food.
8) And because it needs to be said for the Team Ds, yes Bush was a terrible disaster of a president. But Obama doubled down. And now he owns it too.
* Of course, I voted third party both times.
“he would have been publicly executed”
Really? I’ve seen them shot; JFK/RFK, shot at; Ford/Reagan, but never executed? Help me here, which President has been executed?
Now if you are conflating taking a mortal risk…with seppuku…all to exonerate Obama by claiming he is justified in being a coward…while putting himself forward as the bravest of all men…Obama is, after all, commander of the most powerful military force the earth has ever assembled….please say so. I can’t think of anything more uncomplimentary to say of the man, so please Kang, have at it.
I assume, you will concede that JFK/RFK/Ford/Reagan were superior men, in that they performed their duties without publicly displaying the cowardice you say Obama is entitled to?
It isn’t just Obama, but the whole d–n Democratic Party. This drubbing at the polls has been building up every since the 2006 midterms, when voters voted to punish Bush and his cronies for the Iraq War, only to have Pelosi immediately take impeachment off the table.
In election after election the Dems turned their backs on their base in favor of their wealthy donors and they have finally reaped the whirlwind for the actions–and yet they right now overwhelmingly favor an even MORE conservative candidate (Hillary) to be their standard bearer in 2016. Well, good luck with that, I’ll be staying home–again.
Obama is just one person. Can one man change the world? I’m more concerned by the whole system that sustains him. Obama is actually very representative of our current society and culture. We’re pretty much corrupt and rotten to the core.
On the other hand, the fish rots from the head. Does the fish have to de-rot from the head too? The opposite could be true. Maybe the fish has to de-rot from the tail. Maybe we have to change the culture from the bottom up.
We completely bought into the individualistic claptrap they sold us. ” I’m the most beautiful, most precious thing in the world. My needs take precedence over everything else. I can do whatever I set my mind to.”
We swallowed the whole thing, hook line and sinker because we loved it. We deserve every bit of pain they’re inflicting us. The rich couldn’t have achieved this total takeover of democracy without a lot of help from us all.
“Can one man change the world?” Not very often. That is why – meaning we progressive, liberals, or whatever we call ourselves – need desperately to study and read history. Because every once in a while the opportunity arises to change the world. Whether it is one person who stands on a rocky crag and looks out over a battlefield, and sees instantly the doom of an army, a war, and a nation, unless he acts IMMEDIATELY and without orders from on high – as Warren did at Little Round Top, Gettysburg – or someone who spends months and years pondering what happens as matter approaches the speed of light – as Einstein did – the simple fact is, yes, one person CAN change history. And part of our role as sentient human beings, our purpose, is to be familiar with the history of those moments when the scale can be balanced, when the efforts of one individual made all the difference, so that if we are deemed worthy of being given such an opportunity, we will recognize the moment for what it is, and understand what it is we must do.
There is a book that I believe absolutely and eloquently captures the historic opportunity Barack Obama was given in the first year of his Presidency, and how he failed to recognize the moment, and failed to do what needed to be done, with the talents he had, and all the immense power he had been entrusted with, to make the world a better place. That book is Ron Suskind’s Confidence Men: Wall Street, Washington, and the Education of a President.
I left this comment a few weeks ago on DailyKos, and it has a small excerpt from Suskind’s book.
“We completely bought into the individualistic claptrap they sold us.”
Yeah, we did. I just happened to watch Louis CK on youtube last night give a good thrashing to this problem: Louis CK about Corporate America1 on Opie and Anthony(2011)
https://www.youtube.com/watch?v=IndWcEnFhTQ
Thank you, Ian, for a hard-hitting reprise. If I may toot my own horn yet again, I also wrote about the same things, as the same time. In fact, I think it was one of your postings in on The Agonist that inspired me to title one of my pieces “Let Wall Street Burn.”
On January 2, 2008, I argued that The Credit Crises are THE Story of 2007
http://www.dailykos.com/story/2008/01/02/429158/-The-Credit-Crises-are-THE-Story-of-2007
Bear Stearns collapsed four months later, and Lehman Brothers nine months later. I think it is interesting how little attention my story received. It is up to you judge whether that is because my writing fails to capture attention, or I am simply too far ahead of the crowd. Of course, I hope that you will see a way to use my prescience to help inform and direct your audience.
Five days later, I assessed the different Presidential candidates with the goal of determining Who will tell Wall Street to shove it?
http://www.dailykos.com/story/2008/01/07/432425/-Who-will-tell-Wall-Street-to-shove-it
I wrote: “The big problem with Obama is the same problem Hillary has: his economic advisers are Democratic versions of “neo-liberal” radical free marketeers, so it is going to be the major intellectual breakthrough of their lives to have to admit that most of what they know and believe about economics is wrong.”
On April 22, 2008, I argued that it was necessary to
Euthanize Wall Street to save the economy
http://www.dailykos.com/story/2008/04/22/501153/-Euthanize-Wall-Street-to-save-the-economy
I cited the Federal Reserve Board’s Report on the Condition of the U.S. Banking Industry for the second quarter of 2006, which showed that derivatives holdings of the 50 largest bank holding companies totaled $117.6 trillion, and that those derivatives had no relationship to their ostensible purpose: to make it easier, or less risky, to provide loans. I cited a February 2007 Federal Reserve Bank of New York Staff Report, Credit Derivatives and Bank Credit Supply, which reached the same conclusion, though the banking jargon used tried to obfuscate the point. I cited a February 2005 report by the Federal Deposit Insurance Corporation, Consolidation in the U.S. Banking Industry: Is the Long, Strange Trip About to End?, which concluded that mergers of banks were driven more by “empire building and increased managerial compensation” than economic efficiencies. And I ended by outlining the need for a financial transactions tax.
After Lehman Brothers imploded in September, I reposted most of that article in Let Wall Street Burn http://www.dailykos.com/story/2008/09/17/602022/-Let-Wall-Street-Burn
Pissing away $700 billion http://www.dailykos.com/story/2008/10/30/11112/750
posted 10/30/2008 – On how inadequate the “stimulus” was
Debunking the Great Myth of the Financial Markets http://www.dailykos.com/story/2009/5/24/105511/478 posted 05/24/2009 – Presents the evidence that the financial system no longer serves the function of credit mediation for an industrial economy, but in fact is looting the industrial economy
Roosevelt created 4 million jobs in one month http://www.dailykos.com/story/2010/1/8/101352/1485 posted 01/08/2010 – intended to show what could be done if there was will to do it.
Fantastic post, Ian. Thanks.
Also, Marcia!
(Inside joke people, think nothing of it 🙂
A little harsh, Sterling? Scathing would be more like it, and 100% deservedly so. Elegantly put from start to finish.
Stirling sez, “harsh, but accurate.”
Compound F sez, “bristling with the anger of unrequited agonistic encounters & righteously so.” Amen.
Note, of course, that the post is could Obama have fixed the economy, not could Democrats have.
Because Democrats definitely could have, especially if they had been willing to use reconciliation or if they had gotten rid of the filibuster.
As Reslez notes, and as I have said on twitter, the thing is that Bush’s economy was /actually/ better for most of his term. And before you go screaming “he caused the financial collapse”, note that the most important legislation which enabled that to happen passed under Clinton, with this approval.
I believe it is about time the word “communism”starts being thrown around by the masses. Just this alone will scare the rich and their puppet politicians to a certain extent. But guess what, the American people want to remedy this emerging catastrophe with more virus that causes it in the first place.
@ SRK
Think I would go a bit further than that. Any place that puts Karl Marx in the position of being a mild mannered centrist is where we need to be. That alone would generate several generations worth of terrorism (the tactic, not the act). And yes, if a little status quo is good, massive status quo is even better (and stay well away from cliffs and edges).
On Further Consideration: Now the nations foreign policy comes under the firm guidance of John MacCainus and removed from the feckless hands of White House or Department of State stooges. This will give said MacCainus (pronounced MaKKK´anus) another chance to sink a magnificent Aircraft Carrier (somewhere in the Gulf of Persia), a feat he nearly accomplished at a much younger state of age in another sea during another war. All our delusions are now safe in those capable hands; whatever was the idea giving such important positions to a farce of people pretending to be liberals and even Democrats. It was so clever for the Duhmerican public to figure this out and vote so cunningly. Can this end in any other way than well?
“Part of the argument is that Obama couldn’t do almost anything because Obama only controlled the House, the Presidency and didn’t quite have 60 votes in the Senate in his first two years. Because this is the case…”
But it’s most definitely not the case!
The Congressional Budget Act of 1974 carved out an exemption from the filibuster precisely for budgetary matters, called reconciliation.
By invoking reconciliation, the quite progressive 111th Congress could have passed budgetary stimulus with only 50 votes in the Senate.
Something like Christina Romer’s $1.8 trillion plan, heavily weighted towards spending instead of tax cuts, could rather easily have gathered 50 votes in the Senate. (Even that would’ve been a bit too small, but it still would have made a genuinely significant difference in the real economy over the Olympia Snowe / Joe Lieberman / Ben Nelson approved stimulus passed under ‘regular order’ in the Senate, with the 60 vote threshold.)
And why did the stimulus not go on the 50 vote path in the Senate? The WH, of course. In their first week in office, the administration sent a letter to Congress, (under the name of Peter Orszag), pledging not to use reconciliation and the 50 vote path in the Senate for stimulus.
So a much larger stimulus was available in the toolkit for the progressive 111th Congress in 2009. Multiple reports are that Democratic Congressional leadership was in favor of a much larger stimulus, knowing they’d be on the ballot in 2010. And Obama rejected the plan in a desire for ‘bi-partisan optics’.
This may seem like a ‘deep in the weeds’ quibble, but it’s the single most important failure in the entire Obama administration’s management of the economy.
“Note, of course, that the post is could Obama have fixed the economy, not could Democrats have.
Because Democrats definitely could have, especially if they had been willing to use reconciliation or if they had gotten rid of the filibuster.”
While both of those courses were theoretically possible, in practice, not so much.
– Eliminating the filibuster on January 3rd 2009 simply didn’t have close to the necessary 50 votes necessary, in no small part because reconciliation exists. A few Democratic Senators brought it up, and received almost no support.
– While the House and Senate can pass reconciliation instructions without a WH signature, in practice, it would have been essentially impossible in the face of strong WH opposition. After the late January 2009 WH pledge to not use reconciliation for stimulus, the WH would’ve whipped Democratic Senators with every tool they possessed to vote against reconciliation instructions, and would have succeeded. There were reports that both House and Senate Democratic leadership urged the WH in March/April 2009 to back off their position, which was the last point to pass reconciliation instructions, and were met with flat refusals. If you look at the Reid/Pelosi joint press conferences outside the WH after meeting with POTUS from the time, their frustration and displeasure with the administration is unmistakably clear.
I find all the right-wingers commenting on this hilarious. This is not an attack on Obama from the right, it’s a salvo from the Left.
Let’s cut to the chase. Obama did what a self-professed “moderate 1985 Reagan Republican” would do – ensure that the biggest corporations the world has ever seen remain viable while sacrificing those that service the lower classes. Everything he has done since has only increased the security of said organizations against the rise of an angry populace. It was what Obama was paid to do with being the first non-100% Anglo to hold office as President.
Let’s take another glance at American History. After the nation wiped out the Native peoples and stole their lands, there was nothing left within our borders for the wealthy to grow their fortunes to their satisfaction. Enter the Imperialists, delivering new opportunities for exploitation by stealing a major chunk of what remained of Spanish possessions.
We are at such an impasse again. The nations friendly to corporatist exploitation have essentially been tapped out. Nike shoes are no longer sufficient to keep Vietnam on the side of Uncle Scam, so now the US is supplying patrol aircraft and the latest in electronic surveillance equipment so PRV can sting the dragon for us. The US is waging a “war on terrorism” in order to have an excuse to go after the oil reserves of Muslim nations not friendly to corporatism. The Ukraine has been thrust into the breech as the excuse to attack Russia, whose economic growth threatens to violate the Wolfowitz Doctrine that no nation can be allowed to become more economically powerful than the US.
There are so many more examples of the US positioning itself to exploit all of the natural resources of the world for the sole benefit of “American” multinational profit. The US is going to war to dominate and control the world, and no one -especially not the lackeys of the EU- will be immune from delivering tribute to Neo-Rome.
Once this is accomplished, the global thieves will only have each other to devour. Like the elite of the Middle Ages, they will wage war upon each other for increased dominance over the rest. He Who Dies Owning Everything is the goal – and mere humans mean nothing to them.
Now that Congress is firmly in the hands of the triumphant Republicans, the final years of this administration promise to be epic, not in what will be accomplished, but what will be destroyed. Lame duck no longer serves its normal function under such conditions as the final input of an outgoing administration. Another term is needed to take its place, therefore maybe: The Quacky Lackey may do in its stead.
This is pretty funny. Elsewhere I’ve been seeing Democrats claim that Obama fixed the economy but the voters stabbed him in the back, the dirty traitors, and now they’re gonna get what they deserve because the Republicans. But until now I thought the Democrats were saying that Obama couldn’t fix the economy, because he’s just one man, he has no power, he’s helpless, the President is an office without power. Only a naive purist would ever have expected Obama to fix the economy, because he never promised to and only a naive purist would have believed him when he promised to because the President can do nothing.
There’s a similar game about gas prices in the US. When they were higher, the Right blamed Obama, and he and his apologists claimed that the President has no control over gas prices. Now that they’re lower, the Right is silent about gas price and the Democrats are giving Obama all credit for the drop.
So now Ian writes that Obama could have fixed the economy but didn’t, and Dem loyalists are replying: no he couldn’t, he’s just one man. I love American political discourse.
The Republicans next year are going to pass a budget reconciliation bill loaded up like a
Christmas tree. They will do at least every two years while they hold both houses. The Democrats never even considered it when they had both houses. You can’t filibuster a budget reconciliation bill. That’s how Bush got all those tax cuts for rich people year after year. It was political malpractice for the Democrats to ignore the budget reconciliation process. At the the time I thought it was because they were abject cowards. I’m beginning to think that they didn’t though that they didn’t want to accomplish anything. They treated having a majority like a hot potato they couldn’t shed fast enough. That way they can just point he finger and make excuses.