Fair Warning: This is Chapter 2 of a series entitled "How Obama Sold Us Out." I am trying very hard to be respectful and substantive, but if you've taken the pledge not to read any more diaries criticizing the Obama administration you should stop reading now.
When we last left President Obama, he was tanking bankruptcy reform in early 2009. Meanwhile, back at the ranch, the President elect's economic team was hard at work on an economic "stimulus" package. The plan was expressly designed to inject money into the economy on a short term basis without changing the long-term outcomes dictated by financial markets.
In many ways, President Obama's stimulus package was remarkably like the stimulus packages George Bush signed into law in 2002, 2003 and 2008.
But bigger and 100% owned by the Democratic leadership.
Phase 1 - Pre-Stimulus
The pre-inauguration version of the stimulus plan actually sounded pretty good - $400 to $700 billion, to be spent on implementing the President's priority programs. In December of 2008 the LA Times reported:
Congressional leaders say a stimulus plan could cost $400 billion to $700 billion -- figures the Obama team does not dispute. Those numbers dwarf anything the House had been considering before Obama's victory. In recent years, federal stimulus packages sometimes amounted to giving Americans checks, with a goal of stoking consumer spending.
Obama hopes to launch a stimulus program that helps drive the agenda of his presidency: improving the nation's power grid in ways that reduce carbon emissions and cut energy costs, shoring up roads, bridges and tunnels, and computerizing medical records so that doctors have up-to-date information on patients.
Keep in mind that the nation was well into the financial crisis at this point. By January, job losses were at record levels and it was abundantly clear that Washington needed to focus on JOBS. The LA Times story emphasized the incoming administration's intention to target programs that could be implemented quickly - what later became known as the "shovel-ready project" requirement. But it also seemed that the President and his advisors understood the difference between making an investment in the future of the country and simply "giving Americans checks, with a goal of stoking consumer spending."
If the program as originally advertised had been implemented successfully, I believe Democrats could have built on it and perhaps even passed more constructive economic programs in 2010 and 2011, when it became clear the economy was still struggling. But implementing the program announced in December is not what the Obama team did in January, or even what they tried to do.
Phase 2 - Changing Gears
As the inauguration approached, President-elect Obama began "pitching" a plan in Washington that included about 40% tax cuts. Many of these tax cuts were extensions of the Bush tax cuts. Many, like the refundable "making work pay" tax credit, bore a striking resemblence to "giving Americans checks, with a goal of stoking consumer spending," as the LA Times story had said in December.
Some observers suggested the President-elect was promoting tax cuts as a sop to Republicans in Congress. Interestingly enough, President Obama has consistently rejected this suggestion and said that tax cuts were a "core focus" of his campaign.
Phase 3 - The Stimulus We Got
I intended to do a detailed link-fest on the elements of the stimulus plan, but in researching it, I found this from Paul Krugman:
I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.”
Let’s hope I’ve got this wrong.
There's really not much I can add to that. The date of Dr. Krugman's observation? January 6, 2009.
It's not like the outcome of this plan was unforeseeable. We got virtually no visible projects that you could point to and say "here's what we're getting for our money." The Obama administration spent hundreds of billions of dollars, and as it's winding down now they argue that the stimulus made an abstract and highly debatable difference in economic projections. And since things only got a little better for a little while, and now appear to be getting worse again, that argument is very weak.
Phase 4 - Stimulus Post-Mortem
The stimulus package was mentioned as a significant milepost in a New York Times op-ed that received some attention here last month. Drew Westen said:
The truly decisive move that broke the arc of history was [President Obama's] handling of the stimulus. The public was desperate for a leader who would speak with confidence, and they were ready to follow wherever the president led. Yet instead of indicting the economic policies and principles that had just eliminated eight million jobs . . . and against the advice of multiple Nobel-Prize-winning economists — he backed away from his advisers who proposed a big stimulus, and then diluted it with tax cuts that had already been shown to be inert. The result, as predicted in advance, was a half-stimulus that half-stimulated the economy. . . .
To the average American, who was still staring into the abyss, the half-stimulus did nothing but prove that Ronald Reagan was right, that government is the problem. In fact, the average American had no idea what Democrats were trying to accomplish by deficit spending because no one bothered to explain it to them with the repetition and evocative imagery that our brains require to make an idea, particularly a paradoxical one, “stick.” . . . Nor did anyone explain why saving the banks was such a priority, when saving the homes the banks were foreclosing didn’t seem to be. All Americans knew, and all they know today, is that they’re still unemployed, they’re still worried about how they’re going to pay their bills at the end of the month and their kids still can’t get a job. And now the Republicans are chipping away at unemployment insurance, and the president is making his usual impotent verbal exhortations after bargaining it away.
Dr. Westen has been fairly criticized for, among other things, perpetuating the liberal myth that President Obama could defeat Republicans with his magic "storytelling" powers if he really wanted to. Dr. Westen is a psychology professor, and it's pretty much his job to argue about the validity of the magic storytelling wand. But I believe Dr. Westen is irrefutably correct on at least one point:
The most visible effect of the 2009 Obama stimulus package was to discredit the idea that the government in general, and the Obama administration in particular, could do anything effective about the economy.
On a related note, the second most visible effect of the Obama stimulus was to help trigger a fake deficit crisis so Republicans and other advocates of socialism-for-the-rich and austerity-for-the-poor could gain control of the budget debate.
Which leads us to the most important point in my view: the stimulus we got was basically consistent with President Obama's stated economic philosophy. Despite the patently obvious failure of American banks to allocate capital safely and effectively, President Obama apparently believes that only elite bankers can create jobs by allocating capital to private enterprises, which is why he has consistently chosen to protect the bankers from pitchforks, even when it is not politically easy to do. President Obama believes the federal government literally cannot create jobs in any meaningful way:
So when I took office, I put in place a plan -- an economic plan to help small businesses. And we were guided by a simple idea: Government can’t guarantee success, but it can knock down barriers to success, like the lack of affordable credit. Government can’t replace -- can’t create jobs to replace the millions that we lost in the recession, but it can create the conditions for small businesses to hire more people, through steps like tax breaks.
That’s why we cut taxes for small businesses eight times.
This is essentially the same belief system reflected in the ozone regulation debacle last week. It is a belief system shared by the neoconservative wing of the Republican party with its shadowy billionaire backers, and the neoliberal Rubinite wing of the Democratic party with its shadowy billionaire backers. It amounts to giving the steering wheel back to the people who drove the economy into the ditch, despite President Obama's promise not to do that.
Scary Conclusion
President Obama represents the logical convergence of neoliberal and neoconservative policies. Both groups believe that Americans who depend on a paycheck need to take large cuts in pay, benefits, and social safety net programs in order to become competitive with workers in the developing world. The reason American workers need to do this is so the wealthiest Americans can succeed in their quest to become wealthier, which is pretty much the pinnacle of what America stands for.
I disagree with the neo-convergence platform. Despite brooklynbadboy's admonition, I support a primary challenge to President Obama because I am against a federal government that focuses only on providing bailouts and other benefits for the top 1% of the income distribution.
I am not laboring under the illusion that a primary challenge to President Obama will provide a quick or easy solution to our problems. There isn't even an announced candidate yet. Despite the abstract nature of the undertaking, I am not just trying to send a message or shift the Overton Window.
I recognize that the most likely result in 2012, regardless of whether anyone challenges President Obama in the Democratic primary, is that we will have a Republican president in 2013. The second most likely result is that we will have President Obama back for a second term, which is basically the same thing from an economic perspective.
But if President Obama is challenged in the primaries we have a remote chance of electing an economic Democrat for 2013, and a decent chance of electing one for 2017. There is no other way to take on the bipartisan servants of the top 1% and rebuild the Democratic party to represent the bottom 99%.
Conclusion - Metaphorical Version
Think of America as a metropolis controlled by the equivalent of 1930's mobsters or lawless Russian oligarchs, whichever you prefer. Wall Street is the brains of the operation and the teabagging Republicans are the muscle. Their operation is not well disciplined, but they are actively looting the hell out of everything and it is very profitable for the top mobster/oligarchs. It is very bad for everyone else.
In this metaphor the DC leaders of the Democratic party are the corrupt police who are supposed to be cleaning up the city, but in fact are on the payroll and are covering for the mobster/oligarchs. Literally the only way to start a real cleanup is to get rid of the corrupt police first. If you don't do that, you don't have a platform to go after the bad guys.
Right now the Democratic party is the only plausible platform for taking on the financial oligarchs and their Republican sidekicks. That could change - a third party could emerge if the Democrats line up like lemmings and follow their current leadership off a cliff (to switch metaphors for a moment). But barring a miracle, it looks like the Democratic party is all we've got to work with between now and 2012.
The good news is that the current Democratic leadership is working very hard to make itself unelectable and take itself out of the picture. This includes the congressional leadership as well as President Obama. So maybe the party can be saved.
The bad news is that this won't be a quick or easy process. When the metaphorical corrupt police are first first exposed, the shock and turmoil might make it easier for the mobster/oligarchs to go about their business. A Republican might get elected in 2012, and that would be really bad. But that's where we are. Getting rid of the Democrats who are providing cover for the Wall Street mobster/oligarchs is the only plausible first step toward taking back this country for the bottom 99%.