Daniel L. Feldman

Now I’ll Second-Guess Obama

In National Politics, Policy on November 6, 2010 at 11:19 pm

I did not want to depress Democrats any further prior to Election Day, so although I did list my dissatisfactions with Obama, I urged continued support. I still do. But I hope Democrats press him to take a different tack – and not one more conciliatory toward Republicans.

Clearly, a majority of the public believes that both Democrats and Republicans defer excessively to plutocrats, exemplified primarily at this time by Wall Street bankers, but arguably joined by major executives of insurance, defense contracting, oil, and pharmaceutical companies. The Democratic party brand used to be, and still is in some quarters, identified with the working person, not the wealthy executive. When prominent Democrats protect the lower capital gains tax rate for billionaire hedge fund managers, join in the leadership of the repeal of Glass-Steagall’s protections against banking and insurance collusion, and help Republicans deregulate derivatives trading, this blurs the differences with Republicans in a very destructive way.

Say Obama, from the beginning, had insisted that the only federal money to be made available to banks would have to be placed in escrow, so to speak. Banks would have been able to use it for loans to assist struggling homeowners, and could have taken reasonable fees for so doing, but would otherwise have had no access to it. This would have increased purchasing power for otherwise desperate citizens, and enabled them to spend something on clothing, car payments, and the like, thereby increasing aggregate demand.

Far more than the policies actually adopted, this could have generated economic activity that would have increased business activity and decreased unemployment. I suggest, in addition, that the Fed should probably not have lowered the loan rate to banks to about zero, thereby guaranteeing their profits on any loans they make.

Certainly bank profits would not be as high as they are. Perhaps the stock market wouldn’t be doing quite as well either. But the unemployment rate would have been lower.

Politically, such policies would have nipped in the bud the ability of the Tea Party (with their hidden plutocrat backers) to paint the Democrats as at least equally in bed with Wall Street as the Republicans. Indeed, it could have created a sharp contrast with Republicans, who clearly wanted to put as much money as possible directly at the disposal of the bankers. How different Election Day’s results would have been!

Robert Reich, the former U.S. Secretary of Labor, who says something similar, knows what he’s talking about.  Paul Krugman argues that it’s still not too late to “engineer significant relief to homeowners,” and quite correctly also urges a much more aggressive stimulus plan, which would also increase aggregate demand by providing more jobs.  The latter could be in the context of America’s desperately needed infrastructure renewal, which Obama recently floated.

To reaffirm the belief that the Democrats are still the party of the people, as distinguished from the Republicans, this is the direction that Obama and the Democratic party should take now.  The Republicans cannot compete on this ground, because the plutocrats are their true constituency.  True, enlightened persons of great wealth, like Warren Buffett and Bill Gates, support economic and political policies that would benefit everyone, including themselves, by reviving the world economy. But short-sightedness and greed distinguish too much of corporate leadership, which is why we got into this mess and why their allies, the Republicans, will only make it worse if they have the chance. Democrats, if they and the country are to succeed, must move in a sharply different direction.

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