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Obama's Economic Disaster

President Cat Food

by ROB URIE

Back in the depths of the financial crisis Barack Obama put together a ‘bipartisan’ commission to balance the national budget. To promote this effort he used the stunningly misleading conflation of family and national budgets to argue that Americans need to “tighten our belts,” a euphemism for cutting the social programs that in earlier times buffered us against extreme poverty and permanent exclusion from health care. The timing of his effort coincided with the European push for ‘austerity,’ cutting social expenditure to assure that corrupt banks were repaid misbegotten debt.

Mr. Obama selected the members of his deficit commission with a particular outcome in mind—to cut the social programs long derided by the right as ‘entitlements’ while maintaining tax cuts for the rich and pushing more of the same neo-liberal reforms that led to the current bifurcated economy. To be clear, with this commission Mr. Obama was not defending against the wing-nut economics of the radical right, he was straightforwardly promoting them.

To assure the outcome that he wanted he loaded his commission with deficit-hawk Democrats and Republicans. Even so, the commission couldn’t come to consensus and the required votes for ratifying its recommendations weren’t found. Nevertheless, Mr. Obama continued to push the most onerous of these recommendations as if consensus had been found in subsequent negotiations with congressional Republicans.

This tale, generally known to folks who are paying attention to politics and economics, is retold in response to the ongoing pleas from liberals, progressives and New York Times columnists that Mr. Obama stop compromising with Republicans on economic issues. Clearly from his actions, Mr. Obama isn’t compromising with Republicans—he is a Republican. And Mr. Obama has demonstrated time and again that he isn’t a defender against the predations of our economic elite; he is an active proponent of them. How much more evidence is needed for this to be clear?

When Mr. Obama entered office, in the midst of an economic crisis and global financial meltdown, he appointed the main architects of the meltdown to key economic posts. Larry Summers, Timothy Geithner and Ben Bernanke had long been enthusiastic proponents of financial deregulation. Messrs. Geithner and Bernanke were regulators who had failed to regulate the financial institutions under their purview. Messrs. Summers and Geithner were former Clinton administration operatives who personally developed and put forward the very worst of that era’s financial deregulation. All three appointees had more to gain from covering up the catastrophes that they had created than fixing them. And covering them up was what they did.

Messrs. Geithner and Bernanke used the Treasury Department and the Federal Reserve to create the misdirection needed to frame the financial meltdown as a crisis of liquidity, a bank run, rather than one of solvency. Mr. Geithner created programs to raise the value of bad bank assets through gimmicks—by providing risk-free incentives for connected financial firms to buy the assets to create the appearance that a market existed for them. Mr. Bernanke turned the Fed into a garbage dump through asset purchases and revived the fortunes of the financial elite with QE (Quantitative Easing), which was designed to raise the price of all financial assets. The effect was to deflect attention away from the true causes of the financial crisis—radical deregulation of corrupt private institutions, by creating the appearance of a periodic bank run.

But were covering up ill-conceived economic policies all that Summers, Geithner and Bernanke (and Obama) did, the West might be nearer resolution of the decades of disastrous neo-liberal reforms that beset us. By appearances, global capitalism is in the process of imploding. But not without the late stage indignities of the wholesale, visible looting of what remains of our former social wealth. And here Mr. Obama’s three stooges of the economic apocalypse outdid themselves transferring social wealth from our collective coffers to the banks and financial garbage from the banks to our collective coffers.

In addition to promoting the right-wing canard that family and national budgets are analogous, Mr. Obama aided the editorial writers at the Wall Street Journal in their condemnations of our public and quasi-public institutions by shifting trillions of dollars of fraudulent mortgages and bank ‘assets’ from the (still) insolvent banks to the nationalized Fannie Mae and Freddie Mac. By having the FHA (Federal Housing Administration) insure them, Mr. Obama’s dream team assured that these mortgages met the nominal requirements for purchase by these agencies. This affected the conversion of moderately corrupt institutions into everything that the right has ever accused public institutions of being—garbage dumps run by corrupt insiders for their personal benefit. Barack Obama converted what had been tribal fantasy in right-wing ghettos to fact.

Before the automaker bailouts commenced in 2008 a tiered wage system had been negotiated so that a half-century of systematically under-funding pension and health care benefits by company management could be forced onto the backs of newer autoworkers. After the bailouts, engineered by Barack Obama, company management was in large measure left to continue looting their companies through multi-million dollars bonuses. And the outsized wages of the financial arms of the auto giants were left untouched. But despite the bailouts and the economic leverage over labor policies that they provided, Mr. Obama left the newer autoworkers with below-subsistence wages to drag the economy down for decades to come.

In addition to acts of commission, Mr. Obama has overseen the absolute neglect of the greatest unemployment disaster in modern history. By structuring his stimulus program along largely neo-liberal lines, the twin goals of appearing to do something while minimizing any potential benefit to labor markets were accomplished. Understand, even Republicans have historically turned briefly Keynesian when faced with the potential political disaster of a failing economy. Since his stimulus program was enacted we’ve heard nary a word from Mr. Obama about unemployment as the lives of tens of millions of people slide further into economic ruin.

As is the case in American presidential politics, the choice is never between ‘good’ candidates. It is always a contest in lesser-evilism. But at least Mitt Romney is straightforward about whose interests he represents. Despite the use of seemingly different rhetoric, Mr. Romney and Barack Obama serve the same masters. Those putting forward the pretense that there is a great difference between them are not paying attention to Mr. Obama’s record. Sure Mitt Romney would be a disaster. Barack Obama already is a disaster. What we need is a revolution, not more delusion that either candidate would serve our interests.

Rob Urie is an artist and political economist in New York.