Getting Things Done with a Plutocratic Violin
Two and a half weeks after Barack Obamaâs victory in the 2008 presidential election, David Rothkopf, a former Clinton administration official, commented with a musical metaphor on the president-electâs corporatist and militarist transition team and cabinet appointments. Obama, Rothkopf told the New York Times, was following âthe violin model: you hold power with the left hand and you play the music with the right.â5 In other words, âyouâ gain and hold the presidency with populace-pleasing progressive-sounding rhetoric, but you govern, you make policy, in service to existing dominant corporate, state, and military institutions and ideologies.
The Obamaâ administrationâs record over its first sixteen months has been richly consistent with Rothkopfâs analysis. Itâs been âthe violin modelâ with a vengeance. Obama has lectured Wall Street on the immorality of its bonuses and visited hard recession-hit towns such as Elkhart, Indiana, and Pomona, California, to show solidarity with downtrodden working people. And then he gave yet more of the public treasury and commons away to the privileged few, justifying the handouts as a noble expression of his âsensible,â ârealistic,â and âpragmaticâ commitment to rising above ideological divisions to âget things doneâ for the American people.
Funny how the nationâs âpragmatistâ in chief has kept getting things done for the rich and powerful above all. My mind and soul have recurrently gone numb as yet one more populist-, progressive-, and peaceful-sounding Obama campaign promise after another have been crushed by the cold imperatives of business and imperial rule during the first year of Obamaâs presidency. This chapter and Chapter 3 (the latter on âhealth reformâ in the Age of Obama) focus on the administrationâs service to the dominant business class and financial elite in regard to domestic economic and social policy. Chapter 2 takes up the intimately related story of Obamaâs foreign policy. Chapters 4 and 5 look at similar themes of progressive betrayal and deceptive ârebrandingâ in relation to questions of race, ethnicity, gender, gay rights, and civil liberties.
Change Means More of the Same
Keeping Perpetrators Afloat
Consistent with his description of himself as a âNew [that is, conservative and pro-corporate] Democratâ in March 2009,6 Obama has spent more than $10 trillion of federal money on further taxpayer handouts to the giant Wall Street firms that spent millions on his campaign and that drove the economy over the cliff in the first decade of the new millennium. The new president was too attached to those firms and to their so-called free-market ideology to undertake the elementary bank nationalizations and public financial restructuring that were required to put the nationâs credit system on a sound and socially responsible basis. Obamaâs plan to guarantee the financial, insurance, and real estate industriesâ toxic, hyperinflated assets while keeping existing Wall Street management in place amounted to a giant effort (according to liberal economist James K. Galbraith) to âkeep perpetrators afloatâ at a giant cost in taxpayer dollars.7 Liberal economist and New York Times columnist Paul Krugman was âfilled with a sense of despairâ by Obamaâs bank rescue plan, which, Krugman noted, ârecycles Bush administration policyâspecifically the âcash for trashâ plan proposed, then abandoned, six months ago by then-Treasury secretary Henry Paulsen.â8
The plan has rewarded reckless and selfish investor-class behavior with what is supposed to be the peopleâs money. Under the scheme unveiled in March 2009, the public was put on the hook to the tune of $1 trillion. Krugman described this scheme as a coin flip in which âinvestors win if itâs heads and taxpayers lose if itâs tails.â9 As the Times noted while the full-blown Obama phase of the federal Wall Street bailout was being unveiled in the early spring, âThe Treasury and the Federal Reserve will be offering a least a tablespoon of financial sugar for every teaspoon of risk that investors agree to swallowâ by buying up the toxic mortgage assets that the investor class created in the first place.10 The government (âidentical to the people in a functioning democracy,â as Noam Chomsky noted) was slated to take more than 90 percent of the risk, but private investors would reap at least half the reward.11
Meanwhile, the underlying insolvency of the banks went largely unresolved, a problem the new administration hoped citizens would forget about as they got dazzled and bamboozled by its fancy and obscure plan. âIn the end,â even the Times editorial board noted, âthere is no getting around firing the executives at failing banks, acknowledging the losses, wiping out the shareholders and then deciding how the government can restructure the institutions.â12 Beneath claims of allegiance to âfree-marketâ ideals and âprivate enterprise,â the administrationâs âbank rescueâ designâdescribed by former U.S. labor secretary Robert Reich as a continuation of âthe most expensive tax-supported fiasco in historyââboiled down to a traditional, if rather extreme, exercise in Wall Street welfare: socialism for the rich, market discipline and capitalism for the rest. As Reich also noted, the plan threatened to weaken âthe publicâs confidence that its money isnât being thrown down a rathole,â undermining Obamaâs ability to undertake âother ambitious undertakings such as health care or education or the environment.â13
According to the New York Times, Obamaâs corporate-Democratic Treasury secretary Timothy Geithnerâs bailout plan reflected a triumph for unfettered capitalist prerogatives inside the new White House. Times reporters Stephen Labaton and Edmund Andrews noted that Geithner âprevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including [top political and media expert] David Axelrod.â Geithner fought successfully âagainst more severe limits on executive pay for companies receiving government aid.â He overcame âthose who wanted to dictate how banks would spend their money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.â According to administration and congressional officials, Geithner told Obama that âthat plan would not workâ if it was burdened with âtoo much government involvement in the affairs of the companiesââcompanies who deeply interfered with ordinary Americansâ capacity to keep their heads above water. The new Treasury chief, whose nomination was applauded by Wall Street, âalso expressed concern that too many government controls would discourage private investors from participating.â
Geithner grave concern over the negative impact of governmentâthe people in a functioning democracyâwon out over more image-sensitive Obama aides who worried that ârising joblessness, populist outrage over Wall Street bonuses and expensive perks, and the poor management of last yearâs bailouts could feed a potent political reactionâ if the new White House failed to âdemand sacrifices from the companies that receive federal money.â14 âFor all its boldness,â Labaton and Andrews noted, the Obama bailout âlargely repeat[ed] the Bush administrationâs approach of deferring to many of the same companies and executives who had peddled risky loans and investments at the heart of the crisis and failed to foresee many of the problems plaguing the markets.â15
Reinventing the Same System
Early in April 2009, the New York Times published an article with an ironic title: âIn Cuba, Change Means More of the Same.â This ânewsâ item reported that ârather than dismantling Cubaâs socialist framework,â Cubaâs president Raul Castro âseems to be trying to make it work more efficiently.â16 Castro, the Times reported, sought to keep power concentrated âat the top.â
But what had President Barack ObamaâMr. âChangeâ himselfâtried to accomplish other than to make the American corporate profits system âwork more efficientlyâ without âdismantling the [capitalist] frameworkâ and with power (and wealth) still concentrated âat the topâ? As the Times acknowledged in an article titled âEnglish-Speaking Capitalism on Trial,â Obama and his neoliberal partner Gordon Brown, the British prime minister, had âfocused on ways of revitalizing the [existing] system. ⊠Even as both men have embarked on enormous increases in public-sector spending,â Times correspondents John Burns and Landon Thomas reported, âthey have maintained that the solutions to the crisis lie in reawakening the markets and recapitalizing the banks rather than tearing at the systemâs foundations. And both, when they respond to private anger at the private sector, have seemed more geared to managing anger than stoking itâ17 [emphasis added]. As prolific Marxist geographer David Harvey observed on the left television news and commentary show Democracy Now in April 2009, âWhat [the Obama team is] trying to do is to reinvent the same systemââto âreconstitute the same sort of capitalism we have had over and over again over the last thirty years in a slightly more regulated, benevolent formâ that didnât âchallenge the fundamentals.â18
The Banks âOwn the Placeâ
Consistent with Harveyâs judgment, the Obama White Houseâs mild June 2009 plan to âre-regulate U.S. financial markets for the 21st centuryâ left the extreme power of the nationâs elite âbanksterâ class intact. While praising the Obama planâs efforts to create a strong consumer financial regulatory body, to reduce speculative betting with higher leverage standards, to prevent predatory and reckless lending, and to advance the White Houseâs power to take over failing, systemically significant firms, liberal Washington, DCâbased corporate and financial reform activist Robert Weissman noted that the administrationâs plan contained four basic flaws that would leave the financial sector and the broader economy vulnerable to future crises. First, it did ânot propose to do anything serious about executive pay and top-level compensation for financial firms,â failing thereby to address basic questions of economic justice and leaving intact a âWall Street bonus cultureâ that âgives traders and executives alike an incentive to take big betsâbecause they get massive payoff if things go well, and donât suffer if they go bad, or go bad sometime in the future.â
Second, Obama proposed no serious structural reform of the financial industry. His refusal to return to âGlass-Steagallâ principles by reseparating (on the model of the 1930s Glass-Steagall Act, repealed under Bill Clinton) commercial banking from other financial activities, including the speculative world of investment banking, and to reduce the size of gargantuan (âtoo big and interconnected [and powerful] to failâ) financial institutions, promised to leave the nationâs economy (and politics) far too beholden to concentrated wealth and power.
Third, the planâs regulatory scheme included a dangerous âregulatory exemption for customized derivativesâa loophole that will create lots of business for corporate lawyers ready to change terms in derivative contracts so that they differ somewhat from standardized terms.â It also failed to ban âclasses of dangerous financial instruments that cannot be justified,â such as the notorious credit default swap (denounced by international financial mogul George Soros as a âweapon of financial mass destructionâ) and âto require that exotic financial instruments be subjected to pre-approval requirements.â
Fourth, Obamaâs financial plan contained no measure âfor giving consumers the power to organize themselves to advance their own interests. Simply mandating that financial firms include in bills and statements (whether mailed or e-mailed) an invitation to join an independent consumer organization would facilitate tens of thousands of consumersâand likely many moreâbanding together to make sure the regulators do their job, and to prevent Wall Street from âinnovatingâ the next trick to scam borrowers and investors.â Advocates like Weissman called for this basic mandate, to no avail.19
Other key deletions were noted by former Wall Street economist and Distinguished University of Missouri Research Professor Michael Hudson: proposals to repeal federal legislation used by the Bush administration to nullify the power of local state prosecutors to investigate and take legal action against financial malfeasance; measures to properly fund federal agencies charged with fraud reduction and other aspects of meaningful regulation; proposals to âcounter extortionate credit-card practices by re-introducing anti-usury lawsâ; proposals to the ârepeal of the pro-creditor reversal that Congress passed in 2005 [with then U.S. senator Barack Obamaâs support] in response to lobbying by the credit card and banking industryâ (thereby making it more difficult for personal debtors to declare bankruptcy and preventing courts from ârolling back debt to the populationâs ability to payâ); proposals to âreform the tax system that has distorted the financial system to promote predatory extractive debt, not productive industrial credit.â20
All of these critical omissions were highly predictable given that, as Senator Majority Whip Richard Durbin candidly noted in the spring of 2009, âThe banks are still the most powerful lobby on Capitol Hill. And they frankly own the place.â21 Wall Street invested $5 billion in U.S. politics between 1999 and 2009 and was the leading campaign finance sponsor of Hillary Clinton, John McCain, and Barack Obama during the 2008 election cycle.22 Hudsonâs essay on Obamaâs âfalse financial reformâ (Greiderâs description) bore a depressing title: âObamaâs (Latest) Surrender to Wall Street.â
Revealingly enough, Obamaâs financial plan won approval from the leading neoliberal Anglo-American paper, th...