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Turning Point

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As we approach Election Day, many commentators are confirming an observation used as the theme of my posting from September 6:

The steps taken by the Obama administration during its first few months have released massive, long-lasting fallout, destroying the re-election hopes of Democrats in the Senate and House.

Too many people whom the President thought he could count among his supporters have become his biggest critics.  One might expect that after eight years of outrage over the antics of the Bush administration, Maureen Dowd would be thrilled about the work done by the Obama White House.  Nevertheless, her most recent discussion of Obama’s performance was less than flattering:

In 2008, the message was him.  The promise was him.  And that’s why 2010 is a referendum on him.

With his coalition and governing majority shattering around him, President Obama will have to summon political skills — starting Wednesday — that he has not yet shown he has.

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With the exception of Obama, most Americans seemed to agree that the “right” thing to do until the economy recovered was to focus on jobs instead of getting the Congress mired for months in making over health insurance and energy policy.  And the “right” thing to do was to come down harder on the big banks for spending on bonuses instead of lending to small businesses that don’t get bailouts.

Contrary to the President’s expectations, the voting public has not overlooked the administration’s refusal to heed the advice of Bill Black, Robert Reich, and the roster of economists that included Adam Posen and Matthew Richardson advocating the use of the so-called “Swedish solution” of putting the zombie banks through temporary receivership.  To the dismay of everyone in the world (outside of Obama’s inner circle) the new President chose to follow the advice of Larry Summers and put the welfare (as in corporate welfare) of those insolvent, too-big-to-fail banks ahead of the nation’s economic health.  When President Obama appeared on The Daily Show with Jon Stewart on October 27, Stewart began the discussion by asking Obama to explain the rationale underlying his appointment of Larry Summers (a retread from the Clinton administration) as director of the National Economic Council.  President Obama fell back on his two-year-old claim that to follow any course other than that recommended by Summers, would have resulted in the failure of at least 100 banks.  Obama’s claim that the cost of the financial crisis was less than 1% of GDP did not slip past Yves Smith of the Naked Capitalism website.  Ms. Smith (who voted for Obama in 2008) didn’t pull any punches in refuting that claim:

I’m so offended by the latest Obama canard, that the financial crisis of 2007-2008 cost less than 1% of GDP, that I barely know where to begin.  Not only does this Administration lie on a routine basis, it doesn’t even bother to tell credible lies.  And this one came directly from the top, not via minions.  It’s not that this misrepresentation is earth-shaking, but that it epitomizes why the Obama Administration is well on its way to being an abject failure.

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The reason Obama makes such baldfacedly phony statements is twofold:  first, his pattern of seeing PR as the preferred solution to all problems, and second, his resulting slavish devotion to smoke and mirrors over sound policy.

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But Team Obama is no doubt rationalizing this chicanery:  if they can keep from recognizing losses until the recovery takes place, then the ultimate damage will be lower.  But Japan’s post bubble record shows that doesn’t work.  You simply don’t get a recovery with a diseased financial system.  You need to purge the bad assets, only then will meaningful growth resume.

Financial risk management guru, Chris Whalen, recently expressed his anguish over the administration’s unwillingness to restructure the zombie banks:

The reluctance comes partly from what truths restructuring will reveal.  As a result, these same large zombie banks and the U.S. economy will continue to shrink under the weight of bad debt, public and private.  Remember that the Dodd-Frank legislation was not so much about financial reform as protecting the housing GSEs.

Because President Barack Obama and the leaders of both political parties are unwilling to address the housing crisis and the wasting effects on the largest banks, there will be no growth and no net job creation in the U.S. for the next several years.  And because the Obama White House is content to ignore the crisis facing millions of American homeowners, who are deep underwater and will eventually default on their loans, the efforts by the Fed to reflate the U.S. economy and particularly consumer spending will be futile.

The idea that Obama sees “PR as the preferred solution to all problems” surfaced again in a great piece by Peter Baker of The New York Times, which included this observation:

Rather than entertaining the possibility that the program they have pursued is genuinely and even legitimately unpopular, the White House and its allies have concluded that their political troubles amount to mainly a message and image problem.

Baker’s article focused on the most recent gripe made by Obama at another one of his highbrow fundraisers.  Remember the blowback from the President’s recent diatribe at a fundraiser hosted by the appropriately-named Rich Richman?  Well, something similar happened again.  The setting this time was a $15,200-per-ticket affair for doctors at the home of a wealthy hospital executive in Boston.  While addressing this audience, the President explained that the reason why the voters have not embraced the Democrats during this election cycle is because the voters are having trouble thinking clearly, as they are “scared”.  Not surprisingly, this re-ignited the controversy focused on Obama’s elitism.

The Tea Party spokespeople aren’t the only ones who are accusing President Obama of elitism.  The Progressive-oriented TruthDig website, recently published an interesting essay by Chris Hedges, author of  Death of the Liberal Class.  Hedges points out that elitism is exactly the problem afflicting not only Obama, but the entire group, referred to as “the liberal class”.  Consider his argument:

The liberal class, which once made piecemeal and incremental reform possible, functioned traditionally as a safety valve.  During the Great Depression, with the collapse of capitalism, it made possible the New Deal.  During the turmoil of the 1960s, it provided legitimate channels within the system to express the discontent of African-Americans and the anti-war movement.  But the liberal class, in our age of neo-feudalism, is now powerless.  It offers nothing but empty rhetoric.  It refuses to concede that power has been wrested so efficiently from the hands of citizens by corporations that the Constitution and its guarantees of personal liberty are irrelevant.  It does not act to mitigate the suffering of tens of millions of Americans who now make up a growing and desperate permanent underclass.  And the disparity between the rhetoric of liberal values and the rapacious system of inverted totalitarianism the liberal class serves makes liberal elites, including Barack Obama, a legitimate source of public ridicule.  The liberal class, whether in universities, the press or the Democratic Party, insists on clinging to its privileges and comforts even if this forces it to serve as an apologist for the expanding cruelty and exploitation carried out by the corporate state.

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As long as the liberal class had even limited influence, whether through the press or the legislative process, liberals were tolerated and even respected.  But once the liberal class lost all influence it became a class of parasites.  The liberal class, like the déclassé French aristocracy, has no real function within the power elite.  And the rising right-wing populists, correctly, ask why liberals should be tolerated when their rhetoric bears no relation to reality and their presence has no influence on power.

As Maureen Dowd pointed out, Wednesday is going to be a big day.  If President Obama thought he had his hands full going into this election   .  .  .  wait until the aftermath.