So it turns out that Beyonce’s ardent, flawless performance of the Star-Spangled Banner may have been lip-synced. The more important and far trickier question is whether President Obama’s impassioned promise to fight for the middle class and a just society is for real, or just more lip service.
The president pushed all the right buttons to our inspire our belief, crafting a theme of “We the people,” defending the importance of collective efforts and evoking battlefields in the people’s fight for justice, from March on Selma to Seneca Falls to the Stonewall bar. And he took the oath of office with his hand on Martin Luther KIng’s traveling bible, the one the civil rights leader carried with him and scribbled notes in as he led the movement.
Many people have invested their hopes and dreams in the president’s leadership and are willing to give him the benefit of the doubt on the tepid economic recovery and unkept promises. I thought it was a terrific speech but I’m less giddy about the speech and our prospects for the next four years.
One source of my skepticism is the president’s choice to replace Treasury Secretary Timothy Geithner, under whose leadership, blessed by the president, the too big to fail banks got bigger, no bankers were held accountable for the financial collapse, and the government’s efforts to clean up the foreclosure mess floundered. Geithner, meanwhile, ridiculed efforts by others on the Obama economic team who wanted to fight for a bigger stimulus that would have helped others who weren’t bankers.
To replace Geithner, the president chose his chief of staff Jacob Lew, who enjoyed a brief, highly paid stint at too big to fail Citigroup from 2006 to 2009, as a manager in a unit that bet against the housing market in the run-up to the financial collapse. After Citigroup reaped its share of the taxpayer-funded bailout, the bank awarded Lew a $950,000 bonus. Before his service to Citigroup, he served as head of the Office of Management and Budget during the Clinton administration, which gave bank deregulation its final push into reality. Of his Citigroup gig, Robert Kuttner wrote, “It was mainly a chance for a skilled public manager to make himself some money until the Democrats returned to power.”
Especially troubling is the lack of expertise Lew demonstrated in comments during a 2010 Senate hearing, where he candidly acknowledged he was not particularly sophisticated in his financial understanding – but went on to downplay the role of deregulation in the financial meltdown.
“My sense, as someone who has generally been familiar with these trends is that the problems in the financial industry preceded deregulation; there was an increasing emphasis on highly abstract leveraged derivative products that got us to the point that in the period of time leading up to the financial crisis risks were taken, they weren’t fully embraced, they weren’t well understood,” Lew said. “I don’t personally know the extent to which deregulation drove it but I don’t believe that deregulation was the proximate cause. I would defer to others who are more expert about the industry to try and parse it better than that.”
But the even the grandaddy of financial deregulation himself, Alan Greenspan, has acknowledged what a fiasco it was. As the Consumer Education Foundation pointed out in its March 2009 report, co-authored with Essential Information, “financial deregulation led directly to the financial collapse” by allowing banks to concoct and sell complex investments based on worthless mortgages – without any government oversight or interference.
Regardless of his expertise or lack of it in high finance, Lew is a member in good standing of the elite financial industry – government corridors of power that have been peddling austerity – a particularly hostile landscape for the hopes and dreams of the middle class. Is this really the person Obama believes is best to lead the economic team that is supposed to protect the middle class? If Obama is serious about following through about his inaugural speech promises to protect and preserve economically vulnerable Americans, he’s going to need a much more ambitious and specific agenda than he’s offered so far, and he’s going to need to abandon some major policies he’s been pursuing. And he’s going to need a cabinet and a political team to flesh those policies out, sell them to the country and skillfully push them through Congress. Lew will have to reach way beyond his comfort zone, in which he has functioned as a quintessential insider and number-cruncher.
A great inaugural speech is not about to convince the vast corporate interests that have poisoned our politics to pack up and go home.
To truly protect the middle class, the president is going to have get outside the austerity bubble that Washington has built up around itself with the help of the media wise men and women who judge political courage and wisdom by how much our leaders are willing to slash from social programs.
The way to protect the middle class is straightforward – but demands a departure from the conventional thinking that rules Washington.
Economist Robert Pollin suggests two very specific – and grand – goals for Obama to shoot for. First, cut unemployment in half by the end of 2016, back to 3.9 percent, where it was in 2000, creating an additional 13 million jobs, through a combination of federal stimulus funding,and grabbing the excess funds that the Federal Reserve has shoveled to banks. While bankers have profited from the Fed’s generosity, they have not used those funds to spur the broader economy. Here’s an interview in which Pollin details his views.
The second is creating a real program to fight and reverse rising poverty in the U.S., reducing the number of people living in poverty from 15 to 11 million, again aiming to reduce the poverty to 2000 levels. Again, Pollin says the best way to do this is by focusing on resources on job creation.
Inside Washington’s austerity bubble, this idea of dramatically reducing unemployment or poverty is never discussed any more, amid assumptions that either people are poor because of their own failings or the government can’t afford to do anything about it.
But outside the bubble, economists like Pollin and others suggest another path, and if Obama is serious about the ideals he articulated in his speech, he’ll lead the fight to burst the austerity bubble, embracing this more activist path.
If he’s really intent on helping average Americans, there are two policies President Obama is pursuing that he should immediately discard, because they will hurt the middle class.
The first is the Trans-Pacific Partnership, the latest in a long line of so-called free trade agreements like the North American Free Trade Agreement, that have been sold to the public as boosts to the economy but have really crushed low and middle income jobs by increasing outsourcing and lowering wages. While the TPP talks exclude the public, corporate lobbyists have free access.
The president and his team should acknowledge the dangers to America of these phony free trade deals, and abandon the TPP and others like them.
The president should also drop the idea of “tweaking” Social Security by adopting “chained CPI,” which is a way of calculating the “cost of living” that would reduce future Social Security payments. The president has suggested that “chained CPI” could be part of fiscal grand bargain to reduce the deficit. While the president has touted the plan as a kind of a technical fix that would strengthen the program in the long run, Social Security watchdogs say chained CPI would result in substantial benefit reductions.
You’ll know the president is serious about keeping his promise to protect the middle class when you see him following through on this short list.
Martin Berg is editor of WheresOurMoney.org.