There are times when one is left wondering whether every ‘Progressive’ politician is nothing more than a passing snake-oil salesman who accidentally got elected Mayor. Wherever they pop up in leadership positions, the same tell-tale signs are there of things not working on the ground, easily discerned consequences surprising the policy practitioners, and turning on demonised enemies in order to blame them for Paradise Lost. To the list of Blair and Sarkozy can now be added Barack Obama.
A good example is the Obama Health Bill: greatly trumpeted – but drawn up with too little cognisance of the existing infrastructure. Thus, faced with mounting debt and mushrooming costs from the new federal health-care law, many local governments are leaving the hospital business, shedding public facilities that are often the care provider of last resort.
In fact, over 20% of the America’s hospitals are owned by State governments. But many are drowning in debt caused by rising health-care costs, a spike in uninsured patients, cuts in Medicare and Medicaid – and payments on construction bonds sold in fatter times.
Local officials also predict an expensive future as new requirements—for technology, quality accounting and care coordination—start under the Bill, which became law in March. (This is an exact parallel of Health & Safety costs killing off small businesses in Britain: it represents – yet again – the dead, uncommercial hand of bureaucrats writing themselves a watchdog job for life).
As for increased watchdog powers over banks in general and Wall Street in particular, the President has been run ragged at every turn. Under Bush and the Friedmanite madness,
government regulation and oversight became heresy – but policymakers came to ignore the key difference between financial and other markets. Perhaps the market for groundnuts must decide, but Bourse-based markets have always been far too neurotic to leave entirely to themselves.
But once let off the leash, US finance dominated the real economy: not a dog at all in fact, but the frantic tale wagging the overexcited hounds of corporate America. Smart ways of financing new business ideas evolved into complex derivatives deals such as subprime-mortgage-backed securities and credit default swaps that were often little more than scams.
All of these challenges required a fundamental rethinking of the U.S. and global economy. Yet those who were most aligned with the reform side of Wall Street remained, for the most part, outside the Obamites’ tent. It was the pro-greed lobby like Summers and Geithner – acolytes of Bob Rubin, the former Clinton Treasury secretary who, along with former Fed chairman Alan Greenspan, had presided over many of the key deregulatory changes in the ’90s -who convinced Obama that the financial system they themselves had done so much to nurture was, on the whole, fine. As long as there were greater capital reserves, leverage limits, and more regulatory oversight, Wall Street could remain intact.
Obama allowed these old regime people to continue in office, and for this he must carry the can. He is left in the position in 2010 of obviously needing a lot more QE if he is to be re-elected (Bernanke as good as promised this at Jackson Hole) but after engendering Tea Party and centrist Democratic resistance to more government spending by pushing his health-care plan, the question is whether he has the actual or political capital required to deliver that. My view is most emphatically that he doesn’t: by the end of the process, Barack Obama has managed to alienate everyone from Blankfein to the US blue-collar classes.
Foreign policy remains a shambles not just of direction, but also tactics. Only yesterday it was revealed, for instance, that Iran has transferred assets out of European banks in order to defend itself against the effects of sanctions that are part of what Iranian officials have called an “economic war” against the country by the United States. Critics of the Administration continue to insist that sequestering those assets – vital for Iran’s ability to finance both the nuclear programme and its terrorist links – could have been achieved with minimal difficulty. It just seems not to have occurred to the President’s advisors to do it.
Even the initially much-hailed mortgage relief plan has turned sour. It’s hard to cock up a policy that involves giving people in arrears money so they can keep going – but the Obama White House managed that with ease. Millions of dollars were wasted giving support to cases whose indebtedness was beyond help. And now of course, the property sales figures for July are dire. Sales were down 27 percent from the previous month, and 26 percent from a year ago – and remember, only two US recessions in history have ever ended without a property boom.
Having disappointed his supporters and angered his opponents, Obama has sought out whipping boys wherever they could be found – to both distract attention, and suggest he might have cojones after all. BP had its ass kicked (and the action was deeply offensive to America’s most reliable ally), Wall St was promised a fight (but emerged almost unscathed), China has been accused of currency-market rigging (and thus real rapprochement with Beijing damaged), the EU for poor US trade figures (after US company Goldman Sachs had ‘advised’ Greece about how to defraud Brussels) and now today condemnation is being heaped upon China because it is restricting the export of rare New Century technology metals. What would the US do in their position – donate it to the Red Cross?
Obama’s 2008 has rapidly become Blair’s 1997: a tragically wasted opportunity to do some real good with the solid backing of the People. And Barack Obama really did promise so much: change we could believe in, a more outward-looking America, a reform of the financial system, and a clean sweep of all the idiots who said self-regulating markets and trickle-down wealth would eventually sort out the poor.
Nothing has changed, nothing has been reformed, liberal measures have been bungled, and the old Wall Street cronies retained. The President has betrayed those to whom he gave hope at home, and his real allies abroad. And in doing so, he has in turn betrayed his race.
The Slog 