It’s not working. Time for the president to concede that the economy is at best stagnating and at worst about to take another steep nosedive. I don’t know if we are headed for another Great Depression, as Nobel Prize economist Paul Krugman dared suggest recently, but it is amply clear that the Barack Obama strategy, inherited from George W. Bush, of bailing out Wall Street in the forlorn hope that it would repair the economic damage the fat cats inflicted on the rest of us has not worked.
The housing market remains in dire shape, and with it the nest eggs of Americans who are responding by squelching their appetite for consumption. The Wall Street hustlers were made whole, but not so the people whose home mortgages the banks are foreclosing, or businesses and their customers looking for the credit that the banks had promised to free up.
The president conceded last week that our economy is 8 million jobs in the hole despite his bailout and stimulus program. With deficits running wild, heartless Republicans get to claim that six months more of unemployment insurance to 1.7 million out-of-work people whose benefits have ended is more than we can afford.
Of course it’s not. That would be a $34 billion outlay to people who would actually spend the money instead of using it for acquisitions, as the big banks have done with far larger gifts of taxpayer funds. That the Republicans who favor huge military spending and tax breaks for the rich and who launched the Wall Street bailout are being hypocritical scoundrels when they say we don’t have the money to help ordinary folks is obvious. But the problem is that Barack Obama embraced the GOP strategy, and the failures of the bailouts to turn the economy around, along with the cost of two wars, are now his problems to explain.
What we need is for the president’s economic hotshots, Timothy Geithner and Lawrence Summers, to grant damaging interviews to Rolling Stone, as Gen. Stanley McChrystal recently did in self-destructing. Perhaps then President Obama would have the gumption to fire the misleaders of his economic team.
It was always bizarre that those two, who did so much to wreck the economy, were put in charge of the effort to salvage it. Their previous records should have provided ample warning that their economic outlook begins and ends with the demands of Wall Street.
It was Geithner who, as head of the New York Fed, presided over the $180 billion bailout of AIG, which, as revealed by the 500-page documented record of that travesty released last week by the Financial Crisis Inquiry Commission, was a scam to pass taxpayer money to Goldman Sachs and the other large banks that had created the problem.
And it was Summers who, as President Bill Clinton’s treasury secretary, pushed through the Commodity Futures Modernization Act, which guaranteed “legal certainty” for the toxic derivatives packages that Goldman and the others sold. At the time, Summers assured Congress that “the parties to these kinds of contracts are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves from fraud and counterparty insolvencies.”
For such not-so-prescient but very convenient insight, Goldman Sachs rewarded Summers with $200,000 for two speeches he gave to its executives while he was an adviser to candidate Obama. Not surprisingly, the new financial regulations proposed by this administration and soon to be signed into law let Goldman and the others so much at fault off the hook.
There is enormous and justifiable populist outrage out there over the antics of a runaway Wall Street that is not being held accountable. Obama could tap into that outrage by taking his cues from a true populist, Democratic Sen. Russ Feingold of Wisconsin. One of only eight senators to vote against the Clinton-backed 1999 repeal of the Glass-Steagall Act, which had done so much to protect the economy, Feingold voted against the Bush bailout, too, and is now breaking with Obama on his so-called financial reform:
“The bill does not eliminate the risk to our economy posed by ‘too big to fail’ financial firms, nor does it restore the proven safeguards established after the Great Depression, which separated Main Street banks from big Wall Street firms and are essential to preventing another economic meltdown. The recent financial crisis triggered the nation’s worst recession since the Great Depression. The bill should have included reforms to prevent another such crisis. Regrettably, it did not.”
The president’s record on the economy is even worse than his performance in Afghanistan, and a reversal of course is much in order. If he doesn’t get the message now, the voters will give it to him loud and clear come the November midterm elections.
Robert Scheer is editor of truthdig.com, where this column originally appeared. E-mail Robert Scheer at email@example.com.
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