I had an interesting conversation with an old friend the other night. He was telling me how Cabela’s, the big mail order outdoor sports company, was having a run on guns and ammunition. His brother had ordered some ammunition and it was on back order because of the demand. He had ordered some shell-making supplies and they, too, were back-ordered.
Both of us wondered about this run at a time when many outdoor people switch from shotgun to fishing rod. All he could say is, “Something’s going on.” For all the talk about this country turning a corner in this economic crisis, there are folks out there who don’t share that optimism. With Barack Obama rapidly approaching the end of his hundred days, it is clear this is no New Deal. While his personal popularity remains high, all those guns and ammunition being ordered at Cabelas suggests that support may be soft.
Meanwhile on the right, things are not much better. After Rush Limbaugh issued a call to arms to conservatives, John McCain’s daughter made the front pages with her speech to the gay Log Cabin Republicans. Meghan McCain told the gathering:
“I think we’re seeing a war brewing in the Republican Party. But it is not between us and Democrats. It is not between us and liberals. It is between the future and the past.
She went on describe what she termed “old school Republicans” as “scared s**tless” of the future.
Maybe a better title for the theme of this month’s edition should be question month, for as the cherry blossoms fell in a rain in Washington and the rest of the nation moved tentatively into spring, the air is full of unanswered questions that have everyone checking the stock market, which has bounced up and down like a yo-yo, and looking over their shoulders for whatever might be behind them.
Obama’s Hundred Days
Appraisals of Barack Obama’s first hundred days have been mixed. Forget the ranting right which would only be satisfied with Rush Limbaugh in the White House with Sarah Palin as VP. On the left, Naomi Klein penned a “Lexicon of Disappointment” that begins:
All is not well in Obamafanland. It’s not clear exactly what accounts for the change of mood. Maybe it was the rancid smell emanating from Treasury’s latest bank bailout.
Vince Warren wrote in the Progressive of “Obama’s first 100 Days: rhetoric loftier than actions.”
In many areas of critical importance — like human rights, torture, rendition, secrecy and surveillance — his words have been loftier than his actions.
The AFL-CIO Working Families listserv headlined its analysis “An Amazing Hundred Days,” but gone are the references to FDR. Instead the unions seemd to be saying the best thing about Obama was that he was not George W. Bush. Their list of accomplishments included appointing a pro-union Labor Secretary, signing the Lilly Ledbetter Fair Pay Act, passing the childrens’ health insurance bill Bush had vetoed, repealing Bush’s anti-labor executive orders and appointing a task force on middle class working families.
The Obama Question
Many years ago, James MacGregor Burns’ final judgment of Bill Clinton captured the essence of the Clinton Presidency:
The health bill defeat strengthened the hand of those in the administration who wanted the president to follow a political strategy of centrism, moderation, and bipartisanship, operating in the middle of the political and ideological spectrum. Urging transactional rather than transformational leadership, they would have the White House negotiate with friends and foes, left and right, on an ad hoc step-by-step basis.
This was the incrementalism of “policy bites,” such as favoring school uniforms or advising mothers how to put their children in seat belts.
Note that Burns says nothing about Monica Lewinsky or Clinton’s impeachment, for to him Clinton’s failures were of a different order. Instead, Burns hones in on Clinton’s leadership qualities, viewing his two terms as the story of someone who promised transformation but instead became famous for triangulation.
The question many are beginning to ask about Barack Obama is whether Burns’ analysis of Clinton also applies to this President. The campaign and the Inaugural Address promised us transformation. The decision that shut down Guantanamo seemed to signal the end of the Bush years and has had the transformational impact of vetting the entire Bush torture operation. For someone new to the White House, Obama hit the ground running, unleashing a flurry of legislation that had some comparing the early days of his administration with the Hundred Days of Franklin Roosevelt.
The Torture Controversy
But now that Barack Obama’s hundred days are nearing their end, it is clear we have no second New Deal. Instead there is the fear we may be getting the same old deal. While the left wing blogs cannot seem to find enough bytes to expend on the recent revelations about torture, shouting for Obama to investigate if not indict George Bush and Dick Cheney, they have soured on Obama because thus far he has not taken up their calls for revenge.
The information that has become public about the despicable official policies of Bush and Cheney represents one of the low points in American Presidential history. As a first generation American whose family suffered under the Nazis I take a back seat to no one in wanting to see the guilty punished.
However, I believe the bloggers are missing something, as usual. Barack Obama’s claims to transformational leadership will not rise or fall on whether he indicts Bush and Cheney, but rather will rest on how he deals with the current economic crisis. It is here that his Presidency is starting to resemble Bill Clinton’s, which in turn I have compared with Grover Cleveland’s.
Clinton and Cleveland
The major similarity between Cleveland and Clinton is their mutual dalliance with big business. Cleveland was a laissez faire type who when he vetoed an 1887 bill that would have provided free seed to drought-stricken farmers wrote:
The lesson should constantly be enforced that though the people support the government, the government should not support the people. ..Federal aid, in such cases, encourages the expectations of paternal care on the part of the government and weakens the sturdiness of our national character. (Quoted in Richard Welch, The Presidencies of Grover Cleveland, p. 14)
Like Grover Cleveland, the Democratic Leadership Council which Bill Clinton helped to found sought a truce with corporate America, a dalliance that has proven far more important than the one with Lewinsky. The seminal document of the DLC was the 1990 New Orleans Declaration which outlined 15 principles. The Declaration mixed traditional liberal beliefs such as inclusion, civil rights, and progressive taxation with a more conservative economic philosophy. The principles included:
We believe the promise of America is equal opportunity, not equal outcomes.
We believe the Democratic Party’s fundamental mission is to expand opportunity, not government.
We believe that all claims on government are not equal. Our leaders must reject demands that are less worthy, and hold to clear governing priorities.
We believe that economic growth is the prerequisite to expanding opportunity for everyone. The free market, regulated in the public interest, is the best engine of general prosperity.
In a sentence that surely contains more contradictions in the least number of words than just about anything written by an American politician, Bill Clinton, who was elected chair of the DLC at that New Orleans meeting, declared:
We had issued a statement of principles intended to move beyond the tired partisan debate in Washington by creating a dynamic but centrist progressive movement of new ideas rooted in traditional American values. (My Life, pp. 364-365)
Anyone who can explain what is meant by “a dynamic but centrist progressive movement” deserves an endowed chair at Harvard, because reading these words today they make no sense other than as gibberish or an impenetrable tangle of contradictions.
Obama and Clinton
During the Clinton years the prime example of the theme of acquiescence to big business was his signing the repeal of the Glass-Steagall Banking Act championed by his Treasury Secretary Robert Rubin (can anyone name Cleveland’s Treasury Secretary? Answer at the bottom), who no sooner than Clinton’s signature was dry on the bill and one of the coveted ceremonial pens awarded to Citigroup head Sandy Weill left Treasury to work for Weill, who at that time was the prime promoter and beneficiary of the bill.
I have recently written about how Barack Obama has entered into the perfect storm of this crisis with two of Clinton’s lieutenants at the helm–Lawrence Summers and Timothy Geithener. Now the why-does-it-always-take-them-so-long press has begun to uncover the seamy side of Obama’s economic team.
It seems Summers earned millions working at a hedge fund and speaking to banks such as guess who. According to Bloomberg News:
Hedge fund D.E. Shaw & Co. paid Summers more than $5 million in salary and other compensation in the past 16 months, according to a financial disclosure form released by the White House yesterday. Summers served as a managing director at the New York-based firm. Summers, a former Treasury secretary, also earned more than $2.7 million in speaking fees.
As for Geithner, he enjoyed a cozy relationship with the very Wall Street firms he regulated while head of the New York area Federal Reserve bank. A recent New York Times piece charges Geithner:
Forged unusually close relationships with executives of Wall Street’s giant financial institutions. His actions, as a regulator and later a bailout king, often aligned with the industry’s interests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.
According to the Times when asked what might be done to solve the financial crisis the then head of the N.Y. Federal Reserve Bank proposed:
Asking Congress to give the president broad power to guarantee all the debt in the banking system, according to two participants, including Michele Davis, then an assistant Treasury secretary.
As the Times details, this essentially provided the blueprint for Geithner’s actions since then, including his term as Barack Obama’s Treasury Secretary.
Barack Obama’s current economic policy stems from these two, whose relationship to the financial industry is reminiscent of that of their mentor and former boss, Robert Rubin. So far the Obama Administration’s financial policies have mirrored Clinton’s right down to hiring two of his former employees.
The Financial Crisis
Those who wonder whether Barack Obama is a triangulator rather than a transformational leader would do well to start with the financial crisis. Banks now are falling all over each other to return their bailout money (which admittedly came mostly from George Bush) because it has had the unintended consequence of labeling them as failures. All of a sudden these modern J.P. Morgans are crying loudly that they never needed the bailout money, that it was forced on them by the sins of a few bad apples.
But there are a couple of ominous developments occurring as usual beneath the radar screens of the mainstream press that could decide whether this financial crisis does slide into a full-blown depression. I have the theory that the banks are lining up to return their bailout money because at the same time they are putting the screws to a lot of creditors. If they kept the bailout money, people would be howling over their calling in loans from businesses across the country. But if they return the money they can behave like the Scrooges they are.
In towns across the country once venerable businesses are having to shut their doors because the bankers are calling in their loans. We have forgotten the December incident where workers at Chicago’s Republic Windows and Doors occupied the plant where they worked and were abruptly laid off.
As reporters interviewed workers and speakers fired up the crowd, the printed signs they held pointed to the true culprit in the case:
Billions for Bank of America, $0 for workers.
Bank of America you got paid out we got sold out.
Workers zeroed in on the bank because they claimed it had cut off credit to the company. Notice also the theme of those signs: Bank of America received bailout money and yet was putting people out of work. A Bank of America official issued a statement whose precisely vague language all but confirmed the charge:
Because of our client confidentiality obligations, we cannot comment on any individual clients’ situations. Neither Bank of America nor any other third party lender to the company has the right to control whether the company complies with applicable laws or honors its commitments to its employees.
Systemic Implications
In systems terms the banks are behaving exactly the opposite of what is needed to stem this crisis. Many of us have been sayi8ng for some time that this depression is a credit crisis where both individuals and businesses are finding it increasingly difficult to obtain the loans necessary to keep their heads above water. The banks have tightened the credit rules even as they continue to engage in financial activities Glass-Steagall would have prohibited.
Unable to obtain credit, homeowners default on their mortgages while businesses like Republic close their doors. That some deserve to fail may be true, but the banks seem to be taking a particularly Darwinian view that is reminiscent of the 1890s (more on this next month).
The tightening credit crisis creates what systems people term a negative reinforcing loop as the economy spirals out of control even as the banks tighten the screws. Each bankruptcy reinforces another because businesses like Republic in turn owe suppliers who no longer have that income and default on their loans.
Businesses need to be able to lower prices not raise them, but the greedy Mr. Potters of the banking world are making that impossible. Systemically everything is headed in the wrong direction, tightening instead of loosening, concentrating instead of diversifying.
The Second Sin
The second–and even scarier–response of the Obama Administration lies in its failure to enforce existing banking laws. Three banks have been in violation of the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act which states:
The Board may not approve an application pursuant to paragraph (1)(A) if the applicant (including all insured depository institutions which are affiliates of the applicant)controls, or upon consummation of the acquisition for which such application is filed would control, more than 10 percent of the total amount of deposits of insured depository institutions in the United States.
Those three banks–Bank of America (of the Republic Window strike), Wells Fargo and J.P. Morgan–now control an estimated 40% of the banking market. In a must-read article in the Atlantic, “The Quiet Coup,” Simon Johnson points out that financial concentration in this country now rivals that of the Gilded Age.
Beyond the fact these institutions are breaking the law are the systemic consequences of this concentration. In what may be the ultimate post-Cold War irony, Johnson says the economic situation in the United States is coming to resemble the oligarchy that now dominates the former Soviet Union.
Anyone with even a small amount of systems knowledge will tell you such concentration is extremely dangerous because it inhibits the ability of a system to adapt to change or cope with a crisis. Systems from ecological communities to human communities that become concentrated inevitably experience either huge shocks when the system proves unable to adapt or simply fail.
Curiously this point was made in a 2007 report by none other than Timothy Geithner’s New York Federal Reserve. It stated:
As financial markets become increasingly dominated by the same set of financial
firms, these firms may also become more and more alike, thus actually increasing the risk of exposure to common aggregate shocks.
Barack Obama’s failure to reign in this concentration based on advice from the Wall Street Twins, Summers and Geithner, could doom his Presidency even before it has really hit stride. The time to act on this one was yesterday. In fact Obama’s failure to prosecute the law-breaking banks is eerily similar to his refusal to prosecute the torturers.
The Stimulus Bill
As the weeks have passed the stimulus bill is appearing a thrown-together contraption that focuses on the wrong areas and when it does focus on the right ones in some instances does it poorly.
This Christmas Tree Bill to end all Christmas tree bills waddles like an overweight porker, which is hardly what we require for this crisis. Of the wrong ideas in the bill perhaps the most inexplicable is its call for a national health care record-keeping system. Even if it is needed it does not belong in this bill. The bill’s record-keeping provision also has too few safeguards to assuage those who fear national health care record-keeping may open the door to abuse by insurers and others.
Other parts of the stimulus bill are problematical. The ridiculously low rebates will not help struggling families who will use them to pay bills from greedy bankers and the credit card companies they own , not stimulate the economy. Aid to education, which is in deep trouble, is too closely tied to the discredited and wrong-headed No Child Left Behind law.
All this adds up to a less-than-stellar one hundred days.
Leaving the Ship
On reason may be that the President made what I think is a disastrous mistake in deciding to go on a world tour that has left people wondering who was minding the store. While America’s economic situation continued to worsen Obama was presenting a book to Hugo Chavez. During his hundred days, FDR never left the country–and not merely because his disability made travel difficult.
During those tumultuous times, people did not want the captain to leave the ship. These times may not yet resemble the Depression. There are no dust storms and no Hoovervilles sprouting, but the atmosphere is ominous. As my friend said about those gun and ammunition sales, just call it a feeling.
Obama’s leaving the country when he did and for as long as he has seems to send the signal that with his stimulus package everything is now OK. Either that or the White House has run out of ideas. Yet down on Main Street none of its benefits have trickled down.
In the same conversation I had with my friend we talked about the town we both think of as home. The latest news he had was of the closing of a long-time auto dealer and a cafe that has been there seemingly forever. Both are victims of the crisis. The auto dealer has managed to put his dealership back together but without the long-standing franchise he had with Detroit.
The dealer where I take my car is in the same boat and sent a newsletter to long-time customers saying they were still going to be in business. But at the same time he announced the formation of an auto club with a points system like the airlines to use. The points go towards the purchase of your next car.
All this indicates that all of us need to pray I am wrong that Barack Obama is the second coming of Bill Clinton, for as James MacGregor Burns would point out we do not need triangulation–we already know where we are. We need a transformation.
Footnote to History
Cleveland’s Treasury Secretary was John Carlisle, a party hack whose prime qualifications were his terms as Speaker of the House and his support for low tariffs. His prime achievement was the repeal of the Sherman Silver Purchase Act which split the Democratic Party for a generation and precipitated William Jennings Bryan’s “Cross of Gold.”
Coda:
This essay is one where I got it wrong. For an updated view see “A Vision of Interdependency.”
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