Ryan Lizza's inside look at the Obama administration's response to the economic crisis today in the New Yorker is worth a read. While economic analysis at the time--including the analysis of Christina Romer, the chair of the White House council of economic advisors--believed that $1.2 trillion in stimulus was needed, the incoming Obama administration thought that even asking for a stimulus of that size was not politically feasible. And so, as Paul Krugman repeatedly argued at the time, we ended up with about half of the stimulus we needed.
Maybe it wasn't possible to pass a $1.2 trillion stimulus in early 2009. However, this was due as much to Congress passing a $700 billion Wall Street bailout in October 2008 as it was to anything else. From October 2008 through February 2009, Congress did actually pass more than $1.2 trillion in economic stimulus. The problem was that, in the form of the Wall Street bailout, most of that money went to the same people financial institutions who caused the economic meltdown.
Perhaps the distinction between the stimulus and the bailout is clear in the minds of most economists and policy wonks, but it is not clear to many Americans. As such, passing the Wall Street bailout imposed a huge opportunity cost on the amount of money the Obama administration could realistically ask for in the February stimulus / jobs package. If they had not asked for $700 billion to hand over to Wall Street, they might very well have been able to ask for, and pass, the $1.2 trillion needed in the stimulus package.
Imagine if Democrats had passed $1.3 trillion in stimulus rather than $700 billion in bailouts and $600 billion in stimulus:
- It would have worked better, thus improving economic conditions faster and more effectively.
(Even if you think that the bailout was necessary, it was not necessary for the Treasury Department, via Congress, to directly participate. The Federal Reserve Bank has conducted a mach larger bailout of Wall Street than the one approved by Congress and conducted by the Treasury Department. If a large scale bailout of financial institutions was actually necessary, then the Fed's seemingly unlimited bailout ability could simply have been increased to cover for the $700 billion Congress passed on. TARP was a small portion of the overall federal lending program to financial institutions, and as such a far cry from the lynchpin that saved us from disaster. The Wall Street bailout did not have to be done with any taxpayer money.)
- The improved economic conditions would have made Democrats look better and more effective at governance. Further, the liberal economic philosophies under-girding the stimulus would now appear more sound to the electorate as a whole.
- The improved economic conditions would have resulted in a smaller decline in immigration, a decline which is doing real damage to the long-term demographic trends that made a Democratic realignment possible.
- Instead of joining with Republicans in handing over hundreds of billions to the same rich assholes who damaging the lives of most Americans, Democrats would instead have been standing up entirely for the millions of Americans who were hurt by those assholes.
Because of their original complicity, and current ownership, of the Wall Street bailout, Democrats now:
- Have weaker economic conditions than were necessary;
- Have instilled little confidence in the philosophies underlying their policies;
- Are facing less favorable demographic trends;
- Have muddled their image as the party standing up for average Americans against powerful, moneyed interests.
The political implications of this are that we are heading for a close election rather than a realignment. This is because, as Digby points out in a review of Michael Moore's new film, we handed over the populist, anti-corporate messaging to the teabaggers:
Having said all that, there is great, HUGE value in this movie as an emotional, populist polemic for the left, something I've been screaming about since the beginning of the financial crisis. It's extremely disheartening to see the administration and so many Democrats in congress completely ignore the political and policy ramifications of failing to engage in fundamental financial reform and fiery populist rhetoric at a time like this. This teabagger movement is happening in a vacuum created by a lack of interest in this topic by liberals who are so enamored of being members of the new "creative class" and the like that they aren't paying attention to the cynicism and anger that's reaching critical mass among average working stiffs out there. It's easy to dismiss it, but very, very foolish. The issues Moore raises in this film will be answered on the right with authoritarianism, militarism, immigrant bashing and violence. It's a recipe for disaster unless the left takes this on in direct, political terms.
It is incredibly frustrating that Democrats have both not implemented the policies needed to turn the economy around for most Americans, while simultaneously handing over the mantle of economic populism to right-wing corporate astroturf groups (some of whom are funded by the very bailouts they are protesting). I fear a generational policy and political opportunity has been wasted.
Not that we should have expected anything different given the Democrats we elected. Nothing in their actions or campaign rhetoric leading up to the 2008 elections would have given on the impression that we were electing populist crusaders willing to take on excessive corporate influence in government. Barack Obama central campaign plank was non-ideological bipartisanship, for crying out loud. Now, he is trapped by that image, as well as by the bailout. It is too bad, because if there was ever a good time for populist, progressive, anti-corporate leadership, its right now. |
