A NEW DEAL FOR WHOM?
If this was a modern-day New Deal, it was a timid iteration that was not particularly concerned with the big-picture deterioration of average people’s economic situation—the wages that never grew, the rising incomes that always went to someone else. In terms of rhetoric, Barack Obama could be an eloquent champion of these people and their problems; it is thanks in part to his speeches that “inequality” became a mainstream political issue at all. But in terms of deeds, the Obama administration repeatedly sacrificed working people’s interests in the service of some greater goal, or for what Washington called “optics,” or for no discernible reason at all.
Things didn’t go down this way because helping average citizens during hard times is a utopian dream, but rather because those citizens’ interests conflicted with the interests of the upper strata. A choice between the two had to be made, and Obama made it.
The most notorious example was a Democratic proposal that would have allowed judges to modify homeowners’ mortgage debt when they filed for bankruptcy—a process called “cramdown” that would have been extremely helpful to millions of homeowners but would also have had unpleasant consequences for whoever it was who owned the mortgages. In 2008, Obama had announced he was in favor of cramdown, but when it came up in the Senate in April of 2009, the president and his team, in the concise description of Obama biographer Jonathan Alter, “wouldn’t lift a finger to help.”12 With the banks lobbying energetically against it, the measure naturally failed.
Fortunately, the original bank-bailout measure that had passed Congress under President Bush included a component that was supposed to assist homeowners who were underwater on their mortgages; unfortunately, it was implemented in such a way as to become another costly fiasco, sometimes actually worsening the homeowners’ situation. Neil Barofsky, one of Elizabeth Warren’s colleagues in overseeing the bailouts, met with Treasury Secretary Geithner in the fall of 2009 to talk it over. Here is how the meeting went, according to Barofsky’s memoir:
In defense of the program, Geithner finally blurted out, “We estimate that they can handle ten million foreclosures, over time,” referring to the banks. “This program will help foam the runway for them.”
A lightbulb went on for me. Elizabeth had been challenging Geithner on how the program was going to help home owners, and he had responded by citing how it would help the banks.13
Workers got the same treatment. As a presidential candidate, for example, Obama had loudly denounced the still-unpopular NAFTA; as president, he let such talk drift away. In Obama’s early days, labor’s highest priority in Washington was a legislative proposal called the Employee Free Choice Act, which would have made it easier for workers to bargain collectively with management, and might even have reversed the long slide in the unionized percentage of the workforce. Again, Obama declared himself in support of the measure; he had even voted for it as a U.S. senator. Again, though, as Wal-Mart and the Chamber of Commerce mobilized their lobbyists against the measure, the president’s audacity seemed to disappear. The White House simply chose to let it go. One detail that caught my eye at the time was the amazing number of erstwhile liberals that business interests had hired to do their lobbying on this matter: former assistants to John Kerry, to Rahm Emanuel, to several Democratic senators, even to the secretary of labor.14
When the president did take a bold stand, it sometimes came at the expense of those same working Americans. I am referring to the 2015 debate over the Trans-Pacific Partnership treaty, which aimed to extend the NAFTA pattern to many countries on the Pacific Rim. Predictably, the phrase “no-brainer” made its appearance again, most notably from the pencil of an economist who thought the question before us was not the treaty’s particulars but whether trade was a good thing. Obama himself, having spun a full one-eighty since his days criticizing NAFTA, accused the treaty’s opponents of stupidly wanting to “pull up the drawbridge and build a moat around ourselves.”15
The enlightened ones who knew better than to pull up the drawbridge were the industry groups—representatives of Big Pharma and Silicon Valley, for example—who got to advise the officials negotiating the partnership. Unsurprisingly, the treaty they produced will serve these industry groups well: like NAFTA, it is mainly designed to protect their investments abroad. For example, the TPP will help to obstruct trade in cheap generic pharmaceuticals and push people toward buying the expensive brand names. American workers will receive no such protections, of course; for them, it’s to be competition to the death. Their employers, on the other hand, will be further empowered to move operations at will, traveling to low-wage, nonunion locales as they see fit and suing countries for adopting policies that disrupt their profits.
Treating workers and owners in these sharply different ways has been the rule of the Obama years, but there have also been exceptions to it—big ones. The one great achievement of Obama’s presidency, the health insurance reform known as “Obamacare,” has many flaws, but it also subsidizes the purchase of coverage by people who otherwise can’t afford it. This detail was an important victory for the poor—and also a measure without which Obamacare could not accomplish the other things it does, such as stopping insurers from cancelling sick people’s insurance. Another triumph was the establishment of a Consumer Financial Protection Bureau in 2010, a much-needed regulatory agency that is supposed to keep an eye on predatory practices by payday loan shops, credit card companies, and the like. The CFPB is especially interesting to the historian of modern liberalism because its mission statement denounces debt products of the past that were “overly complicated” as well as “loans that [Americans] did not fully understand”—qualities that some well-graduated Democrats often think of in positive terms.16
One place where workers definitely came first was Obama’s 2012 reelection campaign. Economic conditions were still terrible for ordinary people, even though the recession was over by then, and while the Republican nominee, the wealthy venture-capitalist Mitt Romney, tried to blame Obama for this state of affairs, the Democrats had a reply that was simpler still. They played the class card. Obama gave the first of his many speeches deploring inequality in December of 2011 in the small town of Osawatomie, Kansas—symbolically important as John Brown’s hometown and as the place where Theodore Roosevelt announced his conversion to progressivism—and over the course of the next year populist rhetoric came to suffuse his party’s talk. All of it pointed to one single conclusion: rich-kid Romney, blue-ribbon fat cat, doesn’t get people like you. He “may get the economy, he may know how to make money, he may have made hundreds of millions for him and his investors,” an Obama adviser told journalist Dan Balz. “But every time he did, folks like you lost your pensions, lost your jobs, jobs got shipped overseas.”17
That’s how the campaign of 2012 came to feature the starkest proletarian appeals in many years. That’s how the Democratic convention became a long exercise in lighthearted class animus. And that’s how a Democratic Super PAC came to air a shattering TV commercial in which a worker at a paper company that had been taken over by Bain Capital, Romney’s firm, recalled how his new bosses instructed him to build a stage; when he had finished the job, those bosses climbed up on that stage and fired that worker and everyone else at the company. The commercial was so shockingly maudlin that, according to Balz, voters in Ohio could recall “specific details” about the spot even after it had not aired for seven weeks.18
Talk aside, the situation of working people has continued to deteriorate. Since the recession ended in June 2009, the country’s gross domestic product has grown by 13.8 percent; in that same period, salaries and wages have gone up a mere 1.8 percent. The economic clout of labor unions has continued to shrink, as the percentage of private sector workers who were members of a union has dwindled from 7.2 percent in 2009 to 6.6 percent in 2014. The “labor share” of the nation’s income, as I mentioned in the Introduction, declined sharply from its old postwar average; during the Obama pre
sidency it has stumbled along at or near its all-time lows.19
The “profit share,” meanwhile, has hit all-time highs, as has the Dow Jones Industrial Average, the NASDAQ, and Wall Street compensation. There’s been another novel factor as well. In the past, administrations taking office after a wave of corporate crime would often use high-profile prosecutions to signal that a tough new sheriff was on the job. Obama chose not to. Instead, his Justice Department let slide nearly every bit of bank misbehavior to make headlines, from the countless apparent frauds of the housing-bubble days to the huge LIBOR-fixing scam to the “robo-signing” mass-foreclosure scandal of 2010. All these outrages—and yet, according to one study, Federal prosecutions for white-collar crimes hit a twenty-year low in 2015.20
In a 2012 speech, the head of Obama’s Criminal Division, Lanny Breuer, announced that he was sometimes persuaded when banks and corporations asked him not to prosecute on the grounds that it might cause the company in question to fail and thus hurt the economy. “We must take into account the effect of an indictment on innocent employees and shareholders,” Breuer said, describing a courtesy that American prosecutors extend to no other group and that, by its nature, makes a joke of the idea of equality before the law.21
This was Clintonism on monster-truck tires. Not only is it more profitable to make your living by speculation than by working, but it puts you above the law as well.
THE OCEAN-LINER PRESIDENCY
Democrats lost control of the House of Representatives in 2011 and of the Senate in 2015. Although Obama was resoundingly reelected in 2012, he did little on equality issues once the Tea Party tidal wave hit the Washington beach.
By then he had already veered off in pursuit of a “Grand Bargain” in which Democrats would offer up their once-sacred social insurance programs to the budgetary knife if Republicans would consider tax increases. To co-chair the commission charged with hammering out the budget agreement, Obama even chose Erskine Bowles, the man who had been Clinton’s emissary to Newt Gingrich in the secret negotiations over privatizing Social Security.
The Bowles-Simpson Commission failed in its unsavory budget-balancing mission. So did all the other similar efforts of those years. No one outside Washington could really follow the two sides’ complicated budget battles, though they dragged on year after year. But Obama’s determination to win some great Clintonian victory over the federal deficit grew so strong that for a while it cancelled out nearly everything else that had once animated his hopeful supporters.
Obama still had his remarkable skill with words, but at some point the eloquent president reportedly lost his faith in persuasion.22 His presidency had its great moments, of course: the Osama bin Laden raid, the diplomatic recognition of Cuba, the deal with Iran. But on inequality he was reduced to making speeches.
To the dismal record of the later Obama years, leading liberal-class thinkers have responded in an entirely characteristic manner: by constructing a theory of American politics in which inactivity was the best anyone could hope for. Obama has not really disappointed at all. On the contrary, they’ve claimed, the powerlessness of the presidency has been one of the great determining facts of American history—a truth established by political science itself—and Obama has grappled with it as best he could. Presidents, wrote New York Times columnist Frank Bruni in 2015, are “not always mighty frigates parting the waters”; sometimes they’re “buoys on the tides of history, rising and falling with the swells.” The true problem, liberal thinkers concluded, were the whining, unrealistic idealists who expected so much from Obama—and of course those diabolical Republicans in Congress, constantly outmaneuvering the poor, powerless man in the Oval Office.23
By June 2015, Obama himself had taken to saying the same thing, relating to the comedian Marc Maron how he often had to tell his disappointed supporters that “you can’t get cynical or frustrated because you didn’t get all the way there immediately.” A little later he offered the classic metaphor for U.S. government inflexibility:
Sometimes the task of government is to make incremental improvements, or try to steer the ocean liner two degrees north or south, so that ten years from now, suddenly we’re in a very different place than we were. But at the time, at the moment, people may feel like, we need a 50 degree turn, we don’t need a two degree turn.… And you can’t turn 50 degrees.
And it’s not just because of corporate lobbyists, it’s not just because of big money, it’s because societies don’t turn 50 degrees. Democracies certainly don’t turn 50 degrees.24
It is easy to understand why pundits want to write apologetics for the president, and it is even easier to understand why Obama wants to describe his presidency in such a way. Having put so much faith in his transformative potential, his followers need to come to terms with how nontransformative he has been.
OCEAN LINERS WERE MEANT TO FLY
If our goal is to rescue the reputation of a hero who turned out to have clay feet, this is surely the way to go. Ocean liners are hard to turn. Presidents don’t have a lot of power. Republicans are in league with the devil.
If what we are concerned with is inequality, however, it would behoove us to admit the obvious forthrightly: that Obama could have done many things differently, that the Republicans aren’t superhuman, and that the presidency is in fact a powerful office.
It is so powerful that, even in Obama’s worst period, with Congress entirely in the hands of intransigent Republicans, it would still have been possible for the president to use the executive branch to do big and consequential things about inequality. To name just one: He might have resumed Franklin Roosevelt’s legacy on antitrust enforcement.
Allow me to explain. Not too long ago, monopolies and oligopolies were illegal in America. This was because our ancestors understood that concentrated economic power was incompatible with democracy and equality in all sorts of ways. Since the days of Ronald Reagan, however, every administration has chosen to drop the enforcement of the antitrust laws except in rare cases. This has come to mean that mergers and takeovers are permitted in nearly all instances, and achieving monopoly has once again become the obvious objective of every would-be business leader. From Big Pharma to Silicon Valley, everyone in the C-suites knows that this is the path to success today. “Competition is for losers,” they say. Unless your startup has a plan for cornering and using market power, you can forget about interest from venture capital.25
Tolerating such practices has had obvious consequences, both in our everyday economic lives—where citizens face unchallengeable economic power everywhere from beer to bookselling—and in terms of the gradual plutocratization of society. Unrestrained corporate power has naturally yielded unrestrained wealth for corporate leaders and their Wall Street backers.
Barack Obama could have changed this, and by extension, changed the political climate of the country merely by deciding to enforce the nation’s laws in the same way that administrations before Reagan did. The antitrust laws themselves were written a century ago and are still on the books. The current Republican Congress would have had little say in the matter. It would have been almost entirely up to the executive branch.
On this front and many others* Obama was completely free to act, especially before 2010, and even after the Republicans took Congress. The times certainly called for it, with Amazon, Google, and AB InBev romping the globe. Still, he did next to nothing. In fact, anti-monopoly investigations conducted by Obama’s Justice Department went from a barely breathing four in 2009 to a flat zero in 2014.26 (By way of contrast: In 1980, under a different Democratic administration, there were 65 such investigations.)
Let us return again to the financial crisis and the Wall Street bailouts—the episode that will define our politics for generations, that captured everything that is going wrong with the country, that ensured Obama’s election as president in the first place. To say that Obama fumbled this most critical issue is to understate the matter pretty dramatically. More to the point is the gre
at question of why he fumbled it so dramatically. Was it because the ocean liner couldn’t be turned?
On the contrary. It was fully within Obama’s power to react to the financial crisis in a more aggressive and appropriate way: laws were in place, there was ample precedent, he wasn’t forced to pick the men whom Democrat Senator Byron Dorgan plaintively called “the wrong people” for his economic team.27 It wasn’t the Republicans who made Obama choose Tim Geithner to run the bailouts or Attorney General Eric Holder to (not) prosecute dishonest bankers or Ben Bernanke to serve another term at the Fed.
It would have been good policy had Obama reacted to the financial crisis in a more aggressive and appropriate way—by which I mean, the economy would have recovered more quickly and the danger of a future crisis brought on by financial fraud or concentrated economic power would have been reduced.
It would have been massively popular had Obama swung the wheel of the ocean liner and reacted to the financial crisis in a more aggressive and appropriate way. Everyone admits this at least tacitly, even the architects of Obama’s bailout policies, who like to think of themselves as having resisted the public’s mindless baying for banker blood.28 Acting aggressively might also have countered the sham populism of the Tea Party movement and prevented the Republican reconquista of Congress.
There were countless opportunities for the kind of decisive action I am describing: Obama could have questioned or even unwound Bush’s bailouts; he could have fired the bad regulators who let it all happen; he could have stopped the AIG bonuses instead of having his team go on television to defend them; he could have pushed to allow bankruptcy judges to modify mortgages; he could have put the “zombie banks” into receivership; he could have shifted FBI agents back to white-collar crime; and so on.
Listen, Liberal: Or, What Ever Happened to the Party of the People? Page 14