A lot of people have wondered why President Barack Obama chose to expend political capital in his first year in office by reforming health care instead of addressing the jobs crisis created by the financial collapse of 2008 — a collapse that tipped a close electoral race to Obama and gave him a runaway victory.
In reality, Obama wasn’t ignoring the economy at all. It just depends on which economy you’re talking about. For Wall Street, there was easy money on friendly terms: the Bush-Paulson bailout for fiscal malefactors, Part 2. For Main Street, there was a seat on the back of the bus, while unemployment crested to depression levels and millions of homes were foreclosed by banks that didn’t necessarily own them.
In January 2010, as the health care bill seemed to be unraveling (and the Obama presidency with it), Obama declared in his State of the Union Address that jobs would be his No. 1 priority. As things turned out, Nancy Pelosi saved the bill, a bonanza for the health care industry that gave it 30 million new taxpayer-supported customers and enshrined for-profit medicine, the single most disastrous drain on the American economy, for another generation. With that victory securely under his belt, jobs got lost again on the president’s agenda. Instead, he decided that the really urgent concern of the country was to get the federal budget deficit under control. He appointed a commission chaired by an ultraconservative former Republican senator, Alan Simpson, and a Democratic counterpart, former Clinton Chief of Staff Erskine Bowles, to come up with a long-term strategy for deficit reduction.
Now, most deficits have been cured in the past by (a) raising taxes and (b) inflating the economy. Bill Clinton fixed the debt problem bequeathed by George H.W. Bush — itself caused largely by the recession that followed the Savings and Loan debacle of the 1980s — by allowing Federal Reserve Board chair Alan Greenspan to blow one of his exotic bubbles, pushing up stock prices and nominal revenues on the illusory strength of a high-tech boom that was supposed to shower riches on us all. Clinton also raised taxes (again nominally) on the rich, who countered easily by hiring more accountants to creatively shelter their wealth in a tax code with more loopholes than a late De Kooning. The result was that Clinton was able to show a $230 billion budget surplus when he left office. It was smoke and mirrors, and the high-tech bubble was already collapsing by 2000, but hey, that’s why we have a two-term limit on the presidency. No incumbent can project his flim-flam longer than eight years.
Then came the Bush debacle. George W. Bush rammed tax cuts through a complaisant Congress while embarking on two wars. Greenspan engineered another bubble to prime the stock market for a fresh run, this time with far more disastrous consequences. The high-tech bubble shook up some investor and pension portfolios. The new housing bubble undercut the basic source of wealth — home equity — for tens of millions of Americans. In the end, it would deprive many of them of simple shelter.
The price of these policies, wars without end that have already engendered more than $3 trillion in current and long-term costs, and a worldwide financial implosion that swallowed $60 trillion in a flash cratered the federal budget, sending deficits above $1 trillion annually. What to do? Obama wouldn’t touch the sinkhole of the Iraqi and Afghan wars. Rather, he first doubled and then tripled down on the latter while quietly ensuring that America would retain a costly military presence in Baghdad for years to come. Nor would he allow the Bush-era tax cuts for the wealthy to expire on schedule at the end of 2010, despite still having Democratic majorities in both houses of Congress.
As for the Bowles-Simpson Commission, its proposals for draconian cuts in Medicare and Social Security benefits were dead on arrival, and Obama carefully sidestepped them. However, the Commission turned out to be a stalking-horse to revive Republican scare stories about so-called entitlements, to which it gave fresh credence. The establishment media swallowed the bait with more than a little eagerness. Instead of regarding cuts in the two major 20th-century social welfare programs as the breach of a social contract — one for which Americans have paid heavily through the most regressive taxation of any modern nation — Bowles and Simpson were hailed as truth-tellers whose wisdom was sooner or later bound to prevail.
As it turns out, it’s been sooner. The Republicans held the budget process and debt ceiling extension hostage to their demands for budget cuts, and at each artificial crisis the president not only caved but went the supposed opposition party one further, warning that painful and permanent reductions lay ahead. It was Obama, in fact, not the Republicans, who put these reductions on the table in the farcical negotiations over the debt ceiling in August. The result was a congressional committee of 12 (now expanded to 36) to put the remnants of the welfare state on the chopping block. Bowles-Simpson laid the indispensable groundwork for the sellout. But Congress, especially acting in a “bipartisan” fashion, can actually close the deal.
As for jobs? Obama suddenly remembered them when his poll numbers plunged so alarmingly that the one job that seems to compel his attention, his own, was at stake. For weeks he advertised a major speech that would put America on the road back to work. When he finally delivered it, it turned out to be an extension of previous payroll tax cuts and unemployment benefits, tax incentives for businesses to hire workers, and a revival of his earlier call to invest $50 billion in infrastructure repair. The latter, not even a Band-Aid on America’s $2-trillion maintenance backlog, was to be paid for by taxes, which as the President well knew, stood no chance of passing in the now Republican-controlled House of Representatives.
Even by the cynical standards of the White House, the new American Jobs Act — not in fact an actual bill because our president can’t be bothered to send detailed legislation to Congress — was singularly bankrupt, and in the face of a further economic contraction, now almost regarded as certain — a frightening signal of paralysis, indifference or both. Of course, it did enable Obama to get back on the campaign trail for a couple of weeks to urge his weary base to join him in the “fight” for jobs.
There is no such fight, and it seems past time to recognize this administration for what it is. If every time Barack Obama mouths the word “jobs,” you substitute “cuts,” you will get the gist of his agenda. That’s the shell game. What he is presiding over, to all appearances deliberately and not unskillfully, is the managed destruction of the American middle class. The powers he serves have decided that, with corporate profits healthier than ever in a workless economy, it is time to accustom the country to a pre-1929 world of unbridled speculation, unmitigated exploitation and no safety net.
Want to figure out what a second Obama administration will be like? Imagine things if Herbert Hoover had been elected to a second term in 1932. For Hoover, the budget had to be balanced at any cost, and government needed to interfere as little as possible with the sacred flow of capital — even if it wasn’t flowing at all. Now, Hoover was not a bad man — in fact, he was a much better one than Obama, and far more qualified by experience and public service to be president. But he was blinkered by the ideas of his time and class, and these destroyed him. Obama knows better, and therefore his actions are worse.
Oh, well. Look on the bright side: you may be able to vote for Rick Perry in 2012.
Robert Zaller a professor oh history. He can be reached at [email protected].