The beginning was the end
“Serious” Democrats, the ones with long faces who tell us we have no reason to be disappointed in Barack Obama and that if we don’t buck up, they won’t be responsible for the outcome, use an argument designed to make us ashamed of being disappointed. “He never said he was a liberal during the campaign! What did you expect, Norman Thomas? How foolish of you!”
Except the very thing that has hung up this Administration from the very beginning is something which represents a departure from his campaign. I’m talking about assembling his less-than-stellar economic team and their less-than-New-Deal response to the crisis. Now admittedly we did not know in detail the arcana of the economic thinking around Obama the candidate. None but insiders did. But I think it was reasonable to suppose inasmuch as he was running against Hillary Clinton, who had been using many of the same hacks that inhabited her husband’s Administration, that we would not see Bill Clinton hacks in the Obama Administration. But lo! and behold! who is running the show? Why it’s Larry Summers and Timothy Geithner! The former, before becoming Clinton’s Treasury Secretary, was mentored by Robert Rubin, the Goldman Sachs partner who introduced Neoliberalism into the way our former DLC President did business.
Neoliberalism holds that capital markets are so frightfully efficient that any attempt by mere mortals to even fuss around the edges is bound to certain doom. It was Rubin who granted one of Republicans’ fondest, long-held wishes. He gave the go-ahead for repeal of Glass-Steagall, a New Deal law which prohibited the joining of an investment bank, which was free to engage in highly risky trades because it only jeopardized its own partners or shareholders, with a commercial bank, which took deposits from ordinary schmoes like us, incapable of understanding the miracle that are capital exchanges, whose deposits are guaranteed by an agency of the federal government. One wonders how the admiration for the wonders of how capital now travels at the speed of light around the world pursuant to financial “products” that are so arcane that it takes computer algorithms to track them requires even stodgy commercial banks to put themselves at risk. But I guess the problem was that the neoliberals failed to consider that even if the market itself was efficient, it did not prevent market actors from acting imprudently. Alan Greenspan would later act completely dumbfounded when he acknowledged that that is exactly what happened. (Greenspan was never a Neoliberal. He was more of a Paleocapitalist. But on this point they agreed.)
Let’s not get caught up with Bill Clinton, however, or we will have to go down very dark alleys of capitulation and surrender to the right wing of this country. We can perhaps illustrate all those many betrayals in one fell swoop by simply saying one name: Dick Morris.
Summers was so reliably pro-Wall Street that after he left government, he was hired as an adviser to a hedge fund.
Geithner was Summer’s own protegee, who left to run the Federal Reserve Bank of New York, where he was able and willing to craft a bailout for the Bush Administration that saved the banks and did next to nothing for their victims.
Now, I ask you, were we who supported Barack Obama entitled to think that he would not be bringing these people back? But he did!
And it’s worse than that. Obama actually had much better advisers during the campaign. The kind that weren’t “Serious Democrats.” In an online article for The New York Review of Books, Paul Krugman and Robin Wells describe Noam Scheiber’s analysis of Obama’s campaign advisers (from his new book The Escape Artists: How Obama’s Team Fumbled the Recovery (NY: Simon & Schuster: 2012)):
In its early stages, Scheiber tells us, Obama’s campaign relied for policy advice on “obscure academics, contrarian gadflies, and past-their-prime bureaucrats,” like Austan Goolsbee, a young economics professor from the University of Chicago, and Paul Volcker, the octogenarian though still vigorous former chairman of the Federal Reserve. But by September 2008, another economic group had formed and begun competing for influence, composed of “well-heeled insiders. Most [of them] had worked for former Clinton Treasury secretary Robert Rubin.” Rubin had been a partner at Goldman Sachs before joining the Clinton administration; after leaving, he became a director and counselor, and then chairman, of Citigroup.
Soon, the latecomers had completely superseded the early team. For example, the person charged with vetting potential economic hires was Jason Furman, a seasoned Washington economist who ran the Hamilton Project, a neoliberal think tank founded by Rubin and funded by Democratic-friendly financiers. Mike Froman, an aide to Rubin during his tenure as treasury secretary who then followed Rubin to Citigroup, was the personnel chief of Obama’s transition team. It was he who put forward Larry Summers and Tim Geithner as the leading candidates for treasury secretary.
Now this was a change from the campaign to the Administration. It also happens to be the one that led to the decision first to seek a stimulus that was far smaller than was necessary under the circumstances of the crisis and then to remove real money from the package and replace it with non-stimulative tax breaks to appeal for GOP votes. The GOP did not negotiate this largesse; it was handed them. So they got a gift and still not a one voted for it. (Their ability to re-take the government depended on the economy failing, so why sign on the program of the guy you want to topple?) It was such brain-numbing stupidity that the only explanation was: Who could see this coming? Well, perhaps the Clinton economic team whose tax-raising first budget was designed to balance the budget (what Republicans clamor is their most ardent wish until they are in power). And guess what happened? Not one Republican voted for that either! And they retook Congress the next election! Some people don’t need a mule to kick them in the head the second time. Not so this economic team.
This change in personnel and substance from that of the campaign would be the original failure of this Administration. One whose characteristics would be repeated in other failures. And it certainly gives a lie to the “Serious Democrats” who tell us that we shouldn’t complain because he never promised specific liberal policies, he only promised us the Rose Garden.