How Obama Saved Capitalism and
Lost the Midterms
Timothy Egan, New York Times
The banking system was resuscitated by $700 billion in bailouts started by Bush (a fact unknown by a majority of Americans), and finished by Obama, with help from the Federal Reserve. It worked. The government is expected to break even on a risky bet to stabilize the global free market system. Had Obama followed the populist instincts of many in his party, the underpinnings of big capitalism could have collapsed. He did this without nationalizing banks, as other Democrats had urged.
Saving the American auto industry, which has been a huge drag on Obama’s political capital, is a monumental achievement that few appreciate, unless you live in Michigan. After getting their taxpayer lifeline from Obama, both General Motors and Chrysler are now making money by making cars. New plants are even scheduled to open. More than 1 million jobs would have disappeared had the domestic auto sector been liquidated.
“An apology is due Barack Obama,” wrote The Economist, which had opposed the $86 billion auto bailout. As for Government Motors: after emerging from bankruptcy, it will go public with a new stock offering in just a few weeks, and the United States government, with its 60 percent share of common stock, stands to make a profit. Yes, an industry was saved, and the government will probably make money on the deal — one of Obama’s signature economic successes.
Interest rates are at record lows. Corporate profits are lighting up boardrooms; it is one of the best years for earnings in a decade.
All of the above is good for capitalism, and should end any serious-minded discussion about Obama the socialist. But more than anything, the fact that the president took on the structural flaws of a broken free enterprise system instead of focusing on things that the average voter could understand explains why his party was routed on Tuesday. Obama got on the wrong side of voter anxiety in a decade of diminished fortunes.
The three signature accomplishments of his first two years — a health care law that will make life easier for millions of people, financial reform that attempts to level the playing field with Wall Street, and the $814 billion stimulus package — have all been recast as big government blunders, rejected by the emerging majority.
But each of them, in its way, should strengthen the system. The health law will hold costs down, while giving millions the chance at getting care, according to the nonpartisan Congressional Budget Office. Financial reform seeks to prevent the kind of meltdown that caused the global economic collapse. And the stimulus, though it drastically raised the deficit, saved about 3 million jobs, again according to the CBO. It also gave a majority of taxpayers a one-time cut — even if 90 percent of Americans don’t know that, either.
Obama can recast himself as the consumer’s best friend, and welcome the animus of Wall Street. He should hector the companies sitting on piles of cash but not hiring new workers. For those who do hire, and create new jobs, he can offer tax incentives. He should finger the financial giants for refusing to clean up their own mess in the foreclosure crisis. He should point to the long overdue protections for credit card holders that came with reform.
And he should veto, veto, veto any bill that attempts to roll back some of the basic protections for people against the institutions that have so much control over their lives – insurance companies, Wall Street and big oil.
Timothy Egan, New York Times
Bill Hanoi comments:
Absolutely President Obama stepped to save capitalism from itself. And suprising to some, so did President Bush with his intervention in the banking and financial industry.
Imagine the different scenario we would be facing in the US without either President’s interventions. Our financial industry would have collapsed like an elaborate domino setup…gaining speed as it advanced – greater deflation in the real estate both residential and commercial – would have been the accelerator. And we would be wondering who would pickup the salvageable pieces of our auto industry. Unemployment would have been significantly higher setting up the real possibility of a prolonged, deeper depression.
A tenant of well functioning markets is accurate information. Left unregulated, the financial industry became more like the used car business – a little repackaging – repainting – and misrepresentation by rating firms with vested interests. President Obama and the congress has taken this problem on to save capitalism.
President Bush provided a safety net to the financial industry and restored some liquidity to the system. He and President Obama should have demanded more concessions from the industry in salary caps and equity stakes to compensate the American people. President Obama did just that with the auto industry for a much better outcome.
We must dispel the notion that markets are infallible if left to there own devices. There have always been rules of the road – regulations – demanded as much the by business itself as consumers. These regulations should enable markets to do what they do best – create wealth, while restricting those actions that we have learned over and over again create excesses.