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Obama's oligarchic capitalism.

Byline: Hans G. Despain


Obamanomics has been disappointing. The political environment has certainly been difficult for any "hope" of a new New Deal. The "hope" has been partially vanished by the economic conservativism of Congress and the Supreme Court, but above all else by the economic conservativism of the Obama White House. There is a strong faith in markets, even when markets are highly concentrated toward a few very large corporations. The concentration of economic power hardly seems to worry Washington. Indeed, they protect and nurture it.

Obamanomics has been disappointing, but certainly there are impressive successes. Most economists believe the financial bailouts were both necessary and highly triumphant. Not only did TARP stabilize the financial industry and save the automobile industry, it rescued the entire U.S. economy, made big finance firms bigger, and impressively enriched the financial giant Goldman Sachs. In 2008, AIG received billions of bailout dollars and was able to pay Goldman Sachs billions. Goldman was then able to pay its employees $10 billion in compensation and bonuses, nearly $500,000 per employee, and profits over $2 billion.

OK, TARP - aka Goldman Sachs socialism - was the policy of President George W. Bush and his Treasury Secretary, Henry Paulson, former Goldman CEO. But 47 percent of Americans believe it was passed by Mr. Obama. Only 34 percent correctly identify it as passed by Mr. Bush. Then-Sen. Obama did vote to approve it.

Whether Goldman Sachs socialism is counted as Obamanomics, there was an $800-billion "stimulus" - more accurately, stabilization - policy passed by Obama in 2009. According to the Congressional Budget Office, unemployment has been reduced by 0.8 to 1.7 percent as a result of Obama's policy. Stimulus funds extended unemployment benefits, allocating money to people who need and spend it, and state and city governments were able to use stimulus funds to avoid layoffs and address fiscal deficits.

With these modest successes, the 2009 recovery act was far too small to have the impact that was really needed. It was spread out over several years, and overly biased toward long-term infrastructural investment, rather than stimulus. In short, Vice President Biden, in what was then considered a gaffe, was speaking accurately when he told ABC's "This Week," "We misread how bad the economy was," effectively admitting the package was too small and under-stimulative.

Obamanomics round two was signed into law Dec. 17. The $858 billion package is mostly tax cuts, with benefits aimed at businesses, families and students. The main aspects are a two year extension of the Bush-era tax cuts, a one-year decrease in the payroll tax, lowered estate tax, and a 13-month extension in unemployment compensation.

Will it be effective? It is a package that provides good economic maintenance, capable of preventing a recessionary redux. But it is far from the stimulus needed. To be fair, the unemployment extension is stimulative. The payroll tax cut is also well targeted toward the middle class, who are sure to spend it. But this is stimulus at the margin.

The "compromise" politics of the package may be brilliant, but the economics are weak.

This is not because of Republican obstructionism, but because of Mr. Obama's economic conservativism. Obamanomics are in many ways more reminiscent of Hoover than of Roosevelt.

Hoover, a self-proclaimed progressive, passed the Emergency Relief and Construction Act, which distributed funds toward public works and charted the Reconstruction Finance Corporation, which gave $2 billion in aid to local and state governments, and made billions of dollars in loans to private banks, farmers, mortgage associations, railroads and other businesses.

Obamanomics rounds one and two are a return to Hooverism, albeit without Hoover tax hikes; instead, Obama deficits. No aspect of Obamanomics has transformed the relationship between citizens and government as did Roosevelt's minimum-wage legislation, Social Security and unemployment compensation programs.

Too many American households are buried in debt, lack pensions, endure job insecurity, and have stagnant salaries and low wages. None of this has been addressed by Mr. Obama - again, not because of Republican obstructionism, but because Mr. Obama has a fundamental faith in financial oligarchic capitalism: What is good for Goldman Sachs is good for America.

Mr. Obama's policy illustrates his belief that Bush's Goldman Sachs socialism would make Wall Street and big finance profitable again. It has. The Obama administration seems to understand its role as providing minimal economic maintenance and political patience for the magic of oligarchic capitalism to take care of the rest. This is Hooverism, and not a new New Deal.

Hans G. Despain is a professor in the Department of Economics at Nichols College in Dudley.


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Title Annotation:COMMENTARY
Publication:Telegram & Gazette (Worcester, MA)
Date:Jan 6, 2011
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