According to a recent article in the New York Times, a few weeks before announcing his re-election campaign, President Obama invited two dozen Wall Street executives and long time donors to the Blue room of the White House to discuss ways to spur economic recovery. He also solicited their thoughts on bank and hedge fund regulation, and the deficit.
The event, organized by the Democratic National Committee, kicked off an aggressive push by Mr. Obama to win back the allegiance of one of his most vital sources of campaign cash—in part by trying to convince Wall Street that his policies, far from undercutting the investor class, have helped bring banks and financial markets back to health.
Last month, Mr. Obama’s campaign manager, Jim Messina, traveled to New York for back-to-back meetings with Wall Street donors, ending at the home of Marc Lasry, a prominent hedge fund manager, to court donors close to Mr. Obama’s onetime rival, Hillary Rodham Clinton. And Mr. Obama will return to New York this month to dine with bankers, hedge fund executives and private equity investors at the Upper East Side restaurant Daniel.
President Obama, and his Republican opponent, each plan to raise $1 billion to win in 2012, and competition for corporate and Wall Street campaign donations will be fierce. Citizens United opened the floodgates for unlimited corporate donations, and candidates of both parties will be vying to raise large amounts of money from the top 1% of the country. The top 1% expect their agendas will be reflected in the policies of the politicians they support. Former Massachusetts governor Mitt Romney, the likely Republican presidential candidate, is busy using his background in venture capital and his Wall Street friendly policy proposals to woo financial-industry donors away from President Obama.
Working families take a back seat to the needs of Wall Street
The result of this intense focus on big money is that the majority of Americans are left without adequate representation. Many wealthy donors want tax breaks and tax subsidies, toothless regulation, and the privatization-for-profit of government functions such as education, criminal justice, and the military—none of which serves the interests of working families. Medicare and Social Security cuts are on both Democratic and Republican agendas because the top 1% would rather find ways to make money off of them than fund them through higher taxes.
But there is a moral price to pay when money dominates politics. Ex-presidential candidate Gary Hart recently wrote about the social and economic damage caused by politicians turning a blind eye to the growing gap between very wealthy and the rest of us.
. . . we have a growing number of homeless children. Over 90% of the students in a California grade school were homeless according to a recent news story. One in five Americans do not have any health care. About ten percent of employable people cannot find work. [The combined number of unemployed and underemployed is closer to 16 percent.] Many elderly people have lost their homes. . . . hunger relief organization Share Our Strength regularly documents the huge number of children who don’t begin to have adequate diets. Afghan and Iraq veterans are living in public shelters or on the streets. The evidence is overwhelming of a great gap between what our society ought to be and what it actually is on the moral scale.
The moral choice for Congress and the President is to embrace government intervention in the economy in the form of a jobs bill and foreclosure relief. It is to meaningfully regulate business and financial markets, and to reform the tax code to make the outsourcing of jobs unprofitable. Yet Congress and the Obama administration are, at least at the moment, determined to let Wall Street and the private sector determine the economic fate of the country. Although this sounds like a free market, neoliberal ideological position, there is a very practical reason why they are letting the corporate elite determine the economy, and it has to do with the upcoming election. A large government expenditure, for example in the form of a jobs bill, could be slightly inflationary, which would reduce the value of bonds held by that top 1%—the very 1% who are being wooed for their campaign donations. So, unless the economy really goes off a cliff, meaningful government intervention is a non-starter.
President Obama wants the private sector to lead us out of the recession
Yet, relying on the private sector to create jobs is a highly dubious strategy. Corporations, who are accountable to their shareholders, have no loyalty to working families, or to the public good, or even to the United States. They have been sitting on record levels of cash, investing in equipment, and hiring abroad where labor is cheap. The private sector did create jobs in the last months, but they are generally low paying and not adequate in numbers to address the levels of unemployment we are experiencing. In other words, the so-called “free market” which is not “free,” but rather highly subsidized by the tax dollars of working people, is not a viable solution for the systemic economic and social problems that plague this country. If anything the celebrated “free market” is getting more parasitic as time goes on.
A better solution is for the government to both jumpstart and direct the economy by creating jobs that offer a living wage in alternative energy, transportation, infrastructure and education. Even former Obama economic advisor Larry Summers, who has been a staunch friend of Wall Street, is calling for a new stimulus.
“A sick economy constrained by demand works very differently from a normal one,” he writes in a recent article in the Financial Times, before calling for a fresh stimulus while pointedly rejecting deficit-cutting as the fix. “The fiscal debate must accept that the greatest threat to our creditworthiness is a sustained period of slow growth.”
However, 0n Saturday, June 11, 2011, President Obama made it perfectly clear that he has no plans to initiate a “fresh stimulus.” From Bloomberg Businessweek:
President Barack Obama said the private sector must take the lead in creating jobs as the as the economy recovers, with the government assisting by making sure workers have the necessary skills.
“Government is not, and should not be, the main engine of job-creation in this country,” Obama said in his weekly address on the radio and Internet. “That’s the role of the private sector.”
Obama said the government can work as a partner with businesses to enhance training and education for the jobs that are available. With the nation’s unemployment rate at 9.1 percent in May, up 0.1 percent from the previous month, the administration is focusing on measures that can encourage hiring.
The revolving door
There is no denying that the majority of our elected officials, from the president on down, at the federal, state and local levels, are caught in a system in which serving banks and corporations, rather than then needs of working families, is often a prerequisite for getting elected and staying in office. For some, like ex-progressive caucus member Rep. David Obey of Wisconsin, when you retire, you can turn your political skills into a highly lucrative job as a lobbyist for those same corporations. But, if you buck this system, as former Senator Russ Feingold of Wisconsin did, you will probably lose your seat.
Obviously, the only way to stop what appears to be the shredding of the social contract in the United States is to get money and influence out of politics. But, for the 2012 elections, I’m not holding my breath.
Meanwhile, if the economy takes an even stronger turn for the worse, which it appears to be doing, perhaps President Obama will defy Wall Street and initiate a much-needed government intervention in the economy. Such a bold move may hurt his campaign donations, but it just may save his presidency.