Global IssuesPOLITICS-US: Bailout Bitterness Tainting Obama's Broader Agenda
Two months into his term, U.S. President Barack Obama’s ambitious campaign programme for sweeping 'change' has been whittled down to a bid for incremental change, with opposition to some of his proposed broad reforms coming from unlikely places.
In addition to the economy, which by all accounts is a necessary, massive distraction from his campaign agenda, recent splits in the Democratic Party have slowed down some of Obama’s reforms in areas like healthcare, the tax code, controversial and expensive agricultural subsidies, and his bid to promote environmental sustainability.
More than halfway through his first 100 days, a period considered important in setting the tone for a presidency, the administration has repeatedly stumbled, even in dealing with the economic crisis. Many of those measures have been largely ad hoc attempts to deal with either the financial or political fallout from only certain issues.
The reaction to one measure, the bailout of insurance giant American International Group (AIG), actually pushed forward by former President George W. Bush while he was still in office, has raised a storm of what widely being referred to here as ‘populist rage’ with one senator even calling for bankers to 'go commit suicide'.
About one-hundredth of the bailout money set aside for AIG went to paying 165 million dollars in bonuses to AIG executives, many of whom were not with the company or involved in the deals that put the group at financial risk, but had been brought in to help with the dire situation there.
AIG has defended itself, saying it was simply abiding by the law and honouring contracts, thus far refusing to accede to requests from some lawmakers and others to give the bonus money back to the government.
Obama supported the resentment of average citizens, upset that their taxpayer dollars had gone to six- and seven-digit bonuses for employees of a company that plunged itself into dire straits. Obama understood their anger, he said. He was angry, too.
But the responses of some of Obama’s senior staff as details of the bonuses emerged showed what many critics say: it was a large distraction from the greater issue of economic recovery.
Political adviser David Axelrod and chief of staff Rahm Emanuel both said that the AIG flap was a distraction, with Axelrod exclaiming that people weren’t sitting around the kitchen table discussing AIG. The only problem was that, with laser-focused media attention pressing them on, people were starting to do just that.
Then Obama’s secretary of the treasury, Tim Geithner, came under fire about exactly when he knew about the bonuses.
After belatedly acknowledging his own outrage - telling a press conference at the White House, after initially dodging the question, that he wanted to make sure he had his information right before commenting - Obama has since moved on to defending his wider budget and economic recovery plan.
Obama has spoken at length on television twice in the past two days, taking questions from the press Tuesday night and taking to the Internet to answer citizens' questions in the first ever on-line White House town hall. And Geithner, among other representatives of Obama’s economic team, has been in front of television cameras and congressional committees all week.
But those efforts are facing pushback from within Obama’s own party and supposed allies. The wrangling represents a split among liberals - those who believe in more regulation and left-leaning policies - and those who prefer neo-liberal economic policies.
The former have reacted with indignation to Obama’s plans, critiquing that the administration is doing too much for the elite of the financial institutions and not enough for regular people.
'The president is now trapped between these two realms - the governing elites who decide things and the people who are governed. Which side is he on? If he does not choose wisely, the anger could devour his presidency,' wrote veteran reporter and Nation writer Bill Greider in the Washington Post last weekend, calling some parts of Obama’s financial rescue plan 'ideas that could lead to the creation of a corporate state, legitimized by government and financed by everyone else.'
The other group of liberals - moderates and centrists - insist that fixing the financial institutions, no matter the cost, is essential to fixing the economy.
Obama, wrote Greider, 'seems conflicted.' But it appears that he is rather definitively listening to his neo-liberal economic advisers like former Harvard University president Lawrence Summers.
One such effort launched this week involved Obama’s plan to relieve banks of toxic assets - chopped up and repackaged mortgage securities whose plummeting value catalysed the slowing of lending, known as the credit crunch, and, therefore, the larger financial crisis.
The plan partners public and private money to buy up the toxic assets and take them off the banks’ balance sheets, as opposed to using public money to buy an ownership stake in banks to shore them up.
'This is more than disappointing. In fact, it fills me with a sense of despair,' wrote Paul Krugman, the Nobel Prize-winning liberal economist, in his column in the New York Times. 'It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street.'
But while liberal critics have been bashing Obama’s economic recovery plan in the media, his larger agenda, represented by an ambitious budget, has come under fire from within his own party in Congress.
In the House of Representatives, a group of conservative Democrats known as the 'Blue Dogs' present a challenge to Obama’s agenda to pour money into programmes for education, creating a ‘green economy’, and reforming healthcare. Indeed, they hope to slash his budget and keep spending down.
The biggest challenges so far have come from the Senate.
A proposal to limit tax deductions for the wealthiest U.S. citizens has been questioned by a fellow Democrat, Sen. Max Baucus of Montana.
Then Sen. Kent Conrad of North Dakota took on Obama’s attack on farm subsidies. Conrad has also opposed Obama’s healthcare reform as too expensive, a notion backed up by influential conservative Democratic Sen. Ben Nelson of Nebraska.
Another example of Obama’s agenda being reduced to incrementalism is the hold up in the Democratically controlled Congress of a keystone of Obama’s plans to make the U.S. more environmentally friendly.
'We need to achieve environmental results scientists tell us are necessary,' said House Energy and Commerce Committee chairman Henry Waxman, 'but we have to do it in a way that recognises the various regional concerns and concerns about how different portions of the population are going to be affected.'
Both Democrats and Republicans who hail from coal- and oil-producing states and regions oppose the move.
© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service