Obama’s Wall Street Dalliance Demoralizing Democratic Base

By Roger Bybee

The rhetoric of President Obama and his Wall Street advisors suggests that the Great Recession is now in America’s rear-view mirror now that Wall Street is flush with bonus money again and the stock market has recovered significantly, with the secondary task of job creation just starting to work itself out, and then they are home free on the economy.

Even the stunning setback in Massachusetts, with the election of Republican Sen. Scott Brown, is failing to bring their attention back to the miserable, anxiety-filled plight of the unemployed and underpaid Americans sprawled right in front of the Obama limousine. The Obama theme of only reluctantly “bailing out Wall Street to save Main Street” is increasingly sounding like a slightly-softened version of George W. Bush’s trickle-down economics.

Predictably, ominous signs of disillusionment and demoralization are now setting in among citizens who had hoped that Obama would take some bold New Deal-style steps to relieve their misery. Growing suspicions about the commitment of Obama and his crew of Wall Street-based economic advisors were reflected in polling by Research 2000 polling about the Brown victory: “A majority of Obama voters who switched to Brown said that ‘Democratic policies were doing more to help Wall Street than Main Street.’ Residents in traditionally Democratic working-class areas also showed far less interest in the race than wealthier voters in Republican districts.”

Apparently impervious to these indicators, Obama only confirmed his image of remoteness from the urgent crisis facing American families with his comments on Wall Street bonuses. As he has done in the past, President Obama expressed reluctance to cap executive bonuses for fear of driving away top talent like Jamie Dimon, CEO of JP Morgan Chase & Co. ($17 million bonus for 2009) and Lloyd Blankfein, CEO of Goldman Sachs ($9 million bonus). “First of all, I know both those guys,” Obama told Business Week. “They’re very savvy businessmen. And I, like most of the American people, don’t begrudge people success or wealth. That’s part of the free market system.”

Retorted former Labor Secretary Robert Reich, “Free market system? As I recall it, American taxpayers forked out hundreds of billions to keep JPMorgan, Goldman, and other big Wall Street banks afloat through most of 2009. Had we not done so, Dimon, Blankfein, and most other top executives on Wall Street would not have earned a dime last year. In fact, some would be out on the street, rather than sitting pretty on the Street.”

While Obama’s staffers rushed to claim that the comment was torn out of context, in fact the entire statement is actually worse. In it, Obama expresses a mentality excluding the public from any legitimate voice despite their massive contributions to keeping the financial industry afloat (estimated at $17.5 trillion to me by Nomi Prins, former Goldman Sachs executive and author of It Takes a Pillage: Bailouts, Bonuses and Backroom Deals), with decisions over bonuses of bailed-out firms a matter to be settled between CEOs and stockholders: “I guess the main principle we want to promote is a simple principle of ‘say on pay,’ that shareholders have a chance to actually scrutinize what CEOs are getting paid.”

Moreover, Obama’s statement betrays his ongoing tone-deafness to the situation of the bottom 80% of the population suffering through the gravest crisis in eight decades. While the administration hailed a drop in the official unemployment rate to 9.7%, it is likely that the decrease was caused by hundreds of thousands of people halting their job search in the face of such bleak prospects.

A few figures dramatize the scope of the crisis for the working and poor families of America:

1) Wage-slashing frenzy taking place. The US is in the midst of the biggest wage-cutting wave since the Great Depression, foretelling not only increasing poverty and inequality, but also suggestive of Corporate America’s waning interest in the domestic market.

As Louis Uchitelle, author of The Disposable American, notes, the slashing of wages has become ubiquitous, with even uniquely skilled professions airline pilots now included. Uchitelle lays out the big picture bluntly:

“In recent decades, layoffs were the standard procedure for shrinking labor costs. Reducing the wages of those who remained on the job was considered demoralizing and risky: the best workers would jump to another employer. But now pay cuts, sometimes the result of downgrades in rank or shortened workweeks, are occurring more frequently than at any time since the Great Depression.”

Moreover, this follows a period in which American workers’ real wages stood at 18% less in 2007 than they were in 1973, as Les Leopold points out in his book, The Looting of America. America’s richest 1% now collects 23% of all income, and the even richer 1/10 of 1% earn more than the bottom 150 million Americans.

2. The jobs aren’t coming back. A new study from Northeastern University shows that among the top 20% of households — those making more than $100,000 — the unemployment rate is about 3.5%. In the poorest 10% of American households — those making under $12,800 a year — the unemployment rate is 30.8%,” reports Megan Carpentier, 5% higher than the national rate at the depths of the Great Depression. However, Sen. Majority Leader Harry Reid is proposing a tiny $15 billion jobs bill, which NPR commentator Jack Beatty blasted as “a pathetic gesture,” contrasting it unfavorably with the New Deal’s ability to generate three million public workers jobs in 90 days.

Economists quoted by the Wall Street Journal generally project that about a quarter or more of the 8.4 million jobs lost thus far during the recession thus far won’t be coming back no matter how good the economy gets s far won’t be coming back, regardless of how strongly the economy recovers.

As the Journal noted,

“About a quarter of the 8.4 million jobs eliminated since the recession began won’t be coming back and will ultimately need to be replaced by other types of work in growing industries [which were not specified], according to economists in the latest Wall Street Journal forecasting survey.

“While the job market is constantly shifting as some sectors fade and others expand, this recession threw that process into overdrive. Thousands of workers lost jobs as companies automated more tasks or moved whole assembly lines to places like China.”

Although the public’s 77% opposition to the off-shoring of jobs suggests that Obama has room to pressure Corporate America to curb its wave of plant closings and relocations, he has largely ignored the issue. If anything, Obama validated the shift of jobs when re-introduced the specter of NAFTA-style trade deals with Colombia, Panama and South Korea in his State of the Union address..

3. Home foreclosures are occurring at ten times the daily rate during the Great Depression. “We’re seeing foreclosures taking place every day now at a pace that is ten times higher than the daily number in the Great Depression,” noted Nomi Prins, author of It Takes a Pillage. Elizabeth Warren, chair of the Oversight Panel on the economic crisis, worries about a major shock to the US middle class, especially because of unemployment coupled with declining home prices:

“Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can’t make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.”

4. Credit remains frozen solid. Normally, banks lend out about $8.50 in loans for every $1 in deposits, according to consumer advocate Ellen Brown. But as of late last year, banks were hoarding their cash and lending out a mere $1 for each $1 in deposits, or just slightly more than one-ninth their normal pace. No wonder why economic recovery is so sluggish.

Yet in spite of the continuing clouds hovering over the future of working Americans, Obama persists in making both thematic and practical concessions to the Republicans and the right wing of his own party (e.g., Obama’s concession to drug companies severely weakened progressive Sen. Byron Dorgan (D-N.D.), who then decided to retire, while the consistent turncoat Ben Nelson (D-Neb.) gets some $485,00 from the Democratic National Committee to run TV ads denouncing a government role in healthcare reform). At the same time, Obama has shown little serious interest in maintaining the enthusiasm of his party’s most loyal constituencies.

At moments, Obama has shown flashes of a progressive edge, as when he decimated the Republican House Caucus in a televised session, but his populism has seem largely limited to Bill Clinton style micro-gestures and sound bites that are supposed to sound populist.

All of this leaves progressives in a quandary. With Obama and many congressional Democrats showing so much compassion for Wall Street bankers while working America remains mired in debt and anxiety, disillusioned Obama voters may well stay at home in sufficient numbers in November as they did in Massachusetts.

That creates an increasing demand for labor and other progressive networks to do the hard work of mobilizing their now-demoralized constituencies to take to the streets and withhold campaign funding from anti-labor Democrats.

In line with this, AFL-CIO President Rich Trumka recently called for “More mobilization. More education. I don’t know whether you call it militancy or not. But it is more education, so our members know who is really doing it to them.

“Here’s the model that we see. Instead of going after a politician and elect 60 people to the Senate, we create a groundswell of support for an issue that will get more than 60 votes. And those that don’t vote for it do so at their own peril,” Trumka warns.

Given the current drift of Obama and congressional Democrats, Trumka and other progressives face a daunting task.

Roger Bybee is a Milwaukee-based writer and activist with a blog at (zmag.org/zspace/rogerdbybee) and a contributor to (inthesetimes.com/working/). Email winterbybee@earthlink.net

From The Progressive Populist, March 15, 2010


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