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OpEdNews Op Eds    H3'ed 3/11/13

What Is Obama's Political End-Game? Did He Enter Politics as a Democrat Only Because Republicans Are Bigots?

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Keynesianism holds that economic stimulus during a depression or recession -- a time when government is inevitably running deficits because taxes to fund the government are inevitably down -- will place money back into the hands of workers and consumers, who will then spend it, thus restarting consumer demand, and thus promoting industrial production; and Keynesianism further holds that this increased production and selling will turn the economy back again to growth, so that more taxes will then be coming into the government, which thereby becomes enabled to pay down the debt during this period while the economy is booming again. So: the correct time for economic austerity from the government -- otherwise known as reducing government spending -- is during economic booms, not during economic busts, according to Democratic (i.e., Keynesian) economists.

 

Republicans strongly disagree: They maintain that during economic downturns, government spending must be slashed. They basically believe that government expenditures are waste, which cannot be afforded during hard times. Their economics, founded upon pre-Keynesian thinkers, holds that the way to deal with the shortfall in taxes coming into the government during a recession or depression is to cut government spending, definitely not to increase it. Economic history, after economic history, after economic history, has proven that this approach repeatedly fails and merely makes the economy worse (though improves things for mega-banks). The bigs on Wall Street love it and have profited enormously from it, and so the Republican Party stands behind it, regardless of economic history, because Republican-Party campaigns are funded by big business, which also funds the lobbyists who write legislation for them. The Republican Party has served big business ever since Abraham Lincoln was shot in 1865; and the biggest banks control big businesses, through interlocking directorates that have been gained as a result of making big loans and big stock-investments (which are crucial to the families who control corporations). "Wall Street" is, in that sense, where it all comes together -- but it's not really a street at all. It's large corporations and their banks and insurers and all of the law and accounting and PR firms that are paid by them.

 

On 3 April 2009, Politico bannered innocuously (and deceptively, given the shocking core that was buried here -- Obama's statement), "Inside Obama's Bank CEOs Meeting." Eamon Javers reported Obama telling Wall Street CEOs, inside the White House, "My administration ... is the only thing between you and the pitchforks." (This historic, essentially secret, meeting, and the comment itself, had occurred on 27 March 2009, but Javers failed to cite the date, which was indicated only under the accompanying AP wire photo of the CEOs coming out of the event.) Obama's remark was implicitly analogizing here: he implied that he was protecting them not from prosecutions for crimes (which he actually was and is: prosecutable crimes of fraudulently originating and marketing mortgage-backed securities, etc.), but instead from angry mobs outside, who were driven by irrational hatred (like lynch mobs were in the Old South). Obama was metaphorically siding here with the plantation owners, not the slaves; with the KKK, not their victims, but this black American told Wall Street's elite that it was the public that were like the KKK, and that these mega-bank CEOs were being persecuted by them, and that he, Obama, would protect them from them. He was going to protect banksters from the public (i.e., from the very people who had been looted by banksters, and by Bush, and now also by Obama). He wasn't going to protect the public -- which he here analogized to such a hate-obsessed mob. And he followed through on this promise, by refusing even to prosecute -- much less to imprison -- any mega-bank executive (though a few low-level employees were sent to prison, while their bosses walked off with millions).

 

Obama executed his policy mainly through his Treasury Secretary, Timothy Geithner, and also through his Attorney General, Eric Holder. Holder's function was simply to carry out the non-prosecution of elite criminals. Geithner was much more actively involved, structuring and carrying out the taxpayer bailout of Wall Street firms, and of their bondholders, stockholders, and counterparties.

 

On 2 October 2012, Bloomberg News headlined "Top 1% Got 93% of Income Growth as Rich-Poor Gap Widened," and Peter Robison reported that, "The earnings gap between rich and poor Americans was the widest in more than four decades in 2011, Census data show, surpassing income inequality previously reported in Uganda and Kazakhstan," both of which countries are well recognized to be plutocracies. The reason for this yawning gap is that when Geithner structured the bailout of Wall Street, he insisted that future U.S. taxpayers would be obliged to bail out the then-current bondholders in those bailed-out firms at 100 cents on the dollar, as if there were no "toxic assets" at all being held by those firms (which had actually been bankrupted by the toxic assets that remained on their books after the music stopped and so they could no longer find buyers for the corrupt MBS securities they had produced). Shahien Nasiripour, at huffingtonpost, bannered, on 16 May 2011, "Confidential Federal Audits Accuse Five Biggest Mortgage Firms Of Defrauding Taxpayers," and he reported that the Inspector General of the U.S. Department of Housing and Urban Development had carried out audits of Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial, and found, in each case, that they had swindled the federal government. "The internal watchdog office at HUD referred its findings to the Department of Justice, which had to decide whether to file charges" under "the False Claims Act, a Civil War-era law crafted as a weapon against firms that swindle the government." All of "the audits conclude that the banks effectively cheated taxpayers by presenting the Federal Housing Administration with false claims: They filed for federal reimbursement on foreclosed homes ... using defective and faulty documents." Obama's "Justice" Department refused even to prosecute, much less to pursue, any of these mega-crooks, who had cheated the U.S. government -- ultimately taxpayers.

 

On 7 June 2011, Zachary Goldfarb in the Washington Post headlined "Geithner Finds His Footing," and provided a stunning report on Geithner, and on his extremely close working relationship with Obama. Goldfarb just in passing dropped (buried) the bombshell that, "Geithner, who was once a registered Republican," and Goldfarb provided no details as to how long ago that was -- perhaps when Geithner was brought into the Clinton Administration? We don't know. Anyway, Geithner "has a faith in the marketplace that puts him at odds with many of Obama's traditional Democratic allies." This was reportorial code for: in a recession, when the federal government runs deficits, Geithner supported Republican economics -- cutting government spending during hard economic times is more important than cutting unemployment. Also: Geithner outright rejected (and he even misunderstood) Keynesianism: "Stimulus, he told [the President's chief economist, Christina] Romer, was "'sugar,' and its effect was fleeting." Keynesian economics, which is confirmed by massive history ,   says otherwise: stimulus spending by the government during a recession is the way to get money into the hands of consumers who then spend it and restart consumer demand, which restarts industrial production. Geithner didn't care that much about industrial production; he was from Wall Street and wanted the government to instead bail out his friends who ran the mega-banks and to protect the big investors in their stock. Christina Romer was one of the most famous academic economists and an expert on the economics of recessions and depressions, and Geithner had never even been an economist and was just a servant to the aristocracy, and had been surrounded by aristocrats throughout his entire life. But he possessed the nerve to diss Romer, and to dismiss Keynesian macroeconomics, and to hold only microeconomic-based views (the economic theory that the aristocracy's economists had fashioned and that had created depressions) -- which had caused even the Great Depression that Keynes was famous for having solved. Romer was not impressed with Geithner: --There was this move to exit fiscal stimulus a lot sooner than we should have, and we've been playing catch-up ever since,' Romer said in an interview."

 

It was Geithner on the one side, and Obama's National Economic Council and Council of Economic Advisers on the other; and Obama went with Geithner: "Obama stood by him. And they grew closer.... Lawrence Summers, then the Director of the National Economic Council, and Christian Romer, then the chairwoman of the Council of Economic Advisers, argued that Obama should focus on bringing down the stubbornly high unemployment rate. This was not the time to concentrate on deficits, they said." They were Keynesian. Obama, like Geithner, basically was not. Obama sided with Geithner: "Geithner pushed Obama to 'lean forward' according to several participants, cutting the deficit as much as possible as fast as possible." That's the exact opposite of Keynesianism. FDR had been subject to similar advice from conservative economists in 1937, before Keynesianism had been clearly proven, and the results then, as usual, were horrible, so FDR quickly resumed Keynesianism, and the economy resumed rising from the Depression's ashes; but Obama rejected economic history, and he went with the aristocracy instead. Is it any wonder, then, that economic inequality has continued to soar under Obama? The aristocracy boomed, while everyone else plunged, under Obama and other Republicans.

 

This theme of Obama-Geithner Republicanism was confirmed in September 2011 when Ron Suskind's Confidence Men was published. On September 19th, the former Clinton-Administration economist, Brad DeLong, blogged "Obama Develops His Own View of the Jobless Recovery," and pasted in some excerpts from this just-published devastating take-down of the Obama Administration, Suskind's Confidence Men.


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Eric Zuesse Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

Investigative historian Eric Zuesse is the author, most recently, of  They're Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010,  and of  CHRIST'S VENTRILOQUISTS: The Event that (more...)
 
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