It was truly, as the Times pointed out, "a political environment laced with lunacy." But don't blame it all on the Republican "mad dogs" on Capitol Hill playing chicken with the economic plight of the American people and its wobbling economy. It was President Obama who surrendered.
President Obama's disaster began months ago when he agreed to tie raising the debt ceiling to a grand bargain with the Republicans regarding deficits and revenues instead of demanding a debt ceiling raise while he was caving on extending Bush tax cuts for the wealthy. That immediately gave the "fanatic" Republicans a veto power over the "establishment" Republicans in Congress. And fanatics don't blink. Especially those fanatics who, elected last year, say they don't care about being re-elected.
So Obama accepted about $2.5 trillion in spending cuts over the next decade, got no revenue producing tax increases and therefore made it nearly impossible to create a public works jobs program to uplift a sliding economy.
With economic indicators registering more trouble in recent days for American workers, Mr. Obama has no cards left. Interest rates cannot be driven any lower by the Federal Reserve. He didn't get even a renewal of the extension of unemployment benefits. Consumer spending -- 2/3rds of the economy, is stagnant. Without consumer demand, new investment is sluggish. Unemployment is rising, and without jobs, workers can't increase their consumer spending. State, local and federal government spending cannot increase under the yoke of the just agreed-upon cuts. The weaker dollar may increase exports a little, but the U.S. still has a continuing massive trade deficit, especially with China. Europe's financial problems will curb orders of U.S. goods and services.
So what can Mr. Obama do? He can propose a public works program, paid for by the tax increases on the wealthy and the corporations. Both are getting richer. The large corporations are reporting very good second quarter profits further disconnecting their affluence from that of their workers and labor in general. He could, if he wanted, make a very strong case for repairing America's infrastructure and bring the soldiers back from Iraq and Afghanistan, as a majority of the American people and the most mayors of our cities desire.
First, however, he has to take the offensive by showing that the bulk of the deficits since 2002 were caused by the Bush tax cuts, mostly for the wealthy, and Bush's two wars. Obama also has to hold the Republicans accountable for their hostage-taking of the American economy so they cannot impede public works proposals in an election year.
Amazingly, as a Harvard-trained lawyer, he was quick to compromise from the get-go. Consequently, he painted himself into a corner. So, since he is not a leader, maybe he can become a pleader.
Given that non-financial companies are sitting on two trillion dollars of inert cash and other liquid assets, maybe he can appeal to these companies to disgorge ten percent in immediate special dividends to their long-parched shareholders who are, after all, their owners. Loosening the executive locks on this hoard of money would provide $200 billion for more likely spending in the market place. Companies like Apple, Google, Cisco, Intel and Microsoft alone are sitting on well over $200 billion cash. To these coddled, indentured U.S. companies he can invoke President John F. Kennedy's challenge--"Ask not what your country can do for you, ask what you can do for your country."
Second, he can plead with those very profitable corporations that have benefited from the government bailout, or pay little or no federal income taxes, to voluntarily contribute to a public works fund.
Companies like GE, Verizon, Exxon Mobil, Boeing, IBM, Wells Fargo, DuPont, American Electric Power, FedEx, Honeywell, Yahoo, United Technologies as a group made $171 billion in U.S. profits over three years and paid zero federal income tax with a $2.5 billion negative advantage. And that, says Bob McIntyre, director of Citizens for Tax Justice, is "just the tip of an iceberg of widespread corporate tax avoidance."
Is such pleading just Pollyannaish? Maybe. But it will resonate with the American people's sense of injustice. Those feelings of indignation can reverberate and cause members of Congress to start remembering who sent them to Washington. Last I heard, corporations don't have a single vote.