Friday, May 28, 2010

President Obama's Weakness

If anything, the BP oil disaster has proved once and for all that President Barack Obama has his weaknesses. And those weaknesses go beyond the occasional huff of nicotine. "Barack Obama, who doesn't know much about technology or business, put too much trust in technology and business," said Howard Fineman on Hardball, getting it just about right. Democrat operative James Carville, channeling Treme's Creighton Bernette, went off on the President. He was also largely right -- if obnoxious -- in exposing the President's worst weakness. The President, in fine, put too much trust in BP and in the Establishment, which he reflexively does whenever he is faced with a problem that is beyond is scope (which, we cannot fail to note, is quite large).

Barack Obama, a graduate of Harvard Law, the faculty of the University of Chicago, and the United States Senate is a true believer -- and beneficiary -- of the American Establishment. He has been greatly rewarded for his trust and participation in those institutions. Then again, no one gets to be President unless one is in thick with the Establishment. Herein lies Obama's great weakness, particularly in a populist period in which the public mood is thoroughly disenchanted with that overclass. It creates a weakness that his opponent in 2012 may exploit. Has the President forgotten who it was that got us into this fine mess in the first place? Kevin Phillips, the former author of the Southern Strategy turned Obama voter in 2008, did not when he wrote last year:

Back in early 2008, I published a book entitled Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism ... Politically, it holds Wall Street, the Federal Reserve and the Republicans principally responsible for what went wrong over 25 years of financial greed and complicit Washington regulatory negligence. In party terms, the GOP gets 70 percent of the blame and the Democrats 30 percent. When I finished the new additions in January, however, I was skeptical about whether Obama would be able to bring about the needed changes and reforms in U.S. finance. His team had become too entangled with with the financial sector and its massive political contributions. Besides, too many of his top appointees were recycled senior Democrats from the Clinton administration's own tech mania, deregulation binge and stock bubble and crash of 1997-2000.

...The Obama financial program -- the rest of his agenda, remember, will almost certainly depend on his retooling failed finance -- shows hints of a flawed combination. Its first weakness, in both policy and retention of prior government officials, involves an appearance of extending the mismanagement and pro-Wall Street bias of the 2008 Bush regime bailout. Its second Achilles heel, rather than representing the hopes and demands for change from the Democratic Party's grassroots and net roots, involves re-enlisting and banking on the big names of the Clinton administration's regulatory and bubble-managing failures of the late 1990s, especially former treasury secretary Larry Summers and many proteges of former treasury secretary Bob Rubin.

This where the Democrats' 30 percent responsibility for the abuses of the last quarter century has its crippling 2009 relevance. The GOP's 70-percent blameworthiness, while centered in the 2001-2008 misrule of George W. Bush, also goes back to the George H.W. Bush years and the later Reagan regime. The Democrats' culpability, though, concentrates in the late 1990s go-go years, rife with technology mania, market worship, enthusiastic deregulation, massive financial borrowing and pervasive ethical laxity. The stock market bubble, of course, burst in the Spring of 2000, when Clinton was still president and Summers was treasury secretary. Rubin, in turn, was busy helping guide Citigroup to its contemporary disrepute.

Perhaps Obama doesn't understand this.

Or perhaps President Barack Obama is powerless to change? And though the economy looks to be improving, we are not out of the soup yet, and deficits are massive. This automatic acceptance of the authority of the American Establishment is a weakness which showed itself in his choice of an economic team, Obama's first true test as President. Under the mandate of "Change," Obama could theoretically have placed new voices on his economic team. It would have been to the president's advantage to have done so. In not doing so, in fact, he actually entailed a political risk, one that the new President might alienate his young voters. Obama took that risk, going in for the same old albeit experienced hands. Edward Luce in the Financial Times probes deeper still:

According to Barack Obama’s liberal critics, the US president betrayed the progressive cause before inauguration day by selecting a bunch of Clinton-era advisers to run his economic team. Fearing the 2008 meltdown would derail his presidency before it had even begun, Mr Obama called on the most experienced and market-friendly Democratic economists available – starting with Larry Summers, Bill Clinton’s last Treasury secretary, now head of the National Economic Council.

Eighteen months later, they argue, the president is a prisoner of the authors of the late 1990s Wall Street deregulation that paved the way for the 2008 crisis. Worse, he is suffering from Stockholm syndrome – a captive who loves his jailers. Far from bringing change to Washington, Washington has changed Mr Obama. As narratives go, it is pretty good. The only flaw is that it overlooks his own, instinctively centrist, beliefs (a misjudgment the left shares with the Tea Party movement on the right).

It also paints Mr Obama as a dupe – again, with little foundation. From extensive interviews with all his economic advisers and other key figures within and outside the White House, it is a fair bet the president would have selected precisely the same people had he come to power in much kinder circumstances. In addition, he sought what one friend described as 'validation' through his appointments. 'Do not underestimate how vulnerable President-elect Obama was to the charge of inexperience.'

If only the President had more intellectually diverse voices in his administration. Those voices, sometimes, reached his ears. But they were not heeded. Even an old Establishmentarian like Paul Volcker brought contrarian ideas into the mix (perhaps because he studied his undergraduate years in at the comparatively bohemian Princeton?). Alas, voices of "Change" were not to be on the Obama economic team when facing the greatest period of financial instability since the Great Depression. From The Promise:

But Summers and (Rahm) Emanuel failed to keep the circle of advice wide enough and the rising chorus of concern about lack of access eventually reached Obama’s ears. One night in April, Summers had to endure a White House dinner with some of the people he had been blocking from the Oval Office. The president wanted to hear what other economists had to say. So Paul Krugman, Joe Stiglitz, Alan Blinder (a centrist from the Clinton administration), and Ken Rogoff (a more conservative economist and McCain backer) were invited to dine in the White House family dining room. Volcker’s plane was late, and when he finally arrived at the White House gate, the Secret Service had already taken his name out of the computer and he was delayed even longer. He barely made it for dessert.

The dinner had been so hastily arranged that Stiglitz didn’t even get invited until the morning of the event. Over a lettuce salad from the White House garden and roast beef, the group held a spirited two-hour discussion. Obama grew slightly impatient when the conversation grew too technical or backward looking. He wanted to know what the economists would do if they were in his shoes. The answers from Krugman and Stiglitz—which amounted to taking over Citigroup (C) and Bank of America (BAC) for a brief time before breaking them up—hardly made Obama wish that he had hired these economists rather than Summers, who had considered the same idea but seemed more appropriately dispassionate in his analysis of it.

Tragic? In a New York Times article in 2008 titled "The Vanishing Establishment," Nicholas Confessore wrote, "Among Democrats, the establishment candidate would appear to be Hillary Rodham Clinton, the New York senator and former first lady, whose husband remains the Democratic Party’s most influential figure seven years after he left office." Not to sound conspiratorial, we now know that Senate Majority Leader Harry Reid wanted Obama to run for President, even hinting, at an earlier date, that he might offer Hillary Clinton his position. “You don’t have the obvious party elders these days,” Walter Isaacson, president of the Aspen Institute and co-author, with Evan Thomas, of “The Wise Men,” a study of the post-World War II foreign policy establishment, told Confessore in the article.


With all due respect to Isaacson, that was 2008. Plus ca change. In 2010, we have Larry Summers, the insider's insider and Rahm and Hillary. Wouldn't it have been interesting if Obama had put Kevin Phillips ina senior advisory position. While, yes, he was an old Nixon hand, intellectually he has some quite contrarian and interesting ideas about America and empire and peak oil that go beyond simplistic left-right thinking. Leo Hindery and Michael Lind are also thinkers outside-of-the-box that would have been interesting additions to Obama's administration.

Another weakness of the President -- arguably also a strength -- is his lack of passion. His intellectual neatness. The Senator Hillary Clinton, late in the primary process, realized this and pivoted to her populist right against the Stevensonian Obama. It was too late, but it gave the Obama campaign a harrowing jolt that summer of 2008. From Jonathan Alter's The Promise:

Paul Volcker was among those impressed that nothing ever seemed to bother Obama, though he said that sometimes he wanted to shake the president and say, “Goddamn it! Get excited about this!”

Granted, "No Drama Obama" is probably what won him the Presidency first against the messy Clinton campaign and then against the hapless McCain. But as the economy worsens, with unemployment hovering at around 10 percent and staying there, whole industries in the rust belt disintegrating, will Obama's unflappability be a positive or a negative in 2012? It all depends, of course, on who the GOP picks. Obama's natural distaste for populism and populist rhetoric just might be a hindrance in places like Virginia and Pennsylvania and Ohio the next time around, when he will not be running against Bush's management of the economy and our foreign wars, but his own record.

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