Obama's Phony Populism

Obama budget combines austerity and phony populism
By Patrick Martin
14 February 2012

The budget for fiscal year 2013 proposed by the Obama White House Monday is a thoroughly cynical exercise. It calls for hundreds of billions of dollars in social spending cuts, further devastating public services and the living standards of working people.

This is combined with populist demagogy about taxing the rich, although the administration knows full well that no such measures will pass either the Republican-controlled House of Representatives or the Democratic-controlled Senate.

The budget incorporates $1 trillion over ten years in cuts to domestic social spending already agreed on with congressional Republicans in last year’s negotiations over raising the federal debt ceiling. To these cuts will be added a total of $638 billion in social spending cuts.

Relatively few details leaked out over the weekend, and a preview document issued by the White House Friday listed only the programs that would receive spending increases, not those being slashed, for which only vague generalities were available.

The largest cutback will be $360 billion over ten years from Medicare and Medicaid, mainly through reducing payments to health care providers, which will have the effect of further reducing the number of hospitals and doctors willing to treat patients on either government program. This cut is particularly pernicious because the Obama healthcare reform program calls for extending Medicaid to tens of millions of additional people in 2014, which will require more and not less funding to cover the cost.

Another $278 billion over ten years will be cut from non-health domestic programs, particularly farm programs, pension plans for federal workers, the Pension Benefit Guaranty Corporation, which insures private pension funds, and the Postal Service, which is to phase out Saturday delivery and close hundreds of smaller post offices.

The cut in funding for the PBGC comes under conditions where large corporate employers like American Airlines are proposing to dump their pension plans on the government insurance program, which is already facing a huge deficit. This will mean that tens of thousands of workers will receive much less than they expect, or nothing at all, when they retire.

According to one press account, the agencies whose budgets are effectively frozen for the coming year include the Environmental Protection Agency, the National Aeronautics and Space Administration, the Food and Drug Administration, the National Park Service, the Fish and Wildlife Service, the Indian Health Service, Head Start and the National Institutes of Health.

Despite this grim reality, the Obama administration has sought to portray its budget as expanding services for working people and imposing greater burdens primarily on the wealthy. White House Chief of Staff Jacob Lew made the rounds of the television interview programs on Sunday morning, declaring that Obama was proposing measures that would promote job creation and economic recovery. “There is pretty broad agreement that the time for austerity is not today,” he said on NBC’s “Meet the Press.”

In a similar vein, Obama followed the official release of the budget Monday morning with a speech before a student audience at the Northern Virginia Community College campus in suburban Annandale, where he pledged to increase taxes on the wealthy while making more financial aid and job training available to college-age youth.

The budget document does indeed propose a series of tax increases on business and the wealthy: $61 billion over ten years on the largest banks, $41 billion over ten years by eliminating tax breaks for oil, gas and coal companies, an unspecified amount from the so-called Buffett rule, which would set a minimum income tax rate of 30 percent for wealthy individuals. By adding in the expiration of the Bush administration tax cuts for the wealthy, White House officials came up with a total of $1.5 trillion in tax increases.

This figure, however, is entirely phony, since the lesser tax increase will never pass through Congress, and the expiration of the Bush tax cuts does not take place until December 31, 2012, long after the beginning of the 2013 fiscal year, and nearly two months after the presidential and congressional elections.

Equally fraudulent is the claim that military spending will be reduced by $850 billion over ten years, because of the end of the wars in Iraq and Afghanistan. There is no reason to believe that the vast US outlays in Afghanistan will end in 2014, as the White House projects. And while US troops have been withdrawn from Iraq, they are being repositioned for future wars against Syria, Iran and other targets in the oil-rich Middle East and Central Asia, and ultimately against major powers like Russia and China.

The budget also assumes that Congress adopts in full the remaining elements of Obama’s American Jobs Act. This would include a total of $350 billion in stimulus spending, including a one-year extension of the payroll tax cut, a one-year extension of extended unemployment benefits, a $50 billion infrastructure program, a $30 billion program to modernize school buildings, and a $30 billion program to help states hire additional teachers, firefighters and policemen.

Other than the payroll tax extension, which House Republican leaders support as a means of further defunding Social Security and Medicare, there is little reason to believe that any of these proposals will be adopted. The White House proposed them last fall as an exercise in election-year demagogy.

The only true assertions in relation to the budget are the projections that domestic spending will plunge over the next decade, from 8.7 percent of US gross domestic product today, to under 5 percent.

The deficit projected in the 2013 budget is $1.33 trillion, about the same as last year’s $1.36 trillion, and $200 billion more than congressional budget analysts projected last fall. It would be the fourth consecutive annual deficit of more than $1 trillion, fueled by continued record military spending, the collapse of tax revenues because of the economic slump, and the cost of the federal bailout of the banks and other financial institutions.

The staggering rise in total federal debt, from $5 trillion when Bush took office to some $10 trillion when Obama entered the White House, and now approaching $15 trillion, is a demonstration of the colossal scale of the plundering of the US economy and the US Treasury by the super-rich. Both Obama and his Republican opponents agree that the price for the bankruptcy of American capitalism must be exacted from working people, through the destruction of jobs, living standards and social programs.

In his speech Monday to a student audience, Obama made the usual invocations of “shared responsibility” and equal sacrifice, including his now-standard example of how billionaire Warren Buffett pays a lower tax rate than his secretary.

But Obama’s top campaign aides are saying something very different when behind closed doors with a Wall Street audience. According to a report by Bloomberg News, Jim Messina, manager of Obama’s reelection campaign, “assured a group of Democratic donors from the financial services industry that Obama won’t demonize Wall Street.”

Among those present last week at the members-only Core Club in Manhattan, according to Bloomberg, were: “Ralph Schlosstein, chief executive officer at Evercore Partners Inc., and his wife, Jane Hartley, co-founder of the economic and political advisory firm Observatory Group LLC; Eric Mindich, founder of Eton Park Capital Management LP; and Ron Blaylock, co-founder of GenNx360 Capital Partners.”

Messina told them that Obama would not target private equity firms in general if Mitt Romney is his Republican opponent. Any criticism of asset-stripping to destroy jobs would be focused exclusively on Romney, “not the industry that made the former governor of Massachusetts millions,” Bloomberg reported.

Obama’s phony populism

In the wake of Scott Brown’s stunning victory in Massachusetts and in an attempt to halt his declining poll numbers, President Obama is reinventing himself as a champion of the middle class. He seeks to be another Harry Truman: an economic populist who is willing to stand up to Wall Street and the big banks. His administration even has engaged 2008 campaign manager David Plouffe to revive some of the old Obama magic. Mr. Plouffe has advised Mr. Obama and the Democrats to “fight” for their ambitious domestic agenda: redouble efforts on passing health care reform, have the government “create jobs,” implement cap-and-trade legislation and impose another expensive economic stimulus plan.

Mr. Plouffe wants Mr. Obama to continue his socialist revolution. Yet instead of doing this from Washington, he recommends a series of speeches across the country. The White House’s strategy is to return to campaign mode and retake the public relations offensive by more effectively communicating Mr. Obama’s message.

The linchpin of Mr. Obama’s new populism is class warfare. He is calling for a massive $90 billion tax on large banks, limiting their size and regulating how they can diversify their investments. He is demonizing Wall Street, denouncing large bonuses for executives and bankers.

Moreover, in his State of the Union address, Mr. Obama demanded tax credits for small businesses that hire new employees or purchase equipment to expand production. He supports more child care tax credits for middle- and lower-income families. To rein in skyrocketing budget deficits, he proposes a 2011 spending freeze for 17 domestic agencies. The savings would amount to $15 billion. Mr. Obama thinks this will reposition him as a deficit hawk and fiscal conservative whose focus is on job creation and economic recovery.

Contrary to White House spin, however, the problem with Mr. Obama is not his message. It is his ideology. No amount of re-branding can change this fundamental fact: Big-government liberalism leads to economic ruin. Mr. Obama’s spend-and-borrow, soak-the-rich policies are an assault on the middle-class standard of living.

His attacks on the banks may play well with the unions and some Democratic constituencies, but they are bad economics. By scaling back the size of our large banks, Mr. Obama is undermining their global economic competitiveness. His burdensome regulations and tax increases will only undermine financial investment and the much-needed flow of credit - the very lifeblood of a thriving economy.

Foreign investors are fleeing America, placing their vital capital elsewhere. Many of our leading banks will do the same. If they are not welcome in New York, they are welcome in London, Hong Kong and Tokyo. A weakened financial sector entails fewer jobs, higher unemployment and anemic economic growth.

Yet the administration’s biggest assault on the middle class is through reckless spending. Mr. Obama’s first year in office saw an unprecedented expansion in the size and scope of the federal government; outside of the world wars, never before has government power increased so quickly and broadly. Public spending as a share of gross domestic product is at a peacetime high of nearly 25 percent. This means that one out of every four dollars earned by private-sector labor is taxed and redistributed by politicians in Washington. Under Mr. Obama, the central government is strangling the free-enterprise system.

Last year’s budget deficit was more than $1.4 trillion. For 2010, Mr. Obama will add another $1.3 trillion to the debt. The Congressional Budget Office estimates that from 2009 until 2011, the administration’s spending spree will total $3.7 trillion. Hence, the national debt will have increased more in three years than in the first 225 years of our history. Mr. Obama is drowning America in an ocean of red ink and fostering relentless economic decline.

His call for a spending freeze and gimmicky business tax credits is a cynical ploy to divert attention from his failing agenda. It also reflects the belief that Mr. Obama’s personality can trump - and even reshape - reality.

“I’d rather be a really good one-term president than a mediocre two-term president,” he said Monday.

Successful leaders, however, are rarely one-termers. Mr. Obama is quickly becoming the worst president since Woodrow Wilson. Mr. Obama is not a born-again populist. Rather, he is a transnational liberal elitist who despises Middle America - especially its patriotic conservative values. His goal is to be a transformational president: to erect a progressive nanny state.

Leon Trotsky, one of the founders of the 1917 Bolshevik Revolution, said left-wing radicalism was based on “permanent revolution.” Tactics may change. Rhetoric may be adjusted to suit the circumstances of the moment, but the ultimate objectives are timeless: smashing capitalism and traditional bourgeois institutions - including the sovereign nation-state.

Like socialists before him, Mr. Obama claims to speak on behalf of the masses. His actions, however, betray his real intentions. He is not the defender of the people’s interests. Instead, he is their implacable enemy. He is a phony populist.

Obama's Phony Populism
By Sheldon Richman

President Obama likes to portray himself as a man of the people. But a look behind the veil shows this to be a deception. Take the financial regulatory overhaul brewing in Washington.

I know what you're thinking: What could better illustrate Obama's bona fides as a champion of the people? He wants to regulate the banking industry after the recent debacle and is being fought by the banks and the Republicans. Doesn't this clearly demonstrate his pro-people agenda?

A closer looks reveals the real story to be something quite different. First, there has never been an unregulated banking industry in the United States. You can look it up. And since 1914 we've had a central bank, the Fed, whose regulatory powers have only increased over the decades. Several other agencies also regulate the banks. There are regulators at the state level too.

But to focus only on regulation is to miss a big part of the story. In truth what we have had is a banking cartel, a partnership of government (state or national) and nominally private financial institutions. This partnership has two broad aspects that function as a quid pro quo: regulation and protection from free competition, that is, special privilege. The two sides haven't always agreed on the exact proportions of the two elements, and the bankers have even disagreed among themselves. But lack of unanimity about details should not be mistaken for lack of agreement about the fundamental nature of the system. It is a government-banking alliance. Neither side would have it any other way.

Second and following from what has just been said, the government's fingerprints are all over the banking debacle. Various agencies of the U.S. government hold major responsibility for what happened. That the banks raked in big profits doesn't change that; it's part of the whole story. Fannie Mae and Freddie Mac, both government-sponsored enterprises, encouraged dubious mortgage lending, then bundled vast numbers of the loans into securities. An agreement among the world's central banks, the Basel II Accord, encouraged banks to hold those securities rather than mortgage loans they could vouch for. And a government-licensed rating cartel gave the shaky securities high marks. In myriad other ways government and banking together created the crisis.

This is old, if unappreciated, news. But we need the reminder because the proposed financial regulation overhaul addresses none of the fundamental causes of the banking breakdown. A real reform, one that had the people's interests at heart, would be based on the principle that banking is too important to trust to a government-backed cartel. A cozy relationship among politicians, regulators, and bankers is a recipe for trouble. Recent history shows us that. And no matter what the new regulatory regime consists of, that cozy relationship will continue. The regulators will have to depend on the bankers for information and may indeed be drawn from the industry. (They may also intend to work in the industry later.) But even if the regulators initially see themselves as overlords, in time the law of "capture" will kick in and the cozy relationship will resume.

The upshot is that the government's promise to represent the public is false. Even if it wanted to, it wouldn't have the information required to do the job. The irony is that in presenting itself as the guardian against "systemic risk," the regulators present the largest systemic risk of all. It's the Federal Reserve after all that brought us the Great Depression and damaging inflationary booms and bust ever since.

So what can we do? A real program aimed at the people's well-being would take decision-making away from the government-banking cartel and put the financial industry into a free and open market, where competition would discipline bankers and decentralize decision- making. No small group would be in a position to make economywide mistakes and then get bailed out by their friends in high places. Only in the free market is there accountability. Profits would be private, but so would losses.

Obama should study the Democrats of the 19th century, who stood for competition and free trade in all things, especially money and banking. The party has surely gone downhill since then.

Obama’s Phony Populism
BY JOSEPH KLEIN

President Obama is coming to New York tomorrow to draw a line in the sand against Wall Street. He is stoking public anger against the big banks, whom many people believe brought our economy to its knees as a result of what they perceive as the banks’ avarice and deceptive practices. Obama wants to change the target of populist sentiment away from big government onto big business.

How does this Ivy League elite President-turned- populist plan to do that? Obama is portraying the federal government as the white knight riding in to save the public from the Wall Street villains by putting them under government stewardship.

Obama is battling the private sector because he is a socialist progressive who detests free market capitalism. The proof is that the quasi-government agencies which played a big role in helping to bring about the housing crisis through their reckless risk management – Fannie Mae and Freddie Mac - have escaped Obama’s opprobrium. After all, if they are connected to the government with a progressive social justice mission to enable everyone to buy their own homes, whether they can afford to or not, Fannie and Freddie can’t be all that bad.

Obama wants to consolidate more power in Washington at the expense of the private sector. And by exploiting class warfare, he hopes to minimize Democratic Party losses in Congress this November.

No doubt, the civil fraud charges brought by the Securities and Exchange Commission against Goldman Sachs will be front and center in Obama’s populist anti-Wall Street message. But will he mention the fact that Goldman Sachs is second only to the University of California as his biggest single source for donors in 2007 and 2008, according to the Center for Responsive Politics? Will he be returning tomorrow the contributions – approaching $1 million – that Goldman’s employees poured into his presidential campaign?

Unlike the health care debate, which people understood to be about big government versus individual choice, the debate going on right now about reform of the financial sector is more muddled. People legitimately feel they have little control over their own economic fortunes, which they believe are at the mercy of self-interested financiers who turn to Washington for relief at taxpayers’ expense whenever they get into trouble.

Even relatively conservative talk show hosts like Bill O’Reilly have called for more federal government regulation as the answer. He did so last night on “The Factor.” But it is not necessarily the right answer.

We need better enforcement of the laws already on the books, to be sure. Hopefully, the SEC is coming out of its slumber during which it missed all the evident signs of the Madoff ponzi scheme. However, we do not need to establish more government bureaucracies in Washington with broad, vaguely worded mandates that give them the power to intervene into day-to-day business decisions and effectively run the top banks themselves on the grounds that the banks are too big to fail. And we do not need new taxes – which will be passed on to the consumers – to fund a bank bailout slush fund administered by the bureaucrats in Washington D.C.

Here is a better idea. Break up the biggest banks in a way that will sharply reduce, if not eliminate, their capacity to precipitate a systemic melt-down. As the free market proponent Alan Greenspan said last fall:

If they’re too big to fail, they’re too big. In 1911, we broke up Standard Oil. So what happened? The individual parts became more valuable than the whole. Maybe that’s what we need.

Use the antitrust laws to prevent collusion among banks and to untangle any mergers that have produced a megabank with the potential to abuse its market power to the detriment of consumers. As a result of mergers brought about by the financial crisis itself, the largest banks have gotten even larger – making them more dangerous than ever to our economic system if any one of them should fail.

President Obama’s prescriptions are those of a snake-oil salesman who wants ever more power for the federal government at the expense of free enterprise.

Phony Populism and Status Quo Statism

Although occasionally spouting out phony progressive platitudes in an attempt to make nice with the OWS protesters and appeal to his dwindling base, Caesar is revealed to be the snake in a suit that he really is. From The Daily Beast:

President Obama and his aides are increasingly making common cause with the Occupy Wall Street protesters angry about the greed and influence of the nation’s financial powerhouses. That’s a sensible move for a chief executive searching for some populist appeal.

This is a president, after all, who helped bail out the banks, did not press to punish or prosecute the titans who created the financial crisis, hired Tim Geithner as Treasury Secretary, and spent much of his term negotiating with Republicans who habitually, in his own words, leave him at the altar.

And yet expressing sympathy with those who are demonstrating against obscene Wall Street profits is a bit tougher when your campaign is tapping that very street for loads of cash.

Close to 100 of the big-money bundlers for Obama’s reelection team have ties to investment banks and other financial institutions such as Morgan Stanley, Goldman Sachs, JP Morgan Chase, and Bank of America--each of which received tens of millions of dollars in bailout money at the start of the recession. The campaign has roughly 360 bundlers, the high-powered executives who vacuum up individual contributions of $2,500 and assemble them into larger packages.

The fact that Obama is a shill for fractional-reserve bankers and the military-industrial-complex shouldn't surprise anyone. In 2008, his top donors included Goldman Sachs, JP Morgan, and Citigroup (and many other corporate monsters).


And as McClatchy Newspapers reported last year:

Several former Goldman executives hold senior positions in the Obama administration, including Gary Gensler, the chairman of the Commodity Futures Trading Commission; Mark Patterson, a former Goldman lobbyist who is chief of staff to Treasury Secretary Timothy Geithner; and Robert Hormats, the undersecretary of state for economic, energy and agricultural affairs.

Wall Street knew, as many more are beginning to realize, that Obama was the perfect man for the job: a less threatening, handsomer face to make sure that the status quo of bailouts, corporate welfare, Federal Reserve monopoly money, and perpetual war continued without any hiccups. Except the faux populist rhetoric to continue from Obama as he, with forked tongue, flirts with the OWS sentiment across the nation while winking at and rubbing elbows with Wall Street.

The impact of Obama’s phony populism

Obama is playing politics instead of addressing the real problems.

Nobody had more to do with breaking the back of inflation in this country than former Fed Chairman Paul Volcker. Thirty years ago, he stopped it in its tracks with higher interest rates. He was on top of his game in a way that many argue ultimately produced the great bull market that ended in 2000.


However, just as there are instances where other finance seers (as opposed to financiers) subsequently lost their way, especially Bob Rubin, a once revered Treasury Secretary, now known as presiding over a bank one-third owned by the federal government because of actions he approved, the question to ask is whether Volcker, an icon 30 years ago, still has a keen understanding of what went wrong in this banking crisis.

To wit, I cannot recall a single instance where proprietary trading, internal hedge funds, or private equity played a role in creating the banking mess that President Obama has decided to focus on with his much-ballyhooed “Volcker Rule.”

Almost 100% of the problems that caused TARP and the U.S. guarantees are directly related to poor lending decisions and a lax regulatory environment directly traceable to the state and federal governments. A Volcker Rule wouldn’t have stopped any of it.