Obamanomics—Bad Economics, Awful Politics
When it comes to the economy, the Obama Administration seems politically brain dead — clearly not attuned to the kind of real world economics folks on Main Street must live with on a daily basis. There are many problems here, but the basic one seems to be that people at the top of this administration have bought into the notion that what’s good for Goldman Sachs is good for America,
Franklin Roosevelt won office in 1932 because he ran against the banks. He won reelection in 1936, when the country was still deeply mired in a Depression, because be was still running against the banks, against Wall Street, not only rhetorically but with real legislation that limited the games these institutions could play with the economy, games that benefited the few and hurt the many.
The Obama Administration, on the other hand, isn’t running against the banks on Wall Street. It’s fronting for them.
Yesterday a 50 percent levy on bank bonuses was announced in the U.K. Today Nicholas Sarkozy, France’s leader, said his own country might sign on to such a one-time levy. This is a simple and obvious reaction to a situation in which institutions whose past bungling has caused such global distress, institutions only saved from ruin by public intervention, institutions whose top management then turns around and gifts itself to an outrageous extent while most people still suffer the effects of their bungling, are made to pay back a bit.
This levy is being assessed in The City, the British equivalent of Wall Street and the world’s second biggest financial center, and may soon be done on the Bourse, the huge French financial center. But is there a cry from Obamaland for a similar tax here? Heaven forbid.
Oh, the President and his Treasury Secretary Tim Geithner are making shame-shame noises at Wall Street for its own $140 billion mega-bonus payments this year. They seem shocked, however, shocked!, that the trough feeders on The Street who did everything they could to feather their own nests at the expense of the public in years past are feathering them more than ever after the public bailed them out. What’s most shocking to virtually everyone else, however, is how these Washington best and brightest can be so oblivious to the public’s anger about Wall Street continuing to ride high while Main Street has been brought so low.
Don’t people at the Treasury, the Fed, the West Wing, have access to daily news media? A poll released yesterday shows that 84 percent of Americans do not believe that the recession is over, in spite of the fact that Tim and Wall Street tell them it’s over, because this 84 percent sees its own economic prospects getting darker, not better while Wall Street wallows in a sea of cash. Another poll released just today shows people want Wall Street bonus babies to pay for generating more jobs on Main Street. Add to this the several polls of recent days that show that most Americans no longer view Mr. Obama favorably, in large measure because they see his policies aiding Wall Street and the banks rather than themselves.
Politically speaking, Obamanomics has been a disaster for the President and his party. Why then, do they pursue this path? Why do they not push for an excess profits tax on Wall Street bonuses? Why not press ahead for a transaction tax on The Street’s own massive version of worthless day trading? Why are they backing off on limiting the pay of executives who still work in companies the government (i.e. us) largely own?
It all comes back to the incredible view that what’s good for Goldman Sachs is good for America.
In a later post I’ll examine the merit of this belief. In the interim, may I suggest to people in this administration that they wake up to the fact that all the money funneled to them directly and indirectly by Street next year is not going to save them from a nasty trouncing at the polls if they don’t stop acting like The Street’s water carrier.
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I believe your argument can be broken into to constituent parts
1) Not regulating Wall Street is (a) bad economics and (b) bad politics
2) Letting Wall Street bonuses happen is also (a) bad economics and (b) bad politics
I'll agree with 1, which is why Congress is pushing through a financial regulation package right now.
And I'll agree with 2b, but what economic purpose would banning bonuses or capping compensation accomplish? Would that get businesses growing again? Would it put any money in the pocket of the unemployed? Would it help homeowners pay their upside-down mortgages? I don't see how it is bad economics to let bonuses happen, no matter how unfair one may see them.
strictly speaking, and with no intention of letting obama et al off the hook here, i don't think obamanomics is really the appropriate name.
obamanomics is nothing more than a continuation of 'shrub-anomics' which was an amplification of bubba-nomics, itself in turn a elaborate implementation of reaganomics. i'm sure we can go back even further still since we can dole out some thanks to the memory of tricky-dick for aspects of the sad state of our healthcare system. the POTUS may change, but many of the perpetrators remain the same.
these guys [and gals] of course are not stupid. they're indifferently aware of what main street thinks of the ongoing incestuous financial orgy betwixt wallstreet and DC … which is why we get the PR we do. its just more lip service you can believe in. as to the recession, i firmly believe that the recession has ended. it was over on wallstreet once uncle sugar started doling out free money … our money, that is. it ended on main street some months ago with the onset of the current depression.
Several longtime financial observers (including academics that have studied the issue and insiders) point to compensation as a major driving force behind all the risk taking. It encourages them to load up on extremely risky stuff in order to make huge loads of money and huge bonuses. In fact, some believe it is near the top of the list of causes. Even Goldman's founder has criticized them for this dynamic.
out some thanks to the memory of tricky-dick for aspects of the sad state of our healthcare system
Not to mention Ted Kennedy who rejected Nixon's HC plan in 1974.
“Live in the past, die in the future”
-Unknown_
Yup.
I don't see how it is bad economics to let bonuses happen, no matter how unfair one may see them.
its bad economics because we're bonusing [if the word bonus even applies to these massive payouts] the folks who burned down said economics.
they were being encouraged to take on massive risk for the potential of huge gains. they took on the risk, it materialized, but they successfully turned to punch us in the face and say, “pass it on.” they keep the gains, we get the risk. unless and until that changes we'll continue in this horrid cycle.
Agreed as long as it isn't with taxpayer dollars.