James K Galbraith writes:
Bruce Bartlett says it was a failure to focus. Paul Krugman says it was a failure of nerve. Nancy Pelosi says it was the economy’s failure. Barack Obama says it was his own failure — to explain that he was, in fact, focused on the economy.
As Krugman rightly stipulates, Monday-morning quarterbacks should say exactly what different play they would have called. Paul’s answer is that the stimulus package should have been bigger. No disagreement: I was one voice calling for a much larger program back when. Yet this answer is not sufficient.
The original sin of Obama’s presidency was to assign economic policy to a closed circle of bank-friendly economists and Bush carryovers. Larry Summers. Timothy Geithner. Ben Bernanke. These men had no personal commitment to the goal of an early recovery, no stake in the Democratic Party, no interest in the larger success of Barack Obama. Their primary goal, instead, was and remains to protect their own past decisions and their own professional futures.
Up to a point, one can defend the decisions taken in September-October 2008 under the stress of a rapidly collapsing financial system. The Bush administration was, by that time, nearly defunct. Panic was in the air, as was political blackmail — with the threat that the October through January months might be irreparably brutal. Stopgaps were needed, they were concocted, and they held the line.
But one cannot defend the actions of Team Obama on taking office. Law, policy and politics all pointed in one direction: turn the systemically dangerous banks over to Sheila Bair and the Federal Deposit Insurance Corporation. Insure the depositors, replace the management, fire the lobbyists, audit the books, prosecute the frauds, and restructure and downsize the institutions. The financial system would have been cleaned up. And the big bankers would have been beaten as a political force.
Leave it to Jamie Galbraith to get it all so succinctly into one readable article.
Some of the comments are good, too. I particularly recommend this one —
The elephant in the room: The validity of currency has been separated from its’ primary function; labor compensation utilized as a universal bartering tool for trade, goods and services. The religion of economics has subverted it into a measurement independent of its original blueprint. Speculators, financiers -Wall Street-and the banks have uncoupled currency from its’ primary function. The interdependency of compensation and exchange has been dragged into the alley, beaten robbed, and stabbed. Currently, economists argue, theorized, and postulate on how to get the staggering, beaten laborers back into a homeless shelter living on debt.
The system of labor compensation is deeply flawed. We have been living in a system specifically designed for a certain percentage of the population and exclusionary of a large swath of humanity with isolated blips of the pendulum swung towards the middle. We are in need of equitable partnership foundation for all.
Our current practice of compensation is brain dead and hooked up to life support supported by a bankrupt government riding on threadbare tires.
“To argue with a person who has renounced the use of reason is like administering medicine to the dead.” Thomas Paine
Posted by mary dohm | November 6th, 2010 at 11:45 am
Mary is right. a market needs a medium of exchange in order to function and if private parties operate that system then they control the rest of the market and will eventually own it. As contract by all and with all, money is form of public commons, like a road system. What destroys viable monetary system is when these drawing rights to community productivity are treated as a form of private property and everyone tries to hoard as much as possible. The law of supply and demand apples to savings and the economy can only support as much saved wealth as can be profitably loaned out. Notational wealth beyond this level of natural demand and the ability to save is impaired by speculation flooding the market. If savings were taxed above a certain level, people would be far more careful what value they take from natural and social resources to convert into currency. So value would accumulate within society and the environment. The healthier environment would create more natural security than numbers in a bank account. We all like having roads, but there is little inclination to pave more than is necessary. Applying the same principle to money would create a more stable world.
As for government, the banks already own it. Any ten year old on an allowance knows budgeting is to list your needs and desires in order of priority and then spend on what can be afforded. The Federal government doesn’t do this, though. They put together these enormous bills encompassing everything they think must be absolutely necessary and then tack on enough extras to coerce enough legislators to vote for it and then the President can only pass or veto the entire package. The consequence though, is that it creates enormous amounts of government debt, which is the basis of our monetary system.
In the spirit of actual budgeting, a possible solution would be to break the spending bills down to their constituent items and have every legislator assign a percentage value to each item and then re-assemble the bills in order of preference. The president would draw the line at what would be funded. This would divide responsibility, allowing the legislature to prioritize, while giving the president final authority over total spending. Since making the cut would be graded on a curve, there would be much less incentive to trade favors and the percentage system would allow legislators to fine tune their granting of favors to other legislators and lobbyists. As the particular items at the cutoff line would have a far smaller constituency than those being asked to fund them, there would be limited political motivation to overspend. Of course this would totally collapse our current monetary system, since government debt is foundational, but it is happening anyway. A local public banking system that circulated profits from managing the medium of exchange back into the community creating this wealth would cover much of the lost federal funding of local projects.