Barack Obama on the economy: we can’t go back to business as usual

One of Obama's main points today is that we can't go back to what we have been doing:

[W]e have to realize that we cannot go back to the bubble-and-bust economy that led us to this point.

It is simply not sustainable to have a 21st-century financial system that is governed by 20th-century rules and regulations that allowed the recklessness of a few to threaten the entire economy. It is not sustainable to have an economy where in one year, 40 percent of our corporate profits came from a financial sector that was based on inflated home prices, maxed-out credit cards, over-leveraged banks and overvalued assets. It's not sustainable to have an economy where the incomes of the top 1 percent has skyrocketed while the typical working household has seen their incomes decline by nearly $2,000. That's just not a sustainable model for long-term prosperity.

For even as too many were out there chasing ever-bigger bonuses and short-term profits over the last decade, we continued to neglect the long-term threats to our prosperity: the crushing burden that the rising cost of health care is placing on families and businesses; the failure of our education system to prepare our workers for a new age; the progress that other nations are making on clean energy industries and technologies while we -- we remain addicted to foreign oil; the growing debt that we're passing on to our children. Even after we emerge from the current recession, these challenges will still represent major obstacles that stand in the way of our success in the 21st century. So we've got a lot of work to do.

Continue ReadingBarack Obama on the economy: we can’t go back to business as usual

Frank Rich on the character of Larry Summers

In today's NYT, Frank Rich is reminding us of the sordid background of one of the architects of Barack Obama's economic recovery program. These are sad times, indeed.

Lawrence Summers, the president’s chief economic adviser, made $5.2 million in 2008 from a hedge fund, D. E. Shaw, for a one-day-a-week job. He also earned $2.7 million in speaking fees from the likes of Citigroup and Goldman Sachs.

[P]erhaps I’ve become numb to the perennial and bipartisan revolving-door incestuousness of Washington and Wall Street.

That the highly paid leader of arguably America’s most esteemed educational institution [Harvard]would simultaneously freelance as a hedge-fund guy might stand as a symbol for the values of our time.

Continue ReadingFrank Rich on the character of Larry Summers

The extent of the remedy for our financial ailments

How much public money is at stake in the attempt to fix our financial woes? Bloomberg adds it up:

The U.S. government and the Federal Reserve have spent, lent or guaranteed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s. New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.

Continue ReadingThe extent of the remedy for our financial ailments

More heavy criticism of Obama’s economic plan

Obama's economic plan is receiving heavy criticism from distinguished economists, including Joseph Stiglitz, James Galbraith, Paul Krugman and many critics from Europe . Many of the critics believe that Tim Geithner and Henry Paulson are far too beholden to Wall Street and the financial sector. The fear is that the toxic debt (much of it based on fraudulent mortgage-backed securities enabled by Wall Street fraud) is being lifted from the banks and dumped onto the U.S. taxpayers because the Obama plan is making the FDIC ultimately responsible. I'm not an economist, but based on these criticisms, this fear seems well-founded. I don't see any reason for Geithner or Paulson to be going to bat for the taxpayers. Most of their friends live on Wall Street. At this same link, you'll see the Nation's view that we need an outsider to clean up this mess. Writer Katina vanden Heuvel even recommend Eliot Spitzer as one of the few people aggressive enough to take on Wall Street before it was a trendy idea. Frankly, I like that idea, based on her stroll down memory lane (pre-Ashley Dupre):

Spitzer took on Wall Street's metastasizing corruption before the meltdown. He defended consumers' and taxpayers' rights. He speaks with passion and clarity about what went wrong and what needs to be done to restore integrity to our system. He is chastened by personal scandal, yet untouched by complicity in Wall Street's public scandals which have obliterated peoples' savings and devastated our country.

What does Spitzer have to say about the economic crisis? That the crisis was not caused by the lack of necessary laws. Rather, the crisis was caused by the lack of good judgment and lack of tenacity to defend the public interest. These things, says Spitzer, cannot be legislated:

Continue ReadingMore heavy criticism of Obama’s economic plan

The value of public anger

Glenn Greenwald finds virtue in public anger:

[The] anti-anger consensus among our political elites is exactly wrong. The public rage we're finally seeing is long, long overdue, and appears to be the only force with both the ability and will to impose meaningful checks on continued kleptocratic pillaging and deep-seated corruption in virtually every branch of our establishment institutions. The worst possible thing that could happen now is for this collective rage to subside and for the public to return to its long-standing state of blissful ignorance over what the establishment is actually doing . . .

It's a universal dynamic that elites want to keep the masses in a state of silent, disengaged submission, all the better if the masses stay convinced that the elites have their best interests at heart and their welfare is therefore advanced by allowing elites -- the Experts -- to work in peace on our pressing problems, undisrupted and "undistracted" by the need to placate primitive public sentiments.

Consider that it is now well established that emotions are not incompatible with rationality.

Continue ReadingThe value of public anger