| A PRESIDENCY IN PERIL: The Inside Story of Obama's Promise, Wall Street's Power, and the Struggle To Control Our Economic Future Robert Kuttner White River Junction: Chelsea Green Publishers, 2010 |
Rating: 5.0 High |
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| ISBN-13 978-1-60358-270-4 | ||||
| ISBN-10 1-60358-270-3 | 300pp. | HC | $25.00 | |
Barack Obama, elected in 2008 with such enthusiastic support, has allowed much of that support to slip away — much as did his predecessor George W. Bush in squandering the international support he enjoyed after 9/11.
The two men are very different in character, of course. Yet the reasons for their loss of support are similar: Both caved in to close advisers who were committed to narrow interests and embraced policies that are not in the best interests of the nation. In Obama's case, he was persuaded to appoint a set of economic officials with ties to the financial interests his administration proposed to reform. The results were predictable.
"This set of slender reforms is far too weak to fundamentally alter the behavior of the financial system that caused the crash. Mainly, it creates additional risk for taxpayers, increases costs for ordinary borrowers, and expands the role of the Federal Reserve beyond normal monetary policy, upping the risk of inflation later on." – Page 116 |
Journalist Robert Kuttner has probed into Barack Obama's capitulation to the interests of Wall Street and corporate America, sectors whose power has grown steadily since the Reagan administration. Many of Obama's cabinet officials and other advisers come directly from Wall Street firms, notably Goldman Sachs, and other Wall Street insiders like Robert Rubin exert great influence on the administration while remaining outside it. Kuttner documents the selection of these men (and some women), their interactions, and their effects on administration economic policy, in exhaustive detail. He cites other economic historians to show that Obama's advisers (e.g. Larry Summers) have an imperfect grasp of the nature of the problem their president faces.
The problems Obama faces are different than those Roosevelt or Truman dealt with. As Kuttner notes, financial abuses that brought the Great Depression were less complex than today's.
"The collapse of 2007-09 had parallels in the earlier Great Crash of 1929, but it was potentially even more serious because the financial casino that preceded the recent collapse was that much more opaque, convoluted, and interconnected. In the 1920s, there were no hedge funds and only the most limited of derivatives or securitized loans. There were no pension funds to speak of, and only 1.5 percent of Americans held stock. The classic speculative abuse was playing the stock market on margin, which is a model of transparency compared with, say, credit default swaps." – Page 37 |
However, Truman began his presidency as what we would call a "conservadem." Concerned about inflation, he used wartime powers to seize factories and break strikes, and signed a weakened version of the Employment Act of 1946. Unions and liberals blasted these actions. Before the 1946 midterms, his approval rating had fallen to 33%. Yet by embracing New Deal policies and racially integrating the armed forces,2 Truman restored himself and his party to popularity. Kuttner argues plausibly that Obama could do the same by standing up to Wall Street, powerful industries, and the GOP.3
A bewildering number of players appears in Kuttner's account. What makes that account readable, indeed fascinating, is that it reveals the intense battles taking place within the administration; between the administration and Congress, especially congressional Republican obstructionists; and with the investment-bank crowd, who are still unsatisfied with what Obama's team is handing them. Kuttner leaves no doubt that he does not side with the Wall Street crowd, but rather hopes Obama will stand up and demand effective reform, as Franklin Roosevelt did in the 1930s. Neither is Kuttner unclear about the policies and measures that would make up that reform: They include a strong Consumer Financial Protection Agency; restoration of the 1933 Glass-Steagal Act or something like it, to isolate commercial banks from investment banks; better regulation of derivatives and other speculative assets; and executive compensation more closely tied to the firm's performance.
Kuttner next examines the political aspects of what the administration, the Congress, and certain governors have been doing, and demonstrates that he has as good a grasp of politics as he does of economics. He documents Obama's counterproductive appeals for bipartisanship, contrasting these with what FDR did during the Depression and with Harry Truman's hard-line opposition to Republicans after 1948. Kuttner feels this would be an effective approach for Obama, as well as more effective politics.
The book is incredibly well researched, quoting key pronouncements and giving the dates they were made, describing the careers of many of the financial players named, and providing a good deal of political history, especially of Roosevelt's efforts during the Depression (which Kuttner calls the Great Crash of 1929), Truman's efforts after World War II, and the Resolution Trust Corporation which so expeditiously cleaned up the Savings & Loan Crisis of the 1980s. Kuttner also explains the provisions of measures to fix the current economy like the TARP (Troubled Asset Relief Program) and the ARRA (American Recovery and Reinvestment Act).
There is of course an extensive set of endnotes, referenced by both sequence number and key phrase, and an index. The index is defective. I have not done an exhaustive check but note that the following names are missing: Newt Gingrich; GOP chairman Michael Steele (page 223); Michael Steel (page 207), spokesman for House GOP leader John Boehner; CBO director Douglas Elmendorf (the CBO is not indexed either.) I conclude that the index probably fails to list a fair number of the people mentioned in the book.4 These omissions are its only serious defect. This is Kuttner's ninth book. It is a remarkably informative, timely, and optimistic work, as proven by the people who recommend it.5 I am pleased to join them. However, I rate it a keeper only for political junkies.
"For more than thirty years, corporations have been busting unions and firing pro-union workers with impunity because current labor law is too weak to enforce the guarantees of the 1935 Wagner Act. Even if a majority of workers sign union cards, management can delay the certification election, issue threats, and fire organizers, and by the time the complaints are processed—often years later—the pro-union momentum has been broken. Industry treats the very modest fines as a cost of doing business." – Page 201 |
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