Tuesday, March 17, 2009

Why AIG (and Wall Street) has not yet been taken to the woodshed.

President Obama got his dander up the other day and spoke out about AIG handing out multi-million dollar bonuses on the tax-payer dime. As political theater is was marginally satisfying but like Chinese food one found oneself oddly hungry for more a short while later. From a policy prospective the verbal talking down was literally the least the president could do. As other Wall Street kleptomaniacs were not browbeaten into surrendering their ill gotten gains it is unlikely the President can embarrassing the AIG miscreants into doing the right thing either.

It would be hard to find a group more poorly socialized than upper echelons of Wall Street. It seems that the major requirements for reaching the pinnacle of high finance are megalomania, an overblown sense of entitlement, destructive greed, and a borderline sociopathic personality. One definitely can not have the smallest iota of shame. Thus it is odd that Obama thinks that naming and shaming corporate titans will have any effect. The corporate Big-Whigs of Wall Street seem to be not only devoid of any shame but also seem to lack the understanding of why they should at least pretend they have a moral compass.

So why is Obama not picking up a bigger switch? The answer seems to be he can not yet do what really needs to be done—Nationalize the failing financial institutions. The very word nationalization is a third rail in our political and policy discussions. The only lonely voices discussing this belong to the left blogosphere and its ancillary members on cable and in the New York Times. A recent poll showed that a large majority of Americans still oppose nationalization. Oddly enough they do support a temporary take over by the government and subsequent re-privatization. It seems the very word “nationalization” has become a bugaboo. Why is this?

It is because the right-wing noise machine has done an excellent job of demonizing anything that remotely resembles “Socialism” or even Liberalism. The very word “Socialist” and its derivative “Socialism” has become pejorative. Never mind most people using the word would not know a socialist if Karl Marks walked up to them and punched them in the gut. It is a scare tactic, a way to intimidate the ill-informed.

The ground work for this tactic was laid down all the way back in the 2008 election. As a tactic it worked well enough as a dog-whistle for the Republican faithful. The Palinite section of the Republican Party just ate this stuff up. Even today the Obama bashers still claim that the President is a Manchurian candidate, a secret 60’s type radical schooled in the Saul Alinsky tradition. Obama, so the story goes, is wedded to the Black Nationalist / Radical leftist ideology of his mentors Bill Ayres and Jeremiah Wright. He is determined to destroy the nation by imposing his Communist-Socialist-Black Nationalist-Islamic-Anti-American-and-Anti-Capitalist ideas. Nice work if you can get it.

Such tin-foil-hat ruminations would in more normal times be studiously ignored or laughed at by rational people. Unfortunately we do not live in normal times. We live in time when a former drug addict and side-show freak personality has become the intellectual center of a major U.S. political party. The Republicans are taking their marching orders from a man whose entire shtick is tossing about verbal fire bombs and then pouring gasoline on the resulting conflagrations. While it may be great radio it is a crappy way to discuss public policy. Strip away the very thin mask of “entertainment” that Rush provides and there is a poisonous meme that Obama is a traitor to the nation. That and a very large portion of rank racism lay behind the charge that Obama is a “socialist.”

This is the political landscape Obama must operate in. The opposition party is running a campaign of scorched earth. They proudly broadcast that they hope the president fails. They will use any tactic and any type of brick-bat to impede his progress. The party of Lincoln has become the party of no. They may not be clinging to their guns and their religion but they are definitely clinging to free-market absolutism and their anti-tax nostrums. Even after the collapse of the economic Reganism, even after the Laffer curve has been debunked multiple times, even after deregulation has manifestly been proven to be a disaster, Republicans still want to cut taxes and shrink the government. Their “big” idea for stimulating the economy—cut capital gains taxes to 5%. Our economy is in the tank because Wall Street took reckless bets on what turned out to be Ponzi schemes and the Republicans want to solve this by paying the investor class to be even more reckless with its financial dealings. Thanks to the cloture rule in the Senate Obama has no choice but to listen to this as if were a serious policy proposal.

It is precisely because Obama must drag the Republicans around like a lead weight that he is so reticent in doing what clearly needs to be done. He will be forced to prolong our economic agony via the Kabuki Theater that is “stress testing” the banks. Our banking system has melted down into a small puddle of goo and sooner we own up to that salient fact the better off we will be.

Unfortunately the term “we” does not include the Republicans. Republicans owning up to the economic mess means that they must butcher their sacred cow of free market absolutism. They would be forced to admit that the market is not the solution for all ills and government does have a roll in smoothing out the rough edges of capitalism. That is an anathema to the Republican Party and its true-believer Conservative base.

Republicans are not exactly hiding this fact. Mitch McConnell was quite direct in his pronouncements. He is still a believer in the old-time Religion of small government Conservatism. His party is tactically holding out for 2010 and a mythical Gingrich-type counter revolution where their ideas are swept back into power. They are banking on the failure of Obama’s policy because of ideological considerations. They prefer that “liberal” Keynesian notions fail because they want their notions to be the only option out there. They are bound and determined to follow in the steps of Herbert Hoover’s policies and prove that old Herbert was really right and the New Deal was evil. To do this they are more than willing to use scare tactics and demagoguery.

Thus Obama is forced to go sideways until the level of pain raises to a level where the Beltway crowd screams uncle and concede to nationalization. The political elites and the pundits are still lost in the land of Regan. The consensus of the chattering classes in beltway elite is the Obama needs to be cautious lest his free-spending ways lead to disaster. Washington still has not got the memo from the 2006 and 2008 elections—we are done with Reganism, we are done with the notion that “Government is the Problem”, we are done with kowtowing to free market uber alles notions, and we are done listening to the “experts” that drove our economy off a cliff.

The corporate media definitely has not gotten or ignored the memo. They still pander to the same right-wing chatter put out by Rush, Hannity, Drudge, Fox News and the AEI. They still labor under the misconception that people like David Brooks and others are somehow “moderate” because they occupy a political space slightly to the left of Attila the Hun. For the Corporate media it is still 1980 and Morning in America with Ronald Regan. For the Corporate Media “moderate” still really means a Pragmatic Reganite. It is the Corporate Media that is dumbly parroting the "socialist" meme put out by the usual suspects. The Corporate Media, so frightened by being labeled “left” or liberal, still promotes far-right talking points in a pointless attempt to appear “balanced.” Not once has any major media outlet taken the time to actually explain what socialism is and contrast it with Obama’s program. The Corporate Media is wedded to a bogus notion of “two sides of the story.” Because of this Obama must fight off spurious charges of being a wild-eyed radical bent on turning the U.S. into Communist gulag state. A fact-based, reality reporting media would expose the red herring of “socialism” for the drivel it is. A reality-based fourth estate would not force Obama to continue to prove his obvious Capitalist bone fides. A fourth estate that was truly doing its job would point out that only one party, the Democrats, is trying to come up with sound policy solutions to the economic situation we find ourselves in while the other party, the Republicans, are sucking their thumbs and blowing bubbles in the bathtub. Until the fourth estate holds the Republicans (and the so called “moderate Democrats” that enable them) feet to the fire for their obstructionist ways we will continue to be inflicted with the bad behavior of their Wall Street benefactors.
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