The
2010 Double Whammy And The Incredible Shrinking Obama
25 January 2010By Dave Lindorff
The Democratic Party’s embarrassing electoral disaster
in Massachusetts, losing a seat held for 46 years by
the late Sen. Ted Kennedy, provided a clear warning
that the party, and President Obama’s presidency, are
headed for an epic trouncing this November, when all
members of the House and a third of the Senate face
re-election.
But all the frantic strategizing within the sclerotic
Democratic Party leadership ignores the bigger crisis
yet to come for this party that once brought the
nation Social Security, unemployment compensation,
public jobs programs and Medicare. That crisis is the
economy, which is now showing signs of falling off a
second cliff instead of beginning to recover.
Thanks to the abject failure of President Obama to
boldly order up a massive jobs program and a
full-blown economic stimulus program of public
investment at the beginning of his term last spring,
and to his failure to attack the entrenched banking
interests by smashing apart the meg-investment banks
that had turned banking into a casino game, the
economy has been left to stagnate for a year.
Unemployment has continued to rise, with the latest
reports showing that layoffs have begun to
re-accelerate. Unemployment rose in 43 states,
including some of the biggest, in December and fell in
only four. And we are only seeing the beginning of
this new drive into the ditch. The most ominous, and
totally predictable, trend is layoffs by the public
sector--by towns, counties, states, and public bodies
such as public universities, school districts, public
hospitals and transit companies. These layoffs which
could ultimately number in the millions and which will
have a knock-on effect on all kinds of other jobs,
were deferred because of aid provided last year by the
federal government, but no more federal aid is likely
to be forthcoming and the money already provided runs
out this summer. Look for official unemployment this
year to move past the 11 percent record set in 1982.
Meanwhile, real unemployment, which includes people
who have given up looking for work, and those who have
managed to get part-time work, is approaching 20%, and
could eventually top 25%--a rate reminiscent of the
Great Depression.
At the same time, the foreclosure crisis, and the
related decline in home values which has put
one-fourth of all homes “underwater,” meaning they’re
worth less than the mortgage balance, continues
unabated. Time Magazine, in its first issue of the new
year, predicts that at least as many homes will go
into foreclosure in 2010 as in the record year just
ended--over 3 million houses. Equally bad, the
magazine says that many housing experts are predicting
that property values, which have lost an average of
30% since 2006, will continue to decline until into
2013! Already, American homeowners have lost over $7
trillion in wealth because of property value declines,
and they will continue to lose more.
In an economy where 72 percent of all financial
activity involves consumers buying stuff, it is
impossible to imagine where any growth or recovery in
the economy could come from when the American people
are being so battered financially.
For almost a year, the government has hidden this
disaster behind a rising stock market, which rose in
seeming contradiction to all the bad news, as
companies slashed costs to eke out profits from
drastically reduced revenues. Many analysts say that
this bizarre behavior of the equities markets was the
likely result of behind-the-scenes government
intervention in markets. Consider this: for the whole
period between March 9, 2009, when the market began
its rebound, and the present, a period during which
the equities markets recovered roughly 60% of the
ground they’d lost in the last crash, corporations
were net sellers of their stock, and retail investors
were basically out of the market. Foreign investors
entered the market, but not in any huge way. Hedge
funds, too, normally big players, were experiencing
outflows of investor cash during most of the period,
making it unlikely that they were investing either.
Even pension funds, which were badly burned in the
crash, were cautious investors over the past year. So
who’s left? Suspicion falls on the Federal Reserve and
the Treasury Department. This might explain why stocks
have continued to rise on very low trading volume, and
also why most of the upside has come, especially since
last September, in after-hours trading in S&P futures,
not in direct buying of shares during regular trading
hours. If true, what this means is that the federal
government has been doing what it fines hedge funds
and investment banks for doing: manipulating the
markets.
While the Fed and Treasury can theoretically
manipulate the stock market, they cannot do this
forever, and this past week, we have seen indications
that the bull run in the market, whatever caused it,
may have run out of steam.
If the economy does take a second plunge similar to
what happened in late 2008 and 2009, Obama and the
Democrats will have to accept the full blame. They had
the opportunity last year to strike hard at the root
causes of economic decline and at the sinister, greedy
and corrupt activities of Wall Streets banks and
investment banks. Because they chose instead to try
and paper over the problem and accomodate those
banks--even helping them to become bigger and more
powerful-- they will deserve the electoral drubbing
that is coming.
It would be a huge and historic mistake for Democrats
to listen to the advice of people like White House
Chief of Staff Rahm Emanuel, who are claiming that the
loss of the Massachusetts Senate seat to a Republican
means it is necessary for the party to hew even
further to the right. Yes, Massachusetts voters were
voting for a guy who said he would kill the health
bill in Congress, but polls suggest that his winning
margin came from 7% of self-described liberal
Democrats who told exit pollsters that the health bill
was terrible and they wanted it killed. That seven
percent is a huge number, when you consider how hard
it would be for most Democrats to vote for a hard-line
conservative candidate--someone who openly advocates
waterboarding of terrorist suspects, and who is
adamantly anti-abortion rights.
What really turned the trick for the GOP candidate,
Scott Brown, though, was the economy. The
rank-and-file working person (Republican or Democrat),
both in Massachusetts and in the US at large, has seen
enough over the past year to conclude that the
Democrats in Congress and the Man-o-Change in the
White House do not have their interests at heart. They
clearly see that this government’s actions in support
of the banks, the insurance companies, and the other
giant industries in the US, from autos to utilities,
are not being taken in the cause of bringing benefits
to the people, but are simply being done for the
benefit of those industries and their leaders and key
investors. It’s not even “trickle down” anymore. It’s
just catering to the rich and powerful--the people who
make all those fat campaign contributions.
This is why Obama’s sudden “pivot” (people who have
real values don’t “pivot”) to a tacky “populist”
rhetoric about “fat-cat bankers” is falling on deaf
ears. It’s why Democratic leadership calls for
Congress to just pass the wretched Senate version of
the health bill are being viewed with disgust by the
public.
Everyone realizes it’s all just image-mongering.
Nobody in power in Washington, Democrat or Republican,
is there to help the little folks.
It’s all about making the rich richer.
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