One of the striking things about Barack Obama’s campaign is that, for all his rhetorical nods to centrism and non-partisanship, he has systematically burned his bridges with every effort made by electorally successful Democrats to actually put centrism and moderation into practice, and even gone out of his way to distance himself from some of the more popular aspects of his party’s record, while embracing ideas the national Democrats have run away from as being electorally poisonous.
There’s a case to be made that the economy of the 1990s was not, fundamentally, as good as it looked at the time (recall the popping of the internet bubble); that some of the credit for that economy goes to the post-1994 policies of Republicans in Congress and at the state and local levels in places like Michigan, Wisconsin and New York City; that some also goes to historically unique factors (the rapid expansion of democracy and world trade and a time of unprecedented peace, as well as technology spending in advance of Y2K); and that the Clinton Administration’s greatest contributions to the boom years were policies Obama now explicitly opposes, from NAFTA to capital gains tax cuts. But despite all of that, the good economic times under the last Democratic president is an asset with the public’s goodwill that no sane Democrat would tamper with.
But Senator Obama has the audacity to do just that:
Barack Obama on Thursday laid much of the blame for America’s unfolding credit crisis on the financial deregulation of the 1990s in his hardest hitting attack so far on the economic legacy of Bill Clinton’s administration.
+++
Without mentioning the Clintons by name, the clear target of Mr Obama’s speech was the economic record of the 1990s. Hillary Clinton has portrayed her candidacy as offering a return to the economic successes of the 1990s. She has also presented herself as more competent on the economy than Mr Obama.
In his address Mr Obama associated Mr Clinton’s abolition of the Depression-era Glass-Steagall Act in 1999* with the financial scandals that rocked the early years of the Bush administration and which led up to the bailout earlier this month of Bear Stearns.
Mr Obama also ascribed the bankruptcy of Enron and WorldCom in 2001 and the subsequent lack of oversight of the US sub-prime mortgage market to the influence of special interests and lobby groups in Washington DC dating from the Clinton era. And he contrasted his refusal to take campaign donations from lobby groups with Mrs Clinton’s acceptance of such funds.**
“This was not the invisible hand at work – it was the hand of industry lobbyists,” he said. “Instead of establishing a 21st century framework we simply dismantled the old one – aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight. In doing so we encouraged a winner take all, anything goes environment that helped foster devastating dislocations in our economy.”
+++
Mr Obama on Thursday also attacked Mr McCain, whose response to the sub-prime crisis “amounted to little more than watching this crisis happen”. But economists said the significance of Mr Obama’s speech was in offering the most clear distinction so far with Mrs Clinton on the economy.
By distancing himself from the Clintons, Senator Obama is just underlining the obvious: that on economic matters, his proposals would be more of a return to the only other Democratic president of the past four decades: Jimmy Carter.
* – What, you thought Obama wouldn’t still support Glass-Steagall, a decade after its long-overdue death?
** – After which Obama headed to a fundraiser at a major Wall Street investment bank.
The US economy of the 1990s was fueled by two things:
1. First and foremost, oil at $9 a barrel.
2. Tech bubble to the contrary, the planetary communications system underwent a change not seen since cable was laid from London to NY a century ago. Even more than when Telstar was launched. And the US economy adapted to it.
However, it has become evident that Bush and his cronies never did understand history, possibly even spell it. We fueled a world war a half century (OK a bit more) ago by getting major sacrifices from the entire public, be it bonds and/or rationing. We didn’t do that in Viet Nam, and the result was Nixon actually imposing wage and price freezes, because the inflation rate rose to something like 4.5%. Being a landlord here in the Occupied Territories of the People’s Republic of New York, I know something about a totally regulated economy. It never works.
So did Bush learn from FDR or from LBJ? From an acknowledged great president and very smart man or from someone more known as a back room strong arm thug?
I don’t blame Bush for the Wall Street con men, and I blame them almost as much as the dopes willing to be conned. They bought nothing with very little, and now want that little to be worth a lot. Think Holland and tulips. I do blame Bush for the trillions sent out for a war that he never had any clue how to get out of.
You HAVE TO have oversight.
The economic problems of today, were caused by de-regulation of the financial industry. Just as the S&L crisis of the 80s.
Burying your head in the sand, instead of facing the obvious will only lead to more economic misery.
BTW, we also need to get away from privatizing profits and socializing losses. You want to bail out Bear-Stearns and JP Morgan, then limit executive pay to $125K annually.
Also Daryl, don’t underestimate Greenspan’s role in this disaster.
The Left is all running around making like the Fed absorbed Bear’s losses, like this is analogous to stepping in to help somebody avoid losing their house (the analogy the Democrats are using to justify a gigantic bailout for homeowners who took a gamble on mortgages they couldn’t afford). But at the end of the day, Bear lost the house, and the taxpayers paid zero; in homeowners’ terms, what the deal was really more analogous to is the government paying the heating bill over a weekend to keep the pipes from freezing before the bank can foreclose.
Bear’s shareholders, first and foremost its top executives and many employees, lost a ton of money, and assuming the final merger goes through, the company lost its independent existence. Which is a terrible thing, but it’s how the market works.
Crank,
Are you 100% guaranteeing that the money ($30 billion, from what I have heard) will be paid back to the Fed?
BTW, boo-f’n-hoo for Bear’s shareholders, who made a fortune during it’s go-go days due to the deregulation of the financial industry.
Also, I’ve heard that in the free-market, the Fed doesn’t step in and provide $30 billion to “keep the pipes from freezing”. I hear that in a free market, Bear goes under and somebody else steps in to provide financial services to customers (if the market feels these financial services are needed).
The market isn’t all that free, or there would be no FDIC (which is why the S&L con job cost us so much). The market isn’t free, any more than money is. The market, like dollars, euros, or gold for that matter, is worth whatever faith you have in it. The entire world wide (I really like saying planetary, it sounds so Star Trekkish) economy is based on the faith of your word. Seriously. You think anyone has $1 trillion in gold or iridium or something to back it? The fed stepped in not to save Bear Stearns, but to prevent dominos from falling, one after the other, until everything crashed and burned. They acted in a national interest, not in a Bear Stearns interest.
Good points Daryl.
The national interest is in regulating the markets, not deregulating them.
Let’s hear more of this when the “free-marketers” spout about deregulation. Their noise machine can’t state the truth, which is they’re all for privatizing profits and socializing the losses. Always have been, always will be.