The Plutocracy Paradox and Remember the 70’s, When the Democrats were the Fringe Party?

By J.M. Hamilton

The Republican Party has become the party of nuts, and the crazed… As things stand now, I’ll take a “tax and spend liberal” over a “borrow, spend, and wish, conservative,” any day.

Frustration with the Obama administration may have peaked last week, at least in the short run, with the Tea Party takeover of the Republican Party.  A quick read of the situation may suggest that more mainstream Republicans, of the Ike and H.W. Bush variety, may flee to the Democratic Party, as the Tea Party continues its coup.  That’s not to say the Obama administration has not fallen in stature, and admittedly a great deal of political capital, and good will, have been spent.  It does appear that Republicans may make some gains in November, although that could be mitigated if the schism within the party continues to widen and grow. 

None of this meant to deflect some of the anger and frustration directed towards this administration by the opposition, and by members of the Democratic Party.   It seems that to some degree, Obama has upset everyone.  Many of us are very quick to judge, but before we do so, we would all be wise to remember what exactly this man inherited.

*Thirty years of financial deregulation, which culminated in the largest global financial crisis known to man, a crisis that is still with us today.

*Institutions, such as banking and big oil, that have been allowed to grow so large and powerful, that their failure poses systematic risk to the world economy. 

*Government regulators who failed to act, or were outright captured by the very businesses they were supposed to monitor and control.  And in the extreme example of the Minerals Management Service outright banged and drugged by the oil industry.

*A Congress that is the epitome of dysfunction, and makes the corruption and graft of ancient Rome look like shoplifting by comparison.  The “For Sale” sign was posted right in front of the halls of power with the Supreme Court’s ruling in Citizens United v. Federal Election Commission.

*Accounting rules and standards that do more to obscure financial information than reveal results, like Repo 105s and 108s.

*Derivatives and Hybrid financial products that have contributed to the casino atmosphere of Wall Street, and that facilitated the hyper leveraged environment that precipitated the crisis.  This market is totally rogue, unregulated, hidden, and worth trillions in notional value.

*Record Federal and State debt, as well as global government debt, so that the next crisis is not unlikely to be a sovereign debt crisis.

*Skyrocketing unemployment and underemployment that may be as high as 20%, or greater, and a spike in poverty not seen in this country in decades.

While President Obama’s lot in life, as President, maybe akin to Moses…. Last we checked, President Obama is not God, which is the only known entity powerful enough to address the aforementioned mess, in 21 months or less, particularly when Republicans and the plutocracy are doing everything in their power to throw sand in the gears of government.

Not for the faint of heart, indeed.  Many of these problems are intractable, given our special interest dominated government culture.  And this administration inherited a bailout that was already set in motion by the Bush administration, TARP, TLGP, 0% interest at the Fed Funds window, etc.  A bailout, which has, in all probability, consigned the American economy to a lost decade, or greater.  Moreover, as a result of Bush/Paulson’s commitment to Goldman Sachs, Wall Street banks, and AIG, the focus of fiscal and monetary policy has and will be on propping up the banks for many years to come, and ameliorating the effects of the economic crimes perpetrated on the American people by same.  Look no further than the Fed’s efforts at quantitative easing, and the holding down of interest rates: great for the banks, but bad for retirees, who depend upon fixed income investment results to meet their monthly obligations. 

And to be sure there are things not to like about the administrations first 21 months. 

*The focus on healthcare, when the focus should have been on jobs. 

*The President's outreach to a jaded, anti-government, and recalcitrant, post-modern, Republican Party, best personfied by Mitch McConnell.

*The Dodd-Frank legislation, which offers too many passes to Wall Street banks, delays reform that is needed now, and places too much reliance on the very same government bodies and regulators that were supposed to keep us out of our present, and on-going, financial crisis.

*Some of President Obama’s appointees left a great deal to be desired, and actually were participants and contributors to the Great Recession: Larry Summers and Tim Geithner, immediately come to mind.

There have been some bright spots however, like the President’s handling of BP and the creation of the 20 billion dollar fund for the BP victims (depending upon how future litigation goes, BP shareholders may actually thank the President for the fund creation).  The six month moratorium on offshore drilling.  The very recent appointment of the New Consumer Financial Protection Chief, Elizabeth Warren, was a positive development, which showed that the promise of “change” was more than a campaign slogan.  The strong Administration push to aid and assist small business, which the Republicans walked away from.  Finally, just the fact that this administration didn’t attempt to white wash the entire financial crisis, as surely a Republican Administration would have, was a breath of fresh air.

So the rhetorical question stands:  Given the aforementioned problems, and obstructionism, is now the time to turn the car keys over to the Republican Party? 

This blog offers a quick “no” in response.  And here’s why:  probably in an effort to keep the political dialogue open and civil, the President understates the case against the Republican Party with the car/car keys metaphor.  Updating and offering a more comprehensive paradigm for the state of economic and political affairs left by the Bush administration, we get the following. 

If we peruse the economic/political police report produced by the fiscal cops on the scene, we find the following allegory:

“1-20-2009:  Crime Scene:  the Potomac River.

The Republican Party, the Fed, and a dealer/ pusher (commonly known as “Big Oil”) were last seen fleeing a burning vehicle, the Econo 2000.   At the scene was found a known prostitute (aka W.S. Banks), who was incapacitated, and in severe need of medical attention.  Pulse was weak.  Ms. Banks appeared under the influence of any number of substances.  Paramedics indicate Ms. Banks was suffering from easy money (more addictive than crack), and the sudden withdrawl of liquidity.  After the vehicle fire was brought under control, schedule one drugs, drug paraphernalia, and liquor, were found throughout the car, along with a large cache of firearms and ammunition. Billions of unmarked taxpayer dollars were found in the trunk of the car.

The events leading up to the crash into the Potomac are as follows:  The Econo 2000 was originally “jacked” in January of 2001, and was reported stolen by the DNC.   At that time, the Econo 2000 was in mint condition, with a full tank of gas.  Also reported stolen, and contained within the vehicle, was an ATM card with a surplus balance.   It is reported that after the economy, I mean car (the Econo 2000), was stolen, the ATM card was liquidated and ran debit balances, before the card was shut off.

While driving at high rates of speed, the Republican Party engaged in several gun battles (wars); and it is rumored that during these gun battles, the Fed pushed the acceleration of the Econo 2000 to new limits.

Before abandoning the car, the Econo 2000, under the command of the Republican Party, caused a 20 car pileup (G-20) at the intersection of Goldman and AIG.   The Republican Party may also be charged with moral hazard, reckless endangerment of a global economic system, and encouraging and promoting systematic risk.

The vehicle appears totaled.”

Bottom line:  Not only should the car keys not be returned to the GOP, but the Republicans should have their license revoked.

What might the President Obama do, post midterms, to enhance his odds of re-election in 2012?  Tune into this blog next weekend.