Magazine article The American Prospect

Tough Love for Obama

Magazine article The American Prospect

Tough Love for Obama

Article excerpt

BARACK OBAMA IS ONE OF THREE NOMINEES I VOTED for with enthusiasm. The first, Lyndon Johnson (then in his 1964 civil-rights and anti-poverty phase), self-destructed over Vietnam. The second, George McGovern, lost 49 states. For the next three decades, Republican presidents pulled the country and the prevailing ideology far right, while Democratic interludes moved it only to the center.

But Obama portended something different altogether. Here was a rendezvous of a gifted, principled, and politically shrewd leader with a deep crisis caused by the failure of free-market ideology. It was--and is--the most stunning political opportunity for American progressives since Franklin Roosevelt. My reaction to Obama's election was joy, relief, gratitude.

So it is awkward to find myself in semi-opposition after barely 100 days. I'm not a chronic malcontent. I credit Obama with real leadership on multiple fronts, from redeeming the Constitution to reclaiming America's constructive role in the world. I think he is handling several tricky issues well--accepting the need for large short-term deficits; disclosing details of Bush-era torture without personally sponsoring an inquisition; moving universal health coverage; devising a labor-law reform that can perhaps get 60 votes. All this is huge. But there still is a large risk that Obama will blow the opportunity that history has handed him, and that the political right, though currently in disarray, will pick up the pieces.

The reason, of course, is the economy. The past weeks have seen efforts to seize on every shred of good (or not as bad as expected) economic news. The commercial paper market is loosening up! Some new homeowners are getting bargains! The economy only lost 539,000 jobs in April instead of the predicted 620,000!

Even so, the most optimistic of economists predicts a long slog. We will likely avert a second Great Depression. But we still face a prolonged Great Stagnation, one that could be far worse than necessary because of the administration's circuitous, Wall Street-friendly approach to reviving the banks.

Instead of closing or breaking up failed banks, dividing the losses between taxpayers and bondholders, and getting the successor banks quickly back to health, the Treasury is propping up the incumbent zombies. Worse, it is doing so with convoluted schemes that rely on Wall Street's most speculative and unsavory players backed by loans from the Federal Reserve and guarantees against losses from the Treasury. …

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