So far the Obama administration's approach to economic recovery has been to reinflate the bubble whose burst caused the collapse in the first place. Wall Street has been made whole thanks to trillions of dollars of bailouts from the taxpayers and the Fed. They in turn are returning to business as usual fighting any attampt by the Obama administration to regulate them or rein them in. Unabashedly and unchastized, they are proceeding to give each other $150 billion in bonuses larger then any bonus pool even before the collapse. They use their taxpayer bailouts to lobby Congress not to regulate them. In particular they don't want derivatives regulated even though it was unregulated derivatives that caused the crash.
So rather than any real reform, the net effect is just to return the US to where we were before one of the most disastrous economic calamities in history with no reforms in place that could mitigate against the same thing happening again. In fact Wall Street doesn't care if the same thing happens again because they made billions before it happened, billions after it happened and they are on track to making billions more even if that leads to its happening again. Consider the fact that if you're a young aspiring investment banker who hasn't made his millions yet and you've decided to make your career on Wall Street, and then you're told 'sorry, the rules have changed and you will not be able to make the millions that you thought you were going to make.' You'd be very disappointed. In fact the drive to make the kind of money that last year's Wall Streeters made is virtually limitless. People who have been used to being Masters of the Universe and making obscene amounts of money and people starting out on Wall Street who are in a position and aspire to make obscene amounts of money will do virtually anything to keep the same system in place that will allow them to do so regardless of whether or not that will lead to another breakdown or collapse of the world economy. They know from experience that governments will simply bail them out again.
And they know that they are more powerful than the Obama administration or any reform movement. They have hundreds of millions to lobby Congress and fight against any reform of the system that might cause a diminution of their profits. So they are going back to business as usual. The conventional wisdom that, if Wall Street recovers, Main Street will not be too far behind has been totally discredited. When is the Obama administration going to wake up and smell the coffee that it has been government policy for the last 30 years to screw the average middle class worker? It has been government policy to encourage the off shoring of jobs and the offshoring of profits. It has been government policy to deregulate the financial system and hence to encourage wild speculation and unsafe banking practices. It has been government policy to encourage mergers and acquisitions to the point that we have banks that are too big to fail, and they are even bigger today than they were before the meltdown.
Obama's strategy has been to reinflate the bubble in order to bring us back from the brink of total financial collapse and then to reregulate the big banks and then to do something about jobs and the middle class. Unfortunately, this strategy doesn't seem to be working. The banks are fighting back tooth and nail, and the Republicans are fighting any expenditure of funds that would create jobs or help the middle class. So Obama is reduced to tinkering around the edges and allowing the Republican strategy of delay and defeat to work. The longer the Republicans can delay any meaningful reforms, the longer they can delay any meaningful accomplishments, the greater are their chances to defeat Obama in the next election, the greater are their chances to deny the Democrats majorities in Congress in 2010.
It looks like Obama may get a victory in health care reform, but at the price of six months of his administration's time in office, six months during which he has not been able to focus on the next problem, and there are several problems out there he must solve if he is to be reelected and if the Democrats are to be reelected. The next big problem is jobs. Starting next year he must focus full time on job creation or he's a goner. I predict that he will have a victory in health care, but it will be short-lived unless he can solve the jobs problem which is even more intractable. Health care reform didn't require any immediate expenditures; job creation inevitably will, but there is no money for it. The Republican strategy of running the government into debt so that the Democrats will not be able to initiate social programs has been successful to the extent that Obama is hemmed in by the largest government deficits in human history compounded by the fact that so much money has been used to bail out the banks which are only returning to the same practices that caused the financial collapse in the first place.
It is hard to see how Obama climbs out of this hole. And the American electorate is so fickle that it is hard to see how they will reelect Obama and the Democrats if Obama does not successfully address the jobs creation problem. When FDR did it during the Great Depression, he had no effective Republican opposition. When Obama attempts to do something about jobs, he will have every right wing pundit and Republican Congressman screaming out against him. He will have Republican filibusters galore. He will have Blue Dog Democrats whom he can't count on in a pinch. It's hard to see how he will be successful in a major way under these conditions. It's as if the power of money in terms of campaign contributions, lobbyists, TV ads and right wing media is greater than the power of the American government, and their goal is to control the American government in their interests.
Republicans are just waiting their turn to take power again, and then they'll be off to the races in decimating the American middle class while claiming to support middle class values. They will be off to the races in reducing middle class programs like social security and medicare. They will let help for the poor and homeless dry up due to lack of funding while continuing to spend enormous sums on war and the military industrial complex. They will continue to support policies designed to extract money from the middle class and the poor whether in the form of health insurance premiums or in terms of credit card fees and exhorbitant interest rates. They will turn the middle class into a nation of debt slaves and peons. They will "reform" the bankruptcy laws so that the middle class will be saddled with debt their entire lives, debt which they have no hope of escaping. And the American electorate will play into their hands due to their dissatisfaction with Obama who could only do so much with the deck stacked against him.
