Inside Obamanomics
Source Louis Proyect
Date 11/01/28/11:41

Escalating Reaganomics
Inside Obamanomics

President Reagan did not make any bones about his intention to
reverse the New Deal economics when he set out to promote the
Neoliberal economics. Likewise, President George W. Bush did not
conceal his agenda of aggressive, unilateral militarism abroad and
curtailment of civil liberties at home.

There is a major similarity and a key difference between these two
presidents, on the one hand, and President Obama, on the other.
The similarity lies in the fact that, like his predecessor,
President Obama faithfully, and indeed vigorously, carries out
both the Neoliberal and militaristic policies he inherited.

The difference is that while Reagan and Bush were, more or less,
truthful to their constituents, President Obama is not: while
catering to the powerful interests vested in finance and military
capitals, he pretends to be an agent of “change” and a source of
“hope” for the masses.

There has been a wide-ranging consensus that the excessive
financial/economic deregulations that started in the late 1970s
and early 1980s played a critical role in both the financial
bubble that imploded in 2007-2008 and the continuing persistence
of the chronic recession, especially in the labor and housing markets.

Prior to his recent U-turn on the regulation-deregulation issue,
President Obama shared this near unanimous view of the destructive
role of the excessive deregulation of the past several decades
and, indeed, strongly supported the need to bolster regulation:
"It's time to get serious about regulatory oversight," Mr. Obama
argued as the Democratic nominee for President; and again, “…this
crisis has reminded us that without a watchful eye, the market can
spin out of control,” as he stated in his inaugural speech.

Expressions of such pro-regulation sentiments were part of his
earlier promises of “hope” and “change” in a new direction. Back
then, that is, before showing his Neoliberal hand, the majority of
the American people believed him—the middle, lower-middle, poor
and working people who were tired of three decades of steady
losses of economic security were desperately willing to believe a
charismatic leader who peddled hope and change in their favor.

Recently, however, the president seems to have had a change of
heart, or perhaps an epiphany, regarding the
regulation-deregulation debate: he now argues that protracted
recession and persistent high levels of unemployment are not due
to excessive deregulation but to overregulation! Accordingly, he
issued an executive order on 18 January 2011 that requires a
comprehensive review of all existing government regulations. On
the same day, the president wrote an op-ed piece for the Wall
Street Journal in which he argued that the executive order was
necessary in order “to remove outdated regulations that stifle job
creation and make our economy less competitive.” The president
further argued that “Sometimes, those [regulatory] rules have
gotten out of balance, placing unreasonable burdens on
business—burdens that have stifled innovation and have had a
chilling effect on growth and jobs. . . . As the executive order I
am signing makes clear, we are seeking more affordable, less
intrusive means to achieve the same ends—giving careful
consideration to benefits and costs.”

Stripped from its Orwellian language, this “cost-benefit” approach
to health, safety and environmental standards is clearly the
familiar Neoliberal rhetoric that is designed to help big business
and their lobbies that have been working feverishly to stifle the
widespread pro-regulation voices that have grown louder since the
2007-08 financial melt-down.

Indeed, the president’s recent agenda of further deregulation has
already born fruits for big business. The Wall Street Journal
reported on 20 January 2011:

“A day after President Barack Obama ordered the government to
get rid of burdensome rules, two federal agencies backed down from
proposals that had drawn jeers from businesses. . . . The Labor
Department said it was withdrawing a proposal on noise in the
workplace that could have forced manufacturers to install
noise-reducing equipment. And the Food and Drug Administration
retreated from plans to tighten rules on medical-device approvals,
postponing a proposal that would have given the FDA power to order
additional post-market studies of devices. . . . Industry leaders
praised the moves, while consumer advocates expressed
disappointment. . . . ‘This is a very positive step forward,’ said
Bill Hawkins, chief executive of medical-devices heavyweight
Medtronic Inc.”

How is the president’s sharp turnaround on the
regulation-deregulation debate to be explained? What “outdated
deregulation” is he talking about? How could deregulation, which
is widely believed to have been the problem, also be the solution?
Why this sudden U-turn?

The change in the president’s view from the need for regulation to
that of further deregulation can be explained on a number of planes.

On a narrow, personal and (perhaps) simplistic level, it can be
argued that the president’s about-face on the issue of
deregulation should not really be surprising; the turnaround
represents quintessential Obama: spineless and/or unscrupulous, if
you are a critic of the president; pragmatic and/or complex, if
you are an apologist or defender of him.

There are also, of course, re-election considerations here. And
here it seems that the president’s team is pinning his chances for
re-election on big business and big media; confident that once he
is able to win their hearts and minds, they will, in turn, be able
to manipulate the public to vote for him—just as they did in the
2008 election.

On a deeper (but still personal) level, that is, on a
philosophical or ideological level, it can be argued that the
president has always been a Neoliberal thinker, albeit a stealth
Neoliberal, who is coming out of the closet, so to speak,
carefully and gradually. Evidence of his being ideologically more
a partisan of Neoliberal than New Deal economics is overwhelming
(see, for example, Pam Martin and Alan Nasser).

It is necessary to point out that although the stealth Neoliberal
president has been taking baby steps out of the closet, he would
always stay by the entrance: as long as there is no popular anger
or pressure against his Neoliberal policies, he would stay on the
outside; at the first signs of a threatening pressure from the
grassroots, however, he would crawl back inside the closet, and
begin preaching populism or uttering ineffectual, benign
corporate-bashing rhetoric. This is his mission and his political
forte – a master demagogue. And this is why the politico-economic
establishment promoted him to presidency as they found him the
most serviceable presidential candidate. None of his presidential
rivals could have served the tycoons of the finance world and the
kings of Wall Street as well as he has.

On a more fundamental level, President Obama’s reversal of his
view from the need for rigorous regulation to the need for further
deregulation, and his economic policies in general, show that
while the politics and personalities of a president ought not be
ignored, presidential economic policies cannot be explained by
purely personality issues such as a failure of nerve, conviction,
or ideas. The more crucial determinants of national economic
policies are often submerged: the balance of social forces and the
dominant economic interests that shape such policies from behind
the scene. Stabilization, restructuring or regulatory policies are
often subtle productss of the outcome of the class struggle.

Thus, when the balance of social forces is tilted in favor of the
rich and powerful, crisis-management economic policies would be
crafted at the expense of the working people and other grassroots.
In other words, as long as the costly consequences of the brutal
Neoliberal restructuring policies (in terms of job losses,
economic insecurity, and environmental degradation) are tolerated,
business and government leaders, Republican or Democrat, would not
hesitate to put into effect draconian measures to restore
conditions of capitalist profitability at the expense of the
impoverishment of the public.

On the other hand, when crisis periods give rise to severe
resistance from the people to cuts in social spending, such
crisis-management policy measures could also benefit the public. A
comparison/contrast of policy responses to major economic crises
in the United States clearly supports this point. Economic
historians have identified four major economic crises in the past
150 years or so: The First Great Depression (1873-97), The Second
Great Depression (1929-37), the long recession of 1973-83 (also
known as the stagflation of the 1970s), and the current long
recession that started in 2007-08.

Since there was no compelling grassroots pressure in response to
either the First Great Depression of 1873-97 or the long recession
of the 1970s, crisis management policies in both instances were
decisively of the Neoliberal, supply-side type: suppression of
trade unions and curtailment of wages and benefits; promotion of
mergers, concentrated industries and big business; extensive
deregulations and generous corporate welfare plans; in short, huge
transfers of income from labor to capital. Likewise, a glaring
lack of grassroots resistance in the face of the current long
recession has allowed the ruling kleptocracy (both in the US and
beyond) to adopt similarly brutal austerity policies that are
gradually reviving financial/corporate profitability at the
expense of the poor and working people.

By contrast, in response to the Great Depression of the 1930s
workers and other popular forces achieved employment and income
security as a result of a sustained pressure from "below."

The contrast between these two entirely different types of
restructuring strategies shows that, as Mark Vorpahl, a union
steward, recently put it, “Working people and the unemployed
cannot rely on the politicians to get the change we need. We can
only rely on our own collective strength. That is, we need to
organize and mobilize as a united, massive, powerful force that
cannot be ignored by those more intent to do Wall Street's
bidding.” Only the threat of revolution can force people-friendly
reform on the ruling kleptocracy.

Ismael Hossein-zadeh, author of The Political Economy of U.S.
Militarism (Palgrave-Macmillan 2007), teaches economics at Drake
University, Des Moines, Iowa.

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