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Where's Obama the Populist?

(For an explanation of the recent format change, please read this post.)

Barack Obama campaigned as a champion of the little guy -- and kicked off his presidency on decidedly populist notes. The marquee event of inauguration night was a "neighborhood ball" open to everyday Americans. The next morning, the president and first lady welcomed people off the street into their new home for an open house.

But as Obama takes on the enormous challenge of trying to right a perilously listing economy, he seems to be abandoning at least some of that populism in an attempt not to upset Republicans and Wall Street.

Obama shakes hands with Honeywell Chief Executive Officer Dave Cote yesterday. (AP Photo/Ron Edmonds)

In his first days, Obama has spent more time jawing with -- and making concessions to -- Republicans than Democrats. His photo ops are with corporate CEOs, not labor leaders or laid-off workers. His senior economic team represents the dominant Wall Street culture, and is apparently considering a financial rescue plan that will most directly help the same fat cats who gave themselves more than
$18 billion
in bonuses last year, even as they tanked the economy. Despite dramatic new ethics policies, Obama is peppering his administration with lobbyists. And he appears to be in no hurry to repeal Bush's tax cuts for the rich.

At the same time, the Obama team is eschewing even the easiest appeals to populism, responding with discreet pressure rather than more public outrage earlier this week when it was revealed that executives at Citibank -- who received a $45 billion infusion of tax dollars -- were buying a $50 million corporate jet.

And what does Obama have to show for all this outreach and restraint? So far, not much. He got his stimulus bill passed in the House yesterday -- but without a single GOP vote.

My Live Online audience yesterday was in high dudgeon about Obama's concessions on the stimulus bill -- first loading it up with business tax cuts, then bowing to GOP pressure and cutting funding for family planning and the restoration of the Mall.

New York Times opinion columnist Paul Krugman responded to yesterday's vote with an angry blog post: "The House has passed the stimulus bill with not a single Republican vote. Aren't you glad that Obama watered it down and added ineffective tax cuts, so as to win bipartisan support?"

But the real populist test case may be the Obama economic team's response to the crisis afflicting the country's financial institutions. Rather than address the underlying foreclosure epidemic, his advisers are focusing on the banks. And rather than nationalize institutions that took outrageous risks and should therefore suffer the consequences, they appear to be intent on a massive bailout with taxpayer money.

David Cho wrote in The Washington Post yesterday: "President Obama's top advisers are in the final stages of debating several perilous options to right the financial system, all of which are likely to prove unpopular and in some cases carry a significant risk of failure, according to sources in contact with the officials...

"On the table are several approaches, which officials have begun to experiment with on a smaller scale. One would give the firms a federal guarantee protecting them against losses on assets that are backed by failing mortgages and other troubled loans. Another would set up new government institutions to buy these toxic assets. A third would inject more money into financial firms in exchange for ownership stakes, perhaps ending with nationalization in all but name....

"Publicly, these officials said they plan to provide clearer guidelines and oversight for how government money is spent and promised to use rescue funds to help homeowners, small businesses, municipalities and other consumers as part of a comprehensive plan, which could be released this week or next. But other senior government officials and economists said they expect the bulk of the rescue funds to continue going to financial firms...

"All of the rescue efforts are difficult to explain to ordinary Americans, who criticize the government for spending too much money to aid financial firms that started the crisis in the first place."

Stephen Labaton and Edmund L. Andrews write in the New York Times that newly-minted Treasury Secretary Timothy F. Geithner yesterday "discouraged speculation that the plan would include the nationalization of some banks.

"'We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system,' he said."

By contrast, consider this CNN commentary from Nobel-Prize winning economist Joseph E. Stiglitz, who raises the question: "Perhaps the entire strategy is flawed? Perhaps what is needed is a fundamental rethinking. The Paulson-Bernanke-Geithner strategy was based on the realization that maintaining the flow of credit was essential for the economy. But it was also based on a failure to grasp some of the fundamental changes in our financial sector since the Great Depression, and even in the last two decades."

Stiglitz looks back at the government's recent experiment with "equity injection, without strings." The result was that "as we poured money into the banks, they poured out money, to their executives in the form of bonuses, to their shareholders in the form of dividends.

"Some of what they had left over they used to buy other banks -- to pursue strategic goals for which they could not have found private finance. The last thing in their mind was to restart lending."

The alternative, Stiglitz writes, is for the the government to take over "those banks that cannot assemble enough capital through private sources to survive without government assistance.....

"To be sure, shareholders and bondholders will lose out, but their gains under the current regime come at the expense of taxpayers. In the good years, they were rewarded for their risk taking. Ownership cannot be a one-sided bet."

He concludes: "Inevitably, American taxpayers are going to pick up much of the tab for the banks' failures. The question facing us is, to what extent do we participate in the upside return?

"Eventually, America's economy will recover. Eventually, our financial sector will be functioning -- and profitable -- once again, though hopefully, it will focus its attention more on doing what it is supposed to do. When things turn around, we can once again privatize the now-failed banks, and the returns we get can help write down the massive increase in the national debt that has been brought upon us by our financial markets."

Dean Baker, co-director of the liberal Center for Economic and Policy Research, wrote recently on "The idea that we would give one more penny to this crew that has wrecked the economy should make taxpayers furious. There is a legitimate public interest in keeping the banks operating; a modern economy needs a well-operating financial system. But, there is zero public interest in rewarding shareholders and overpaid banks executives.

"These executives bankrupted their banks and brought the economy down with them. They belong in an unemployment line not collecting multi-million dollar paychecks in their designer office suites.

"The obvious answer is to take over the insolvent banks, just as we did with the insolvent S&Ls....

"This is the only reasonable solution to the mess that the bankers have created. The other solutions are simply efforts to transfer dollars from hardworking taxpayers to overpaid and incompetent bank executives. It is hard to believe that anyone would take it seriously, if not for the enormous political power of the Wall Street gang."

And in the view of influential Washington blogger Steve Clemons, that power extends right into the highest levels of the White House.

"Obama and [Chief of Staff] Rahm Emanuel have hired a group of people who are going to make the rich stay rich -- and who are not designed to really change things for the middle class or the struggling lower end," Clemons writes.

"After all, it was they who said that the economy was booming, that offshoring was great, that manufacturing was not important, that those CEOs deserved that high pay and little could be done about it, and the reason that the middle class was being left behind is that they were becoming less globally competitive and/or they didn't have the educational background or fortitude to keep pace with the highest end earners."

Obama could have hired advisers "who might have kept some balance between those who could think through the micro-economic dimensions of economic policy and the macro types who helped contribute to today's problems -- but Obama's selections have mostly been the latter type of Robert Rubin acolytes. I would count Council of Economic Advisors Chair Christina Romer in that mix as well as both National Economic Council Chair Lawrence Summers and Treasury Secretary Timothy Geithner....

"Obama has essentially brought in the same crowd of people or ideological fellow travelers who helped hatch the Clinton era manic finance fest that the Bush administration made worse."

By Dan Froomkin  |  January 29, 2009; 1:14 PM ET
Categories:  Financial Crisis  
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Next: A Spoonful of Populism


I understand what you write in today’s column, but I think it is a wee bit incomplete. I read much about the money problems in America, but I am struck by how few, if any, really talk about the basic problem: the simple point that everyone seems to miss is that there is plenty of money in the economy- it is just concentrated in too few hands. It is interesting that people want the banks to lend more money; well, how can you lend to people who are maxed out as it is? With the rise of foreclosures and bankruptcies, isn't it obvious that the 90 percent of us who own 30 percent of America's wealth are tapped out? Even if we create a dollar's worth of new wealth, the way our economy is structured, 70 cents of that dollar will go to 10 percent of the population. Hence, the 90 percent of us share 30 cents- roughly 1/3 of a penny each goes to the rest of us. It would seem to me that it would take a staggering amount of money to be printed to have any effect on the 90 percent of us. Meanwhile the other 10 percent would get even more insanely wealthy if we printed gobs of money.
I hate to say it: but until we figure out a way to share the wealth, no amount of printing money, rebate checks, deflation, dollar an hour raises, etc. will make a spit of difference. Look at the math:
median US income-50k
median US home price-250K
monthly budget family of four:
take home pay- 3300
mortgage (based on 200k assuming 20 percent down on 250 k)- 1199
real estate taxes- 200
new car loan- 425
elec- 100
heat- 100
health ins- 200
car ins- 100
food- 800 (less than 10 dollars per meal)
gas- 150
Our median family is now at 3174 dollars without credit cards, without clothing, dental, car repairs, out of pocket medical expenses, home equity loans, etc...
So, where did the ability to consume more things come from? A phony increase in housing and the use of credit cards led the way. There was no wealth there to spend. It was predicated upon people making more money and being able to afford more expensive homes. That did not happen, as you know.
The reality is that the median US household is broke and has been broke for a long time. While wealth zoomed for the top 10 percent, the rest of us flat-lined. A bank, if run properly, would be insane to lend money to the average US household. They would never, most likely, get their money back.

Posted by: bokun59 | January 29, 2009 1:49 PM | Report abuse

A good question. Where is the candidate I voted for, campaigned for, donated money to? A couple of really nasty results of the "economic downturn" has been an acceleration of outsourcing accompanied by an even greater demand by corporations for more guest workers! Instead of ending the H1-B visa and ending the suicidal nonsense of Indian guest workers displacing U.S. workers, providing at least 3 MILLION jobs for U.S. workers, Obama hosted a meeting for corporate CEO's that are calling for removing all limits to this program! In March, this country is due to issue somewhere between 150,000 and 400,000 NEW/ADDITIONAL H1-B visas!!! Last week's layoffs announced by Microsoft (and layoff's not so publicized by IBM, TI, HP, Intel, etc.) tens of thousands of U.S. workers lost their jobs while not one H1-B worker was laid off! So, for all of the talk of "job creation" and "job saving", Obama and the Democrat's aren't doing anything. Even more insulting, it wont cost the government one dime to end that visa and like ones. It would, in fact, SAVE them billions of dollars. They could end the H1-B visa tomorrow. They ought to end it tomorrow because it is a national security threat, not just a job threat, but they wont because THEY get money from those corporations.

This sort of nonsense is being repeated in the timber products industry, in every section of manufacturing. "Populism" is nothing but talk when it comes to the Democrats. So... we are left with Republicans that are openly in the pocket of corporations and Democrats who promise to act in our interest, but act just like Republican's once they are in office.

Posted by: mibrooks27 | January 29, 2009 1:50 PM | Report abuse

"Stiglitz looks back at the government's recent experiment with "equity injection, without strings." The result was that "as we poured money into the banks, they poured out money, to their executives in the form of bonuses, to their shareholders in the form of dividends.

"Some of what they had left over they used to buy other banks -- to pursue strategic goals for which they could not have found private finance. The last thing in their mind was to restart lending."

This is the truth about the bailout. Plain and simple, and for anyone who thinks Obama is not beholden to Wall Street and institutional investors is a fool.

Just because Obama uses lofty language and artful prose should not disguise the fact that he is a politican and there is a certain inertia in Washington that maintains the status quo. That is why, for all the bluster about "new politics" what we are getting is more of the same.

Even though we are in the midst of a prolonged recession (dare we say Depression) the folks at the Treasury and Fed still don't get it: the consumers [who are the engine of the global economy] are in dire straits. There is record unemployment, and those with jobs are seeing lower wages with rising costs all around them. Huge amounts of people are literally living paycheck to paycheck, and nothing about the TARP and Stimulus Bill will change that.

Unless there is a tectonic shift in thinking in Washington (akin to hell freezing over) we will continue to squander taxpayer money to insulate the already rich & affluent against the rising tide of economic squalor -- which is already washing over tens of millions of Americans.

Posted by: winoohno | January 29, 2009 1:50 PM | Report abuse

Instead of giving away the country to the bankers why not bail them out through the American consumer? Give the bail out money first to the taxpayer/consumer who must then give the money to the banks in the form of mortgage, loan, or credit card payments. The banks would get their cash and the taxpayer would have his or her debt load reduced, which would free up more money for the taxpayer/consumer to spend. If the lucky taxpayer has no debt to pay off which is unlikely, then they must spend the money on green energy efficient purchases or high end items or be forced by the IRS to return the money to the treasury. The consumer spending would help business and stimulate the economy. Is it not why it is called a stimulus package and not just a give a way to the criminals in the banking system?

Posted by: meadowrock | January 29, 2009 1:53 PM | Report abuse

We are, yet again, asking the wrong questions. First, this stimulus should not be about punishing those who contributed to this situation, or even rewarding those who were innocent victims. In my mind, this stimulus should focus on creating jobs, stabilizing our financial markets, and creating long term solutions to our long term problems. Our manufacturing industries are antiquated, our service industry outsourced, and our labor force accustomed to a pay scale and benefit package that cannot be supported by the price consumers are willing to pay for the goods produced.

We can and should be angry about our financial condition, but, we should also recognize that such anger, inappropriately channeled, does not serve us.

My hope is that we can focus on finding long term solutions to our very real problems and leave partisanship at the door and punishment for a more appropriate time.

Posted by: mabooker | January 29, 2009 1:57 PM | Report abuse

That's a really good question, Dan.

Did Obama the Populist ever really exist?

While he was far better than the alternative and I have been pleased with many of his actions so far, I strongly feel that Obama is way too concerned with keeping the fatcats happy. He doesn't seem to realize that when you try to make everybody happy, you don't make anybody happy. And it bothers me greatly how little he really seems to care about making the people who VOTED for him happy.

The things that he's done that I like, he just did because he thought they should be done - not because his supporters wanted him to. That's fine up to a certain point, but when push comes to shove, he better darn sight remember WHO put him in the White House, and it sure wasn't the republicans!

Posted by: solsticebelle | January 29, 2009 1:57 PM | Report abuse

I just reread Keyenes General Theory and starkly absent from the current efforts to prevent a plunge into depression is the effect of short and long term expectations on aggregate consumption. Expectations influence investors perceptions of future economic activity and therefore their assement of the marginal utility of capital. Our new president needs to instruct his economics gurus in some basic economic theory. KIT HORTON

Posted by: rufinus | January 29, 2009 1:58 PM | Report abuse

Years ago I was watching CNN when GWB talked about his proposed tax cuts and how they would create so many American jobs. The next day I pulled up CNBC, and a spokesman for Goldman Sachs was being asked how he would advise his clients on spending the windfall. He said they should look for corporations trying to cut labor costs by looking off shore. He also advised investing in "emerging markets," including Indonesia and China. Hmmmm.

And how does that create American jobs, I asked myself.

I must remind myself that the Republican perspective is that all monies must flow through the hands of those "born to rule" so that they can decide the most efficient measures for employing labor. As an old union friend of mine used to say, "GOP stands for Greed, Opulence, and Privilege. Those people think they are entitled to all the wealth, whether it is created by other people or not."

Posted by: oldbob | January 29, 2009 2:15 PM | Report abuse

All you knuckleheads who were starry eyed over Obama and did not hold him accountable for all his flip flops during his campain are getting your just desserts, i.e., you voted him into office. I find it extremely funny that you all are surprised that he is not living up to all his campain talk and promises and only 9 days into his presidency, you are so unhappy. Awwwww poor babies :(

Posted by: SirLoinofBeef | January 29, 2009 2:15 PM | Report abuse

This is what you get when you listen to what they say instead of watching what they do.

Posted by: ronjaboy | January 29, 2009 2:17 PM | Report abuse

Oh, my long-time amigo Dan, who kept me going through the past eight years:

What you don't seem to realize is that faced with Obama, you are in the presence of political brilliance.

He went all the way to show the Nation that he was willing to be bipartisan, to compromise, to be reasonable.

Now, after the House vote--which no doubt he expected--Obama can reasonably declare war on the Republicans whenever the situation warrants it. After all, he can tell the Nation, didn't he do his best to reach across the aisle?

I for one would wholeheartedly back him, and I'm betting you would too.

Thanks for all your work. You kept me going in very dark times.

Posted by: FedUp1 | January 29, 2009 2:36 PM | Report abuse

I predict that Obama will eventually (not too late, I hope) come to realize that Republicans are still going to take the partisan stance. Republicans don't want to work with a Democratic President. Republicans are hell-bent on pursuing their own ideology, come rain or shine. Republicans DON'T CARE ABOUT THE POOR. Republicans DON'T CARE ABOUT THE LAW OR THE CONSTITUTION. Republicans DON'T CARE ABOUT DOING WHAT'S RIGHT OR MORAL. In short, Republicans ONLY CARE ABOUT MAKING SURE THE WEALTHY GET EVEN WEALTHIER. Republicans ONLY CARE ABOUT GREED.

I hope it doesn't take Obama too long to figure this out. I hope that he, like Clinton, doesn't end up being an ineffectual president.

The thorn in Obama's side is Republican Leader Mitch McConnell. McConnell is an evil man; most people down here in Kentucky hate him, but his access to big money keeps getting him elected.

If Obama wants to ensure the cooperation of Republicans, I believe his first task is to get rid of lobbyists and make public financing of ALL elected offices the law.

Down here in Kentucky, we've been trying to get rid of Mitch McConnell for the past two or three elections. Short of the good Lord sending him straight to hell, Democrats are either going to have to find a candidate with scads of money who is unblemished or finesse some scandal that McConnell can't shake.

There's an old saying that you have to fight fire with fire. In McConnell's case, I believe that's what's going to be required.

I understand what Obama's trying to do. He's trying to win over Republicans by offering his hand of "friendship." I have one piece of advice: It won't work.

Posted by: kentuckywoman | January 29, 2009 2:38 PM | Report abuse

Krugman is dead right: there was no point in Obama's concessions. Obama should have withdrawn them as soon as it became clear the votes were not going to happen. Bipartisanship is not one side making concessions and the other side doing nothing.

Posted by: jpk1 | January 29, 2009 2:44 PM | Report abuse

1) I wrote 2 days ago what Krugman wrote. When one makes a stipulation, one either gets a stipulation, or has a darn good reason to let it slide. Perhaps it's a rope-a-dope strategy, Rahm is fond of those.

2) I COMPLETELY disagree with the idea that Wall Street financial types were TAKING RISKS.

Unlike an entrepreneur who stands to lose his equity, his company and his livelihood, they had little to lose as demonstrated by their compensation plans. They received huge bonuses for hollow deals. They lost their clients' money, not their own. Their personal equity in the deals was deminimus compared to their commissions. So they lost a job at Lehman or Merrill? Thain expressed the prevalent opinion that the top talent would find another sucker.

Posted by: boscobobb | January 29, 2009 2:52 PM | Report abuse

You write that Obama's in no hurry to repeal the Bush tax cuts for the wealthy -- but was the plan to repeal them, or to just let them expire on their own in 2010 (I think? 2011?) as they are to do?

Posted by: fallschurch1 | January 29, 2009 3:04 PM | Report abuse

Ha Ha....

If the fat-cats were being "pleased" as some here are claiming... then why did the republicans in the house vote unanimously Nay to the so-called stimulus bill.
It completely defies any logic that if adjustments were being made to placate the greedy wall st types, then wouldn't Republicans vote for the measure??
What specific concessions did Obama make for the stimulus bill, and did the Congress include them??

Besides, how are you being bi-partisan and reaching across the aisle when you host and dog-and-pony meeting with republicans for the stimulus bill? And the meeting with CEO's, was just a photo-op stunt to try and convince Republicans that Obama is considering the effects on businesses of his stimulus bill. (which is where a majority of the job losses are coming from).

Another thing folks here and Dan need to do, is to LOOK AT THE ACTUAL BILL's COMPONENTS. The Wall St Journal had a great breakdown of the bill's contents by $$ amount. And most of the $900B is not stimulus money... its pork and welfare expansion.

Posted by: alutz08 | January 29, 2009 3:12 PM | Report abuse

I think Obama not only knew the Republicans would not receiprocate any concessions, he was probably hoping they wouldn't. Adding tax breaks and removing the family planning piece of the stimulus package were clear concessions, but the House Republicans unanimously rejected any cooperation.

And by doing so, they took Obama's bait, hook, line and sinker. By huddling together in an unresponsive mass, they looked a lot like a herd of bison clustering into a defensive position when faced by men with rifles. (And we all know how that turns out for the bison.)

Silly Republicans... it's not about the House. Republicans in the House are irrelevant; he doesn't need them. It's about the Senate elections in 2010. Obama will continue to offer concessions to the Republicans in Congress, for a while. But at some point, after showing what appears to be great paitience, if the they don't reciprocate he will drop the hammer on them in time to get a veto-proof majority in the Senate for his third and fourth years in office.

And the Republicans, if they don't start admitting that he is giving them some of what they want and cooperate a little, will have no one but themselves to blame.

Well, they can blame Obama, but only for taking advantage of their willful ignorance.

Posted by: Gallenod | January 29, 2009 3:14 PM | Report abuse

Maybe the President is thinking that the congressional Republicans are like Confederate officers post-Civil War.

As Grant did in offering amnesty (without clearing it with Lincoln first) through Lee to those Confederate officers and allowing them to keep their horses and firearms, the President is trying to be more like General Grant than President Lincoln.

The risk for the country is that this crew of congressional Republicans is nowhere nearly as smart or honorable as the Confederates were nor do the Republicans have anywhere near the integrity that the dispatched Confederates had.

Posted by: Patriot3 | January 29, 2009 3:21 PM | Report abuse


Is your the candidate who promised to do silly things if you elected him missing?

I'm glad. Remember, "bipartisanship" means you have to compromise with the guys across the aisle.

Posted by: ZZim | January 29, 2009 3:29 PM | Report abuse

I can't understand why Obama and his economic team 'can't or won't' consider anything other than assisting the banks [Wall Street] 'first' when, in fact, providing help to Main Street would cost much, much less and solve the problems for everyone as suggested below:

To get our economy immediately moving by assisting MAIN STREET, I’m proposing ‘My Plan’ to help Main Street DIRECTLY. Since there are 300+ million people living in the US, the Fed could give each one of these people $1M – that is ONLY $300+M. The $1M would have certain stipulations and restrictions imposed by the Fed, and listed [more or less here]:

1.] A specified portion would go directly into savings [helping banks through deposited funds which they could use immediately],
2.] A certain portion would go toward paying off all mortgages, relieving the housing industry crisis [unless the homeowner has a mortgage worth more than $1M, in which case he would not require Government assistance] helping to eliminate foreclosures,
3.] Another portion would be set aside for one adult in the family to attend college and obtain an education in ‘green’ technology [would ready people for green jobs],
4.] All incurred credit card debt for that family would have to be paid in full and no further credit card use for a pre-determined time [would assist financial institutions in making lending funds more easily available],
5.] A certain portion must be spent to allow retailers to regain profits so our economy would immediately start to grow.

My plan would only require $300+ MILLION [that is $1M to each American adult taxpayer]. Wouldn’t my plan not only STIMULATE OUR ECONOMY, HELP MAIN STREET ‘FIRST’ RATHER THAN WALL STREET CEOs FIRST, EDUCATE many adults that have been left behind due to financial or other reasons, move RETAIL SALES toward INCLINE rather than the DECLINE it’s currently facing, and KEEP BANKS FROM FAILING BECAUSE PEOPLE WOULD ‘DEPOSIT AND SAVE’ FUNDS [required savings and funds to work with as above], perhaps even increase their profits along with making CREDIT CARD FUNDS more readily available? People who want to start businesses, could with money left over which would help with unemployment issues as this would provide more jobs. It would also STOP THE MORTGAGE CRISIS, which the Fed stated was the UNDERLYING REASON for the financial crisis in the first place.

Posted by: MadasHelinVA | January 29, 2009 3:52 PM | Report abuse

The bill passed by the House would make a huge difference in ordinary people's lives by making Medicaid accessible to the unemployed and making COBRA available to the retired. It is definitely a populist bill. Obama, by reaching out to the Republicans, is accomplishing two things: 1) He may change a few minds; 2) If the Republicans vote in lock step against what turns out to be a successful bill after Obama has done everything he can to reach them, it makes them look that much more out of touch, in the pocket of the rich, and easier to defeat in 2010. This is smart politics.

Posted by: jonawebb | January 29, 2009 4:12 PM | Report abuse

First of all, every poster needs to take a DEEP breath. The economic mess is so complicated that, no matter what this administration proposes and manages to enact, it will not have a chance to succeed without taking the GLOBAL, not just domestic, economy into account (Projects patch-worked into the current stimulus plan, such as restoration of the Mall, are small potatoes. Infrastructure improvements are necessary, but probably should be part of a separate bill, and are probably irrelevant to an effective economic stimulus program).

As a case in point, a proposal to "buy American" as part of a stimulus plan may create a push back from other countries, which could further aggravate the current crisis (the Great Depression didn't really cast its long shadow until Congress passed the Smoot-Hawley Tariff in 1930. The stock market "crash" didn't immediately affect the average person until the effects of the tariff were felt almost two years later, because most Americans had no money in the market (only the fat cats), and the stock market actually recovered some of the losses resulting from the October, 1929 incident. Protectionism only made a bad situation worse.

There has also been a call to get tough with China on devaluation of it's currency, which could have serious repercussions, since they hold so much of the debt that we incurred during our spending spree (some of which I am sure, helped fuel the real estate binge and the accompanying mortgage asset mess).

As the old adage goes, the number of economic theories is only limited by the number of economists in the room at any given time. No one really knows how this will shake out, and we won't know what works until it works (or doesn't work). And it may be that we will have to swallow our indignation and sleep with the Devil (the financial institutions and their CEOs), in order for the economy to improve.

One thing that we can learn from the Great Depression is that TOO much government involvement in the markets can be as bad as TOO little. The country experience a Depression within a Depression in 1937, even after all of FDR's ambitious programs.

Posted by: MillPond2 | January 29, 2009 4:12 PM | Report abuse

Did you listen to anything Obama says? It is hard to believe that anyone has not heard him say that he is a pragmatist not an ideolog. Anyone looking for him to toe the line of any particular ideology is going to be disappointed. But, even though he has no intention to be a populist, he does intend to focus tax cuts on the middle class and adopt tougher tactics on trade with China. Both of those realities have already been upsetting the Republicans.

Posted by: dnjake | January 29, 2009 4:21 PM | Report abuse

I think the main thing we've gotten out of the Obama presidency is a record amount of whining from the liberals.

Obama is a consensus builder and he's not going to overcome the hostility of the last 12 years in a week. He's creating a structure and building relationships to work within to get a full term's worth of issues passed into law.

While the budget bill is important, we know right after this they'll be tackling even more crisis prevention topics. Since he was smart enough to win the election maybe we should give him enough credit to at least get a running start.

Posted by: don1one | January 29, 2009 4:30 PM | Report abuse

Sorry to say this, MadasHelinVA, but as much as I agree that your proposal would stimulate the bejesus out of everybody, and as much as I'd love to get a cool million, I don't think we can afford a $300 trillion stimulus package. Financially, we'd be Zimbabwe without the hot weather.

Posted by: AMac1 | January 29, 2009 4:46 PM | Report abuse

Froomkin, just one question for you. How much did the Republicans pay you to write this article?

Posted by: mzbond | January 29, 2009 5:20 PM | Report abuse

I can't take credit for this statement, I heard it on NPR the other day and it wasn't credited, but it is absolutely the truth. Someone needs to tell Obama this truth:

"GREAT presidents do NOT move to the center to govern, they move the center to THEM."

Posted by: smeesq | January 29, 2009 5:23 PM | Report abuse

First, THANK YOU, Dan Froomkin, for tweaking the new format and creating a "print all posts minus comments" feature! You have assured my continuing readership and reinforced my respect for your methods.

Second, I am strongly inclined to agree with Krugman on this: "The House has passed the stimulus bill with not a single Republican vote. Aren't you glad that Obama watered it down and added ineffective tax cuts, so as to win bipartisan support?"

But third, I hope that Gallenod is correct in reasoning that this is all, in the end, part of Obama's strategy to advance his overall agenda. I think the Republicans' negative response to his outreach earlier this week will strike the average person as churlish -- especially since their party has offered no alternatives except the perennial mantra of cutting taxes.

Posted by: SeattleVoter | January 29, 2009 7:03 PM | Report abuse

I agree with most of this article -- especially about Obama's economic team -- but let's also remember that any stimulus has to get through the Senate, that the House Republicans have now proven that their party is in lockstep opposition mode, and that most Democrats in the Senate are Big Business types too. A truly populist bill would go nowhere. Heck, we knew that a year ago, that's why we didn't nominate Kucinich.

So, yeah, an Obama administration will be only an incremental step towards economic sanity. That's normal for our system, we don't make quick, big changes. (GW Bush is not, alas, a counterexample, he was merely a little too obvious about the poor-to-rich wealth transfer that had been increasing for decades). You want better? Start supporting Senate and House primary challenges from the left. November 2008 was a start, not an end.

Posted by: MannyJ | January 29, 2009 7:18 PM | Report abuse

I too am disappointed that Obama seems to be following the same "top down" approach to our economic situation as Bush did. It must be just a little too logical to give the us, the taxpayers, the money. Instead we get a $500 tax cut and a huge bill. What a slap in the face. Something's still badly wrong with our government, including our new president.

Posted by: sinderdj | January 29, 2009 8:19 PM | Report abuse

The column seems to assume populism works when the evidence is less than sterling. The goverment can't just wave a wand and guarantee prosperity.

The financial rescue package for the banking system was designed to prevent a run on the banks that we had during the Depression. One thing WE DON'T need is a wave of bank failures. Nationalizing at least some banks temporarily might be justified but we don't want politicians determining who gets credit in the long run. While we shouldn't bail out those who made bad stock purchases we shouldn't rush to cover the costs of those who bad home purchases either.

Posted by: RealChoices | January 29, 2009 8:37 PM | Report abuse

Why tax cuts don't stimulate spending and why spending won't stimulate the economy: debt. Until mortgage debt (in the form of declining valuations) and credit card debt are addressed there is no disposable income to spend on discretionary items. Spend money to stimulate the economy but make sure it creates jobs or there will be no business to work for and no tax money to add to the government coffer. The reason the econmoy hasn't completely collapsed is because of the positive feedback loop of government jobs and tax revenue.

Posted by: gozermac | January 30, 2009 12:29 AM | Report abuse

I like the approach I heard Jon Stewart tell Gwen Ifill last night. He suggested that the govt gives money to taxpayers for their consumer and mortgage debt, to pay it back, so the banks get the money in the end for the debts, and the taxpayer wins too. They also have good credit that banks would want to lend too. Bottom up, not top down. Why not, really?

Posted by: collingwood11 | January 30, 2009 4:29 AM | Report abuse

What the hell does Froomkin expect? The economic crisis centers on the titans of big business, so Obama spends time with them. And he and Geithner are now reacting forthrightly and responsibly to corporate jets and bloated bonuses. Obama has done a great deal n his first week in office to show he will act on his promises to the people. He has gone out of his way to lay out a genuinely bipartisan approach to Republicans, including trimming pork fat from the stimulus bill. The fact that no Republicans voted for it reflects ominously on them, not on Obama. Give him credit for trying!

Posted by: ejmurphy414 | January 30, 2009 8:47 AM | Report abuse

You guys need to sit down and take a chill pill, and realize that just because Obama is now President, and we Democrats have taken control of the House and have serious influence in the Senate, the Republicans have yet to wake up from the nightmare that the recent election has been for them. It will take a while for them to realize that the governing torch has actually been passed, and that the specific group of Americans who remain their solid core of support is nowhere as solid or as large as it has been. The political era that started with Reagan is indeed over, but we cannot run amuck or else the American Electorate may turn on us over hubris on our part. Furthermore, the days of FDR and Lyndon Johnson - when we could get almost anything enacted - will never come again. The reason for that is the fact that while things are already pretty bad - especially in unemployment - they have yet to hit rock bottom. If you want the days of FDR and Lyndon Johnson once again, then we have to sit back and let the economy hit rock bottom. Of course we're not going to let that happen, so stop with the sour grapes vis-a-vis Obama. He has no choice but to govern from the Center if he wants the level of constituent support that will give him the solid majority he needs to get his program enacted. Otherwise the Republicans will get the feeling that Obama's political house is divided, and continue to obstruct as much as possible.

Posted by: cseon | January 30, 2009 9:40 AM | Report abuse

Why does the stimulus/bailout have to be an either or proposition? There are those who think propping up the banks is necessary and those who think the American public need a break or we will never recover. Why can't we do both at the same time? Split it in half so the wealthy CEOs and Republicans get their beaks wet, and the American taxpayer gets a rebate healthy enough to get people back on their feet?

Posted by: mossmtn | January 30, 2009 10:12 AM | Report abuse

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