by Oliver Stone
Journalist Ron Suskind later reported that a more complicated internal negotiation had actually occurred behind the scenes in which Obama agreed with Romer and others that a fundamental restructuring of the banks was necessary, beginning with Citigroup. It was Geithner and Rahm Emanuel who sabotaged this effort. Geithner, Suskind contended, simply refused to come up with the plan that Obama had asked for and eventually convinced the president to go along with his own Wall Street–friendly approach. Emanuel, who had earned over $18 million in two and a half years working for the investment banking firm Wasserstein Perella after leaving the Clinton White House in 1999, insisted they all go along with Geithner. Obama rolled over without a fight.10
The financial crisis that began in 2008 did nothing to stanch the corporate bleeding of the middle and working classes. Average total compensation for CEOs of Standard & Poor’s 500 Index companies rose 23 percent in 2010 to $11.4 million. CEO pay, which equaled 343 times that of the median worker in 2010, had risen more than eightfold since 1980, when it stood at a mere 42 times as much. By comparison, CEOs in other industrial countries earned far less. British and Canadian CEOs earned 22 times as much as the average British and Canadian worker, and Japanese only 11. Discovery Communications’ CEO David Zaslav was among those who cashed in. His pay jumped from $7.9 million in 2008 to $11.7 million in 2009 to $42.6 million in 2010.
The rest of the workforce was left largely to fend for itself. Obama’s economic stimulus program was only about half the $1.2 trillion advocated by Christine Romer, whose recommendation was left off the options submitted by Summers.11 The economic recovery of the early Obama years was not only weak in terms of generating new jobs, its benefits went entirely to the wealthiest Americans. Economist Andrew Sum and his group of researchers at Northeastern University discovered that, from the second quarter of 2009 through the first quarter of 2011, national income grew by $505 billion dollars. Pretax corporate profits grew by $465 billion. Wages and salaries, however, declined by a sobering $22 billion.12 In the nine months after hitting the nadir of the recession in the second quarter of 2009, they found, corporate profits accounted for 85 percent of the increase in profits and wages. For the same recovery period following the 1981–1982 recession, only 10 percent had gone to corporate profits. In 2010, 93 percent of income growth went to the top 1 percent of households, leaving a scant 7 percent for the other 99 percent to divide up. The top .01 percent, some 15,000 families, did even better, absconding with a stunning 37 percent of new earnings. Meanwhile, benefits continued to tumble. A 2010 survey found that over the previous year, employee health insurance premiums had increased 13.7 percent while employer contributions fell by 0.9 percent.13
What Chris Hedges termed “the corporate rape of America”14 had been under way for decades. While executive pay skyrocketed, pay for the average nonsupervisory worker, according to the Bureau of Labor Statistics, had fallen more than 10 percent since the 1970s. The Congressional Budget Office estimated that between 1979 and 2005 income of the top 1 percent jumped 480 percent.15
By 2007, the top 1 percent was receiving 25 percent of national income and owned almost 40 percent of American wealth. With unions representing only 7 percent of the private work force in 2007, real wages, adjusted for inflation, were actually lower than they had been thirty years earlier. In 2007, the bottom 80 percent owned only 15 percent of all wealth. Overall, by 2011, the Economic Policy Institute reported, the richest 1 percent had more wealth than the bottom 90 percent. Families had, for the most part, managed to maintain standards of living since the 1970s by expanding female participation in the workforce (women with young children working outside the home jumped from 24 percent in 1966 to 60 percent in the late 1990s), sharply increasing the number of hours worked (100 more hours per year for the typical male worker and 200 more for the typical female over two decades earlier), and borrowing at inordinate, and ultimately unsustainable, rates (squeezing $2.3 trillion from homes between 2002 and 2007).16
A stunning measure of how far the United States had fallen came from the October 2011 Bertelsmann Stiftung Foundation report “Social Justice in the OECD—How Do the Member States Compare,” which ranked the United States twenty-seventh out of the thirty-one OECD nations, only beating Greece, Chile, Mexico, and Turkey. The report measured many factors, including poverty prevention, poverty rates for children and senior citizens, income inequality, expenditures on pre-primary education, health care, and other key metrics. The United States came in twenty-ninth in overall poverty rate and twenty-eighth in child poverty and income inequality.17 Columbia University’s National Center for Children in Poverty reported that 42 percent of children lived in low-income families, half of them below the poverty line. The Associated Press reported in December 2011 that almost half of all Americans were either in poverty or subsisting on low incomes. The Census Bureau reported that in 2010, 46.2 million Americans were below the poverty line, which was the highest number since it began publishing those figures fifty-two years earlier.
Not only were more Americans falling into poverty, fewer and fewer were able to escape. Mobility studies shattered the myth that the United States was a society with fluid class lines and easy upward mobility. In fact, the United States, with its porous social safety net, failing schools, and low percentage of unionized workers, had considerably less social mobility than any other advanced industrial society.18
These disparities had so infuriated Americans who were struggling to afford health care and mortgage payments while feeding their families that Congress reluctantly acted, passing the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. The act required corporate executives of publicly traded companies to submit their pay to shareholders for nonbinding approval. Among those who railed against efforts to curb corporate pay was Countrywide Financial CEO Angelo Mozilo, who pulled in more than $470 million in cash plus proceeds from stock sales during the five years before the effects of his untrammeled greed and illegal dealings helped bring down the housing market. Mozilo denounced “the left-wing press and the envious leaders of unions” for pressuring corporate boards and accused them of driving “entrepreneurship” out of the public sector.19
The Dodd-Frank Act, though a step in the right direction, did little to correct the underlying problems that caused the collapse, failing to address the incentive structures that encouraged risky behavior or to reverse the dynamics that allowed banks to grow to the size where they were “too big to fail.” As William Isaac, former chairman of the Federal Deposit Insurance Corporation, acknowledged in Forbes magazine, the bill “would not have prevented the recent financial crisis, and it will not prevent the next one.” “In truth,” Isaac wrote, “the bill does almost nothing to change a dysfunctional regulatory system that drove three very serious banking crises in the past 40 years.”20
Washington Post financial staff writer Steven Pearlstein was stunned that Obama could not “give voice to this populist outrage and constructively channel this public anger” over Wall Street and Geithner’s “let-them-eat-stuffing” attitude. For Pearlstein, a “telling moment” came in November 2009, when Geithner “gave a back-of-the-hand to the idea of a global tax on financial transactions as a way of raising money for economic stabilization while also discouraging high-volume, short-term speculation.” If Obama really cared about the people instead of those who had plundered the economy, Pearlstein wrote, he could instruct the Justice Department to launch an antitrust inquiry into excessive Wall Street profits, pressure Congress to close the tax loophole allowing hedge fund and private-equity fund managers to pay lower taxes than their secretaries, and push the Group of 20 to “put the transaction tax back on the agenda.”21
A homeless man sleeps under an advertisement for luxury residences in the Bowery neighborhood of Manhattan. The Census Bureau reported that in 2010 a record 46.2 million Americans were below the poverty line, one of many indicators of expanding economic inequality in the United States.
Pearls
tein wondered, “Whose Side Is Obama On?” The question became more poignant as the 2012 elections approached. Anger over the economy had boiled over. Occupy Wall Street and allied protesters gathered in towns and cities across the nation in a grassroots uprising of a sort not seen since the 1930s. Obama walked a fine line, trying to signal both the anti–Wall Street protesters and the Wall Street tycoons, whom the protesters reviled, that he was with them. In June 2011, the New York Times reported that Obama had offended Wall Street’s high rollers by calling them “ ‘fat cats’ and criticizing their bonuses” and by having the audacity to propose any curbs at all on their rapaciousness. Now, according to the Times, Obama and his top aides, looking for Wall Street backing in his reelection bid, were trying to salve the bankers’ wounded feelings.22 Franklin Roosevelt had compared ungrateful capitalists to the drowning old man who berates his rescuer for not saving his hat; Obama came before them, hat in hand, and begged forgiveness. Unlike Roosevelt, who had made enemies of Wall Street financiers by implementing large-scale government job creation and sweeping regulatory reform, Obama not only privileged those Wall Street insiders over the working masses, he apologized for having hurt their feelings.
Obama also paid debts to other corporate donors. Nobel Prize–winning economist Joseph Stiglitz noted, “When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.” Stiglitz cited the response from banker Charles Keating, who was brought low by the 1980s savings and loan crisis. When asked by a congressional committee whether the $1.5 million he had contributed to elected officials could buy influence, he answered, “I certainly hope so.”23 The Supreme Court decision in the 2010 Citizens United case, which removed limits on corporate campaign spending, ensured that the influence of corporate and banking interests would mushroom.
Obama’s failure to articulate a progressive vision was also apparent in the fight over health reform, which was to have been his signature initiative. Obama decided early on that he would avoid a fight with the health insurance and pharmaceutical industries, which not only had contributed heavily to his campaign but had played a major role in defeating Clinton’s reform efforts. To win their support, he capitulated to demands that the legislation exclude core Democratic initiatives like drug reimportation and bulk price negotiations. He also took the single-payer issue off the table, although he admitted that a single-payer system represented the best option for providing affordable care for all, as most developed countries had long proven. Rather than leading the reform effort himself, he asked Congress to come up with the details. He further placated the health insurance industry by removing the public option and Medicare expansion, despite the fact that both received lopsided public support.
The medical industry did the rest. The massive effort to eliminate provisions that might reduce corporate profits was galvanized by 3,300 lobbyists representing more than 1,500 organizations, triple the number registered to lobby on defense. Fighting to shape policies that could affect 17 percent of the economy, the lobbyists, who outnumbered members of Congress six to one, spent $263.4 million in the first six months of 2009 alone. The resulting legislation expanded coverage for uninsured Americans but did so in a way that was a windfall for the insurance companies.24
The White House blamed congressional “centrists” like Joe Lieberman for forcing it to accept compromises that were anathema to most Democrats. Senator Russell Feingold, a strong supporter of the public option, wasn’t buying these excuses. “This bill appears to be legislation that the president wanted in the first place, so I don’t think focusing it on Lieberman really hits the truth,” Feingold said.25 Obama’s bungled health care reform effort, marked by the inability to even refute Republican charges of death panels, was so unpopular that it became an albatross around the necks of Democrats in the 2010 election. As Robert Kuttner noted, “This battle should have been the president and the people versus the interests. Instead more and more voters concluded that it was the president and the interests versus the people.” And the Democrats paid for that widely perceived sellout.26
Budget battles followed the same script. Obama continued to strive for bipartisanship with opponents who were out not only to defeat him but to discredit any notion that government was at all capable of solving social problems. As Washington Post columnist Harold Meyerson stated in April 2011, “If it does nothing else, the budget that House Republicans unveiled . . . provides the first real Republican program for the twenty-first century, and it is this: Repeal the twentieth century.”27
Yet the final deal that Obama struck with the Republicans was actually worse than the Republican starting position—not only extending the Bush tax cuts for the wealthiest Americans, but slashing desperately needed social programs for the most vulnerable. Bush had “temporarily” instituted the tax cuts a decade earlier, knowing full well that they were never intended to expire. Dan Bartlett, Bush’s former spokesman, admitted: “We knew that, politically, once you get it into law, it becomes almost impossible to remove it. That’s not a bad legacy. The fact that we were able to lay the trap does feel pretty good, to tell you the truth.”28 The fact that the Obama-led Democrats walked blithely into the trap felt less good for the American public, which overwhelmingly opposed extending the tax cuts for the wealthiest Americans at a time of prodigious budget deficits.
Nobel Prize–winning Princeton economist Paul Krugman bemoaned the loss of Obama the “inspirational figure” and wondered, “Who is this bland, timid guy who doesn’t seem to stand for anything in particular?” He described Obama’s approach to bargaining with the Republicans as starting “by negotiating with himself, making preemptive concessions, then pursue a second round of negotiation with the G.O.P., leading to further concessions.” Krugman criticized Obama for failing to challenge the new consensus, which he characterized as “a philosophy that says the poor must accept big cuts in Medicaid and food stamps; the middle class must accept big cuts in Medicare (actually a dismantling of the whole program); and corporations and the rich must accept big cuts in the taxes they have to pay. Shared sacrifice!”29
Rather than heed such criticism, Obama tacked further to the right. First he selected William Daley, a former JPMorgan Chase executive, as his chief of staff to replace Emanuel. Then, adding insult to injury, he chose GE chairman and CEO Jeffrey Immelt as chair of the President’s Council on Jobs and Competitiveness, making him Obama’s chief outside economic advisor. Obama could not have sent a clearer signal on where he stood. In 2010, GE made over $14.2 billion in profits but paid no federal taxes. In fact, GE actually received a $3.2 billion tax credit. The company had also received $16.1 billion from the Federal Reserve during the 2008 financial crisis. Obama’s selection of Immelt as his chief advisor on job creation came at a time when GE was being lambasted for outsourcing jobs as well as for cutting health and retirement benefits for new employees. For so effectively privileging private greed over social responsibility, Immelt, an “old” employee, saw his total compensation jump from $9.89 million in 2009 to $21.4 million in 2010, a raise of well over 100 percent. In case Wall Street didn’t get a clear enough message from Immelt’s appointment, Obama followed up with a conciliatory address to the archnemesis of everything progressive in America, the U.S. Chamber of Commerce, and with an order to federal agencies to review regulations for the purpose of eliminating some.30
When the 2010 Congressional elections rolled around, the enthusiasm gap between Republicans and Democrats was enormous. Obama’s temporizing and lassitude had so demoralized his base that the Republicans won in a landslide, prompting him to reach out even further across the aisle. He quickly reneged on his promise to implement tougher environmental standa
rds, announcing that he would forgo new rules regarding smog and toxic emissions from boilers, leaving in place Bush administration policies.
Even this didn’t placate the Wall Street and corporate elite, who repaid Obama’s largesse by throwing their support behind Mitt Romney in the 2012 elections. By April 2012, top banking executives, hedge fund operators, and private equity investors—the same people who had backed Obama two to one in 2008—were contributing four times as much to Romney as to Obama, and that doesn’t include the enormous sums they were lavishing upon pro-Romney “super PACs.” As of summer 2012, General Electric employees, who had contributed five times as much to the Obama campaign as they did to McCain’s in 2008, were backing Romney 4:1. And Immelt announced that he wouldn’t be endorsing either candidate.31
Among the greatest disappointments to his followers was Obama’s refusal to roll back the expanding national security state that so egregiously encroached on American civil liberties. He had actually gotten off to a promising start. On his first day in office, he rescinded a 2001 Bush executive order limiting access to former presidents’ records and overturned a 2001 Ashcroft memo giving government agencies broad authority to reject public disclosure requests. He pledged his administration to a new transparency. “For a long time now, there’s been too much secrecy in this city,” he acknowledged. “This administration stands on the side not of those who seek to withhold information but with those who seek it to be known. The mere fact that you have the legal power to keep something secret does not mean you should always use it. Transparency and the rule of law will be the touchstones of this presidency.”32
