[Vision2020] How Obama Saved Capitalism and Lost the Midterms

[Ted Moffett]

http://opinionator.blogs.nytimes.com/2010/11/02/how-obama-saved-capitalism-and-lost-the-midterms/?src=me&ref=general

November 2, 2010, 11:59 pm
How Obama Saved Capitalism and Lost the Midterms
By TIMOTHY EGAN

If I were one of the big corporate donors who bankrolled the
Republican tide that carried into office more than 50 new Republicans
in the House, I would be wary of what you just bought.

For no matter your view of President Obama, he effectively saved
capitalism. And for that, he paid a terrible political price.

Suppose you had $100,000 to invest on the day Barack Obama was
inaugurated. Why bet on a liberal Democrat? Here’s why: the presidency
of George W. Bush produced the worst stock market decline of any
president in history. The net worth of American households collapsed
as Bush slipped away. And if you needed a loan to buy a house or stay
in business, private sector borrowing was dead when he handed over
power.

As of election day, Nov. 2, 2010, your $100,000 was worth about
$177,000 if invested strictly in the NASDAQ average for the entirety
of the Obama administration, and $148,000 if bet on the Standard &
Poors 500 major companies. This works out to returns of 77 percent and
48 percent.

But markets, though forward-looking, are not considered accurate
measurements of the economy, and the Great Recession skewed the Bush
numbers. O.K. How about looking at the big financial institutions that
keep the motors of capitalism running — banks and auto companies?

The banking system was resuscitated by $700 billion in bailouts
started by Bush (a fact unknown by a majority of Americans), and
finished by Obama, with help from the Federal Reserve. It worked. The
government is expected to break even on a risky bet to stabilize the
global free market system. Had Obama followed the populist instincts
of many in his party, the underpinnings of big capitalism could have
collapsed. He did this without nationalizing banks, as other Democrats
had urged.

Saving the American auto industry, which has been a huge drag on
Obama’s political capital, is a monumental achievement that few
appreciate, unless you live in Michigan. After getting their taxpayer
lifeline from Obama, both General Motors and Chrysler are now making
money by making cars. New plants are even scheduled to open. More than
1 million jobs would have disappeared had the domestic auto sector
been liquidated.

“An apology is due Barack Obama,” wrote The Economist, which had
opposed the $86 billion auto bailout. As for Government Motors: after
emerging from bankruptcy, it will go public with a new stock offering
in just a few weeks, and the United States government, with its 60
percent share of common stock, stands to make a profit. Yes, an
industry was saved, and the government will probably make money on the
deal — one of Obama’s signature economic successes.

Interest rates are at record lows. Corporate profits are lighting up
boardrooms; it is one of the best years for earnings in a decade.

All of the above is good for capitalism, and should end any
serious-minded discussion about Obama the socialist. But more than
anything, the fact that the president took on the structural flaws of
a broken free enterprise system instead of focusing on things that the
average voter could understand explains why his party was routed on
Tuesday. Obama got on the wrong side of voter anxiety in a decade of
diminished fortunes.

“We have done things that people don’t even know about,” Obama told
Jon Stewart. Certainly. The three signature accomplishments of his
first two years — a health care law that will make life easier for
millions of people, financial reform that attempts to level the
playing field with Wall Street, and the $814 billion stimulus package
— have all been recast as big government blunders, rejected by the
emerging majority.

But each of them, in its way, should strengthen the system. The health
law will hold costs down, while giving millions the chance at getting
care, according to the nonpartisan Congressional Budget Office.
Financial reform seeks to prevent the kind of meltdown that caused the
global economic collapse. And the stimulus, though it drastically
raised the deficit, saved about 3 million jobs, again according to the
CBO. It also gave a majority of taxpayers a one-time cut — even if 90
percent of Americans don’t know that, either.

Of course, nobody gets credit for preventing a plane crash. “It could
have been much worse!” is not a rallying cry. And, more telling,
despite a meager uptick in job growth this year, the unemployment rate
rose from 7.6 percent in the month Obama took office to 9.6 today.

Billions of profits, windfalls in the stock market, a stable banking
system — but no jobs.

Of course, the big money interests who benefited from Obama’s
initiatives have shown no appreciation. Obama, as a senator, voted
against the initial bailout of AIG, the reckless insurance giant. As
president, he extended them treasury loans at a time when economists
said he must — or risk further meltdown. Their response was to give
themselves $165 million in executive bonuses, and funnel money to
Republicans this year.

Money flows one way, to power, now held by the party that promises tax
cuts and deregulation — which should please big business even more.

President Franklin Roosevelt also saved capitalism, in part by a bank
“holiday” in 1933, at a time when the free enterprise system had
failed. Unlike Obama, he was rewarded with midterm gains for his own
party because a majority liked where he was taking the country. The
bank holiday was incidental to a larger public works campaign.

Obama can recast himself as the consumer’s best friend, and welcome
the animus of Wall Street. He should hector the companies sitting on
piles of cash but not hiring new workers. For those who do hire, and
create new jobs, he can offer tax incentives. He should finger the
financial giants for refusing to clean up their own mess in the
foreclosure crisis. He should point to the long overdue protections
for credit card holders that came with reform.

And he should veto, veto, veto any bill that attempts to roll back
some of the basic protections for people against the institutions that
have so much control over their lives – insurance companies, Wall
Street and big oil.

They will whine a fierce storm, the manipulators of great wealth. A
war on business, they will claim. Not even close. Obama saved them,
and the biggest cost was to him.
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Vision2020 Post: Ted Moffett