RSS
The blame game
America's economic panic is the fault of Tea Partiers, S&P, speculators, and Big Business. And it's up to Obama to convince us to put country first
Robert Shrum
Robert Shrum
B

arack Obama is being blamed right, left, and center — by almost everyone for one thing or another — including the credit downgrade, the market crash, a slouching economy, and the miasma of the Washington swamp. Critics and erstwhile admirers grumble among themselves — and, mostly anonymously, to the press. Columnists once ready to cheer Obama's rise now jeer his timid, professorial leadership; Maureen Dowd ridicules him as the "Withholder in Chief."

The reaction is over the top, inaccurate, and unfair — a contentless exercise in opportunistic cynicism from the Republicans, an expression of confused frustration from the center of the political spectrum, and a seething exhalation of worry and disappointment from progressives. Never mind that the president has brought about historic changes, almost certainly fended off a second Great Depression, and has openly and honestly tried, perhaps too hard, to compromise on tax cuts and the debt ceiling. As John Kennedy once observed, "Life is unfair."

Obama is at a turning point. He needs to renew his presidency and his vision, reconnect with the American people, and redefine the big choices before the country. It is not enough to say, as he did while the stock markets swooned, that our problems are "eminently solvable"; unless he persuasively explains what's happening, people will ask why he hasn't solved them.

For today's Republican, coherence is beside the point in economic policy. Chaos is welcome.

It's ironic that amid the most withering criticism he's faced, a Gallup Poll shows the president moving from an eight-point deficit to a six-point lead in a race against a generic Republican candidate. But it's also true, as clichés often are, that the tribune of hope now lacks a convincing narrative. This he can remedy — if he chooses to; and he has to — if he aspires to govern successfully in the coming months or campaign successfully through next year.

Along the way, as I argued last week, he needs to rediscover the passion of 2008. We are learning that in the era of the permanent campaign, Mario Cuomo is wrong: You have to both govern in prose and poetry. Without the poetry, the bully pulpit looks out across a congregation drifting away. I assume this is not a president who will go gently into a Carter-esque night — that he will prove equal to this defining moment as he has to others before.

But meanwhile, fairness does have its claims and they are not irrelevant to the fateful decisions — or deadlock — that will soon mark or scar our democratic process and our economic prospects. So to set the record straight, we ought to get serious and blunt about blame — and name those who truly are accountable for our present distress, which is not primarily a product of willingness to compromise or a shortfall in presidential communication.

The preeminent culprit is the loyal opposition that now seems loyal only to deluded ideology and the possibility of winning the White House by ruining the economy. There is no need to rehash the adamant Republican obstruction of every measure to revive growth and jobs — and then, as David Frum put it here at TheWeek.com, something that "feels like one of those tragic episodes out of the history of the fall of republics" — holding hostage the financial stability and credibility of the United States during the debt ceiling debate.

Amid the debris on Wall Street and across world markets, the GOP hasn't pulled back from the precipice, but pushed harder toward it. Republican members appointed to the super committee tasked with additional deficit reduction are already pledged to the political equivalent of the Red Queen's jurisprudence in Alice in Wonderland — first the verdict, then the trial. No matter what the economic realities, most if not all of them are mightily opposed to any increase in revenues — a position which would make it impossible to rein in deficit and debt without rewinding history and unwinding Social Security, Medicare, Medicaid, and aid to education. (As Ted Kennedy once said, "There is something at the heart of the Republican Party that yearns to undo Social Security.")

Democrats, to the discomfort of the base, would agree to modify entitlement programs while protecting their fundamental guarantees; the president already has. The GOP's refusal to find middle ground threatens another crisis in the fall and a deeper deterioration of the economy — for Republicans, just one more chance to blame Obama. It might not work; the ploy is transparent; the GOP's disapproval in the latest CNN survey has soared to 59 percent.  Nonetheless, the party appears to be doubling down on this ugly strategy.

Just watch the Republican presidential candidates mouth Tea Party paranoia as they pander for the nomination. Lying has become standard operating procedure; Michele Bachmann blithely attributed the stock market plunge to the increase in the debt ceiling: "The markets said, 'We don't think it's a good idea.'" But for the markets, that increase was the only responsible course, albeit without the Republican brinksmanship and demands that infected the final bill. Pardon me, but Bachmann is both fact-free and flakey — a klieg-lit version of her rivals for the nomination and her GOP colleagues in Congress. One of them, the otherwise negligible Michael Burgess from Texas, has proposed impeaching Barack Obama. The president's high crime and misdemeanor? Presumably, his refusal to quaff the extremist tea.

Even an addled Republican Party won't venture this far; the memory of the backlash against the attempt to depose Bill Clinton haunts all but the most clouded conservative minds. Still Burgess did express the essence of his party's game plan, saying impeachment would "tie things up."

The losses in the stock market already equal or exceed any plausible increase in tax revenues. But for today's Republican, coherence is beside the point in economic policy. Chaos is welcome. And they have plenty of accomplices, too — some of them unwitting, but each of them with their own selfish purposes. They too deserve to be named and blamed.

The ratings agency that downgraded U.S. bonds bears a name that is only half right: S&P doesn't set a very high standard but its performance is demonstrably poor. It made a $2 trillion error in calculating the projected federal debt; no wonder Standard & Poor's provided a gold-plated rating to Enron and the packages of subprime mortgages that blew up in 2008. The $2 trillion mistake was swiftly spotted, and so S&P shifted its rationale, instead complaining of a broken political system. Having failed at math, they took up political science.

And Standard & Poor's is banking on just that breakdown — furiously lobbying in Washington to avoid liability when its ratings go wrong. Instead of a license to be duped or to deceive, federal rules ought to require transparency and explicit standards in a rating process that is dangerously secretive and irrationally ad hoc, and should never again be treated as unaccountable.

Next in the blame lineup come the speculators. This week, they spread rumors that France too was about to be downgraded, or that one of its major banks was in trouble, which triggered a 500-point implosion in the Dow Jones Industrial Average. Neither rumor was true, but in a world with instant networking, panic rolled across the Pacific to Asian markets. The blame here should come with regulatory teeth. It is time for regulation to catch up with the hyperspace of global finance in the form of a tough crackdown on financial manipulation and short-selling.

Also to be blamed — and they may be blaming themselves every time their stock values shrink — are the companies and investment banks that financed squads of Tea Party candidates in 2010. The candidates posed as populists; their Wall Street funders saw their anti-government animus as leverage to roll back financial reform and let the pre-2008 times roll again. The GOP has labored to keep that promise by weakening and defunding regulatory bodies, decapitating the new Consumer Protection Agency, and slashing enforcement personnel across the board. But the bargain had an unintended consequence when it came to raising the debt ceiling. When their patrons asked for a yes vote, they encountered the invincible economic ignorance of their Tea Party protégés — who, in the words of one administration official, "gave them the finger." Companies and investment banks have now paid the price.

Finally, there are the inflation hawks at the Federal Reserve who are resisting the full exercise of the Fed's powers, which are pretty much the only remaining tool to sustain a recovery. In addition to blocking fiscal stimulus — even modest proposals for a payroll tax cut and extended unemployment compensation — congressional Republicans are reinforcing the inflation hawks and working overtime to intimidate the Fed and immobilize monetary policy. The result, as The New York Times wrote, is "half measures… tools that could help the weak economy are going unused."

Plainly, the danger now is not inflation, but deflation and a relapse into recession. That has never tempered the tight money instinct of many central bankers, even during a downturn. In 1935, with tens of millions still jobless despite the progress made by the New Deal, Winthrop Aldrich of Chase National Bank decried inflationary pressures: "There it is, spread out, explosive material awaiting the match." With the reluctant consent of FDR, the Fed buckled in 1936, but only halfway. It was a prelude to the 1937 fiscal entrenchment that reignited a downward spiral — until Roosevelt, ever the pragmatist, reversed himself again.

Maybe S&P does have a point about our dysfunctional politics. I don't quote Richard Nixon often, but his words are precisely on the mark. "When the chips are down," he said, "the world's most powerful nation, the United States of America, [can't] act like a pitiful, helpless giant."

That's how America has looked this summer. That's why recovery has lagged. So get over blaming Barack Obama first. He's not even a secondary or tertiary cause of this mess. But he is president; he asked for the job; and no one ever said it would be easy.

In the face of enemies within — within the political system and the financial system — he and he alone can recast the contest for America's future. The issue probably won't be settled until the 2012 election, and so the economic headwinds may be harsh. This president may decline the "on your side" message of FDR and Truman. But he should embrace it. And in any event, he should speak and lead for something even bigger — a patriotism that transcends heedless partisan ambition, rigid ideology, and moneyed interests.

Put simply, against the narrowness of now, the president needs to summon and inspire us to put country first.

EDITORS' PICKS

THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER

Subscribe to the Week