I am thankful each and every day that Barack Obama won the 2012 election, and that he is our president instead of Mitt Romney. The current version of the Republican Party is the most extreme, cynical, and utterly heartless group of people I have ever witnessed in American politics- and I have witnessed a lot in my 30-plus years in politics. I am proud of the president for the good things he has done on many different issues, and for many of the fights he has chosen to take on.
But on economic policy, and especially on fighting for the middle class, this President has two blind spots the size of a Mack truck.
The first is Wall Street. Obama’s first term Secretary of the Treasury Tim Geithner believed that the most important thing in making the economy work better was to help the biggest banks on Wall Street, and Obama’s current Attorney General openly admits in official testimony to Congress that he is hesitant to prosecute criminals who are executives at big banks because it might hurt those companies, and therefore, apparently, the broader economy. These policies are bad economics, bad morality, and bad politics. This allegiance to Wall Street’s interests has drained vast amounts of money out of productive investments in the real economy, put millions of homeowners underwater on their mortgages or into foreclosure, made big bank execs feel free to commit financial fraud, and allowed continued dangerous speculation in our financial markets that could lead to another financial panic in the not too distant future. These pro-Wall Street policies have slowed the economy down dramatically. Favoring the biggest banks over the rest of the economy is terrible policy if you want to help the middle class.
The other huge blind spot is on Obama’s great desire to strike this “grand bargain”, including cutting Social Security and Medicare benefits. He seems obsessed with the idea, offering it up to the Republicans over and over and over again, no matter how many times they say no. He is dead wrong on this issue, and Democrats in Congress should fight him on it tooth and nail.
On Medicare, there are plenty of ways to save serious money without hurting seniors. Negotiate drug prices, for example. Bring younger, healthier people into the Medicare pool. Ask hospitals, who cut a sweet deal in the health reform negotiating process, to find more cost savings. Squeeze the medical equipment industry more. Re-orient health care toward paying for good outcomes rather than fee for service. There’s a ton of savings to be had if we would take on the big health industry special interests, but Republicans have no interest in doing that. They want to squeeze those old people Paul Ryan describes as the “takers” in society. And because Obama wants to have a grand bargain with the Republicans, he has at various points offered up raising the retirement age (although he seems to have backed away from that offer, which is good given that the blue collar folks helped by Medicare and Social Security don’t enjoy the benefits of longer life expectancy nearly as much as high income people) and means testing Medicare. Do these proposals make good sense? Do they help the middle class? Who cares, we have to be bipartisan!
On Social Security, the president keeps suggesting a benefit cut called Chained CPI. The theory is that when inflation goes up, people can always substitute lower cost items- you know, if the cost of Ferraris heads north you can always switch to buying a Cadillac. The problem is that most seniors these days are retiring without pensions, their houses are worth less than used to be, and they don’t have the kind of savings that earlier generations of seniors did. They aren’t choosing between Ferraris and Cadillacs, they are choosing between cottage cheese and Velveeta at the grocery store. The product substitution thing on inflation that economists theorize about just doesn’t work with people on low fixed incomes.