Wall Street Welfare

"As Mr. Obama prepares to lay the groundwork for the second phase of government assistance," The Wall Street Journal (WSJ) reported last week, "his tough stance on pay may help build support from a Congress weary of bailouts." [1] 


"Tough stance on pay" referred here to President Obama’s order limiting executive compensation to $500,000 at companies receiving "extraordinary [taxpayer] assistance" from the federal government.  It also encompassed Obama’s description of certain corporate executive bonus payments as "shameful" in light of the economic difficulties faced by millions of Americans,


By "government assistance," the WSJ did not mean public help for the rising number of Americans pushed into destitution by the current epic recession.  They referred instead to the Obama administration’s plan to deepen the federal government’s massive bailout of the leading financial institutions that have done so much to push the U.S. and global economy over the edge.  The next stage of this gargantuan Wall Street Welfare project (begun with Obama’s approval under the expiring George W. Bush administration) involves the government absorbing hundreds of billions of dollars worth of "troubled assets," whose value was artificially hyper-inflated by financial elites.


According to The New York Times, Obama’s corporate-Democratic Treasury Secretary Timothy Geithner’ bailout plan reflected a triumph for unfettered capitalist prerogatives inside the new White House. Times reporters Stephen Labaton and Edmund Andrews note that Geithner "prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including [top political and media expert] David Axelrod."  Geithner fought successfully "against more severe limits on executive pay for companies receiving government aid."  He overcame "those who wanted to dictate how banks would spend their money.  And he prevailed over top administration aides who wanted to replace bank executive and wipe out shareholders at institutions receiving aid." According to administration and congressional officials, Geithner told Obama that "that plan would not work" if it was burdened with "too much government involvement in the affairs of the companies" – companies whose behavior deeply interferes with ordinary Americans’ capacity to keep their heads above water.  The new Treasury chief, whose nomination was heartily applauded by Wall Street, "also expressed concern that too many government controls would discourage private investors from participating."  This grave concern over the negative impact of government – the people in a functioning democracy – won out over more image-sensitive Obama aides who worry that "rising joblessness, populist outrage over Wall Street bonuses and expensive perks, and the poor management of last year’s bailouts could feed a potent political reaction" if the new White House failed to "demand sacrifices from the companies that receive federal money."


"For all its boldness," Labaton and Andrews, note, the Obama bailout "largely repeat[s] the Bush administration’s approach of deferring to many of the same companies and executives who had peddled risky loans and investments at the heart of the crisis and failed to foresee many of the problems plaguing the markets." [2] 


Consistent with David Axelrod’s public relations concerns and with Obama’s bluster on executive pay and bonuses, however, the Times reported that Geithner would  "blame corporate executives for much of the economic crisis" [3]  – this even as he announced a plan that failed to punish those executives to any significant degree. Geithner naturally gave no blame to the economic policies implemented under his mentor and former Goldman Sachs CEO Robert Rubin when Rubin (a top Obama advisor during the presidential campaign) served as Bill Clinton’s Treasury Secretary and Lawrence Summers (Obama’s current top economic advisor) was the number two official in Treasury. The (excess) capital-fueled asset inflation that recently burst with such disastrous consequences at home and abroad was richly encouraged by the deregulatory activities of the militantly corporate-neoliberal Democratic Clinton-Rubin administration [4] – a critical detail the new president leaves out when he (routinely) blames the current crisis on "the failed economic policies of the last eight years."  


New York Times columnist and Nobel Prize-winning economist Paul Krugman recently put the curious juxtaposition of (a) Obama’s "tough" talk on executive pay alongside (b) his Wall Street-welfarist bailout plan in instructive context with the following rhetorical vignette: "Question: what happens if you lose vast amounts of other people’s money? Answer: you get a big gift from the federal government – but the president says some very harsh things about you before forking over the cash." [5]


As Obama’s image-handler Axelrod certainly knows, the "second phase of government assistance" (to leading investment and banking houses and insurance corporations) would certainly be rejected by most Americans in a straight-up policy referendum.  Consistent with what Noam Chomsky calls "the normal [authoritarian] workings of state capitalism" [6], it will be implemented nonetheless. The nation’s top banking institutions (who have tens of millions of dollars to Obama’s presidential campaign) are "too big" and (more to the point) too powerful "to fail." 


Obama’s game here is not much different from that of Teddy Roosevelt at the turn of the century or of John Fitzgerald Kennedy (JFK) during his brief dust up with U.S. Steel in 1962. [7]  Falsely claiming (like JFK) to stand above "ideology," the new president finds it useful to cloak his deep allegiance and captivity to the barons of capital by pounding his chest with some vaguely people-leasing rhetoric.  It’s all consistent with the formerly left Christopher Hitchens’ onetime description of "the essence of American politics" as the "manipulation of populism by elitism." [8]


Government Assistance for the Poor Lags as Joblessness Rises


So what about the rising number of poor and even destitute Americans who are too small and powerless to matter?  What level of government assistance is the self-described "world’s greatest democracy" providing to the increasingly desperate mass at the widening bottom of its socioeconomic pyramid, the steepest in the "advanced" capitalist world?  Surely that form of public assistance is rising in accord with the terrible expansion of human desolation and misery?


A recent New York Times report is less than encouraging.  According to veteran Times reporter, author, and welfare policy expert Jason Deparle:


"Despite soaring unemployment and the worst economic crisis in decades, 18 states cut their welfare rolls last year, and nationally the number of people receiving cash assistance remained at or near the lowest in more than 40 years."


"…Michigan cut its welfare rolls 13 percent, though it was one of two states whose October unemployment rate topped 9 percent.  Rhode Island, the other, had the nation’s largest welfare decline, 17 percent."


"Of the 12 states where joblessness grew most rapidly, eight reduced or kept constant the number of people receiving Temporary Assistance for Needy Children (TANF) the main cash welfare programs for families with families with children." [9]


The public family assistance safety net is not stretching adequately to meet the needs of the growing number of poor and deeply poor Americans. The reason is the vicious welfare "reform" (elimination), which ended poor families’ 60-year entitlement to cash aid, exchanging it for work requirements and time limits and giving states the power to discourage people from entering the welfare rolls.  The "reform" program was passed by a Republican congress and signed by the regressive corporate Democrat Bill Clinton (whose presidency Obama has described as "recognizably progressive") over considerable protest in 1996.  "While it was widely praised in the boom years that followed," DeParle notes, "skeptics warned it would fail the needy when times turned tough." [10]


The warning is being born out in spades as one of the bipartisan welfare "reform’s" key structural aspects – "fixed federal financing" regardless of caseload size – discourages states from assisting the rising number of poor families. Obama, it should be noted, has repeatedly praised the great welfare "reform," arguing that "we should acknowledge that conservatives and Bill Clinton were right about welfare" [11] and voted for "welfare-to-work" measures during his time in the Illinois Legislative Assembly.


"No One is Even Taking About the Poor"


During the presidential campaign, moreover, Obama joined John McCain in pushing poverty and inequality to the margins of political discourse. Days before the election, New York Times columnist Bob Herbert noted the shocking absence of the rising number of truly disadvantaged Americans from the electoral extravaganza. "The focus in the presidential campaign," Herbert noted, "has been almost entirely on the struggles faced by the middle class – on families worried about their jobs, their mortgages, their retirement accounts and how to pay for college for their kids….no one is even talking about the poor"…


"…But if we are indeed caught up in the most severe economic crisis since the Great Depression," Herbert added, "the ones who will fare the worst are those who are already poor or near poor.  They are millions of them, and yet they remain essentially invisible. A step down for them is a step into destitution." [12]


In a perceptive Election Day column, Herbert situated rising U.S. poverty in the context of something not generally discussed on the Op-Ed pages of the Times – economic inequality and its deadly impact on democracy.  "Right how," Herbert noted, "the United States is a country in which wealth is funneled, absurdly, from the bottom to the top.  The richest 1 percent of Americans now holds close to 40 percent of all the wealth in the nation and maintains an iron grip on the levers of power."  [13]


Consistent with Herbert’s populist concerns, diminished in Herbert’s post-Inauguration commentary [14], Obama has put Vice President Joe Biden in charge of a "Middle Class Task Force" charged to recommend proposals to ensure that "the middle class is no longer being left behind." [15]  The notion of setting up a Poverty Task Force or a related Inequality Commission is unimaginable under the reign of the supposedly "non-ideological" world view that prevails in the Obama-Summers-Geithner administration. 


The left commentator Nicholas Kozloff argues that Obama’s inauguration was "a missed opportunity" to have "used his bully pulpit" to mobilize the "grassroots" in opposition to poverty and inequality. Obama president could have used his remarkable popularity and resources  to "revolutionize progressive politics" by kicking off  "a poverty tour" that would have involved "high profile rallies in public parks or stadiums" and "mass marches through poor neighborhoods where people faced housing foreclosures." Instead the new president gave a "cliché-ridden, mundane and thoroughly unmemorable speech" and then got down to the business of bailing out his Wall Street sponsors and crafting a weak and conservative stimulus package. [16]


Dead Center  


There’s not much help coming to the poor or "the middle class" – a group that seems (in the new administration’s  world view) to cover everyone making less than $250,000 a year -from  the "giant" (corporate media deceptively claims) stimulus package.  The U.S. Senate stimulus plan that the militantly centrist and corporate-friendly Obama hailed as an example of "Democrats and Republicans [coming] together [to] respond appropriately to the urgency this moment demands" was a monument to business friendly equivocation. As Krugman notes in a column titled "the Destructive Center," the Senate plan "eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, undermines schools, but offers a $15,000 bonus to affluent people who flip their houses."


"Even if the original Obama plan — around $800 billion in stimulus, with a substantial fraction of that total given over to ineffective tax cuts — had been enacted," Krugman notes, "it wouldn’t have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years."


Yet even with those severe limits, corporate Republicans and Democrats in the Senate felt compelled to slash $40 billion in desperately needed assistance to cash-strapped state governments, which would have provided a quick boost to the economy while preserving essential services. Also cut were $40 billion more including badly needed funds for school funding, assistance (health care aid especially) to the unemployed, and Food Stamps.  Still, the Senate bill included a lucrative tax credit for affluent homebuyers, reflecting what Krugman calls "the centrists’ insistence on comforting the comfortable while afflicting the afflicted will" – an insistence that will "lead to substantially lower employment and substantially more suffering."[17]


More reason for faux-populist Obama administration chest-pounding on executive pay and perks.



Blacklisting Progressives


The stimulus and bailout plans might look a little better if Krugman, Dean Baker, and other reasonably progressive economists were in the Obama administration instead of commenting on it from afar.  As the veteran left-liberal Washington- and Obama-watcher David Sirota notes, however, Obama and his centrist handlers have "blacklisted progressives" from key policy roles in his administration. "Amid a stable of eminently qualified and well-respected progressives like James Galbraith, Joseph Stiglitz, Dean Baker, Robert Reich, Paul Krugman and Larry Mishel," Sirota observes on Open Left, "Obama has chosen [corporate neoliberal] Rubin sycophants like Larry Summers and Tim Geithner to run the economy – the same Larry Summers who pushed the repeal of the Glass-Steagal Act [a New Deal measure that mandated the separation of investment and commercial banking], the same Geithner who masterminded the kleptocratic bank bailout, the same duo whose claim to fame is their personal connections to Rubin, a disgraced Citigroup executive at the center of the current meltdown. And the list of Rubin sycophants keeps getting longer, from Peter Orszag to Jason Furman."


Sirota notes that venture capitalist Leo Hindery – a top economic advisor to presidential candidates John Edwards and (later) Obama – was banned from serious consideration for a top economic post in the new administration because he is "one of the few business leaders to use his wealth to challenge deregulation, corporate trade deals, and anti-worker policies." Hindery "dared to clash with the same Wall Street Democrats whose corporate-backed policies destroyed the economy." He committed the unpardonable sin of standing "in opposition to Obama’s top [corporate-neoliberal] economic advisors, many of whom were associated with The Hamilton Project, an economic think-tank that was the inheritor of former Treasury Secretary [and former Goldman Sachs CEO Robert] Rubin’s generally pro-trade positions."  [18]


It isn’t just "hard left" anti-capitalists like me who are considered too radical for the new team’s concept of "Change We Can Believe In."  Even capitalists who prefer a slightly more equitable and high-road model of development are considered too far left [19] for the country.  Never mind that majority of U.S. citizens hold progressive policy opinions well to the left of the business class and the nation’s two dominant business parties [20]. 


Plus ca change, plus c’est la meme chose? No! Aux barricades [21], fellow citizens and workers.  Let Axelrod’s fears be realized.




Paul Street ([email protected]) is an author and speaker in Iowa City , IA. His latest book is Barack Obama and The Future of American Politics ( Boulder , CO : Paradigm, 2008, order at http://www.paradigmpublishers.com/Books/BookDetail.aspx?productID=186987.  Street will speak (along with three other panelists) on “Obama and the Left: Different Perspectives on Social Change Today” at UNITE-HERE Hall, Debs Room, 333 S Ashland Ave, Chicago, IL,   Saturday, February  28, 2009, 6 PM.




1. Jonathan Weisman and Joan S. Lublin, “Obama Lays Out Limits on Executive Pay,” Wall Street Journal, February 5, 2009, A1.


2. Stephen Labaton and Edmund L. Andrews, “Geithner Said to Have Prevailed on the Bailout,” New York Times, February 10, 2000, A1, A16


3. Labaton and Andrews, “Geithner Said to Have Prevailed.”


4. Robert Pollin 2003. Contours of Decent: U.S. Economic Fractures and the Landscape of Global Austerity ( New York : Verso, 2003), pp. 20-75.


5. Paul Krugman, “Bailouts for Bunglers,” New York Times, February 2, 2009.


6. Noam Chomsky, “Elections 2008 and Obama’s ‘Vision,’” Z Magazine (February 2009), p. 23.


7.Richard Hofstader, The American Political Tradition and the Men Who Made It (New York: Alfred Knopf, 1948), pp. 286-297; Bruce Miroff, Pragmatic Illusions: the Presidential Politics of John Fitzgerald Kennedy (New York: Longman, 1976), pp. 176-198.


8. Christopher Hitchens , No One Left to Lie To: The Values of the Worst Family ( New York : Verso, 2000), pp. 17-18. For (I hope) useful reflections on Obama’s “non-ideological” claims (very reminiscent of JFK’s), see Paul Street, “David Brooks’ Pragmatic Illusions and the New Administration,” Z Net Sustainer Commentary (November 25, 2008), read at http://www.zcomm.org/zspace/commentaries/3692; Paul Street, “‘ Getting Things Done’ With Obama,” ZNet, December 21, 2008, read at http://www.zcomm.org/znet/viewArticle/20015; Paul Street, “Barack Obama’s Not-So Non-Ideological Inaugural Address,” Black Agenda Report (January 25, 2009), read at http://www.blackagendareport.com/index.php?option=com_content&task=view&id=999&Itemid=1


9.  Jason DeParle, “American Welfare System Failing to Grow As Economy Lags,” New York Times, February 2, 2009, A1.


10.  DeParle, “American Welfare System.” Obama’s description of the Clinton presidency: Barack Obama, The Audacity of Hope: Thoughts on Reclaiming the American Dream ( New York : Crown, 2006),pp. 34-35. For a very different take on the Clinton presidency (showing it to have been militantly corporate-neoliberal), see Robert Pollin, Cntours of Decent: U.S. Economic Fractures and the Landscape of Global Austerity ( New York : Verso, 2003), pp. 3-75,


11. Obama, Audacity of Hope, p. 256.


12. Bob Herbert, “Crisis on Many Fronts,” New York Times, October 25, 2008.


13. Bob Herbert, “Beyond Election Day,” New York Times, November 4, 2008.


14. See Bob Herbert, “The Chess Master,” New York Times February 9, 2009, where the columnist’s previous progressive-populist anti-poberty concerns seem buried as he praises the new president for deftly playing the great bipartisan political game in Washington.


15 Jonathan Weisman, “Biden is Asked to Help Middle Class,” Wall Street Journal, December 22, 2008, read at http://online.wsj.com/article/SB122987787442224517.html


16. Nicholas Kozloff, “The Stimulus Imbroglio: What Obama Might Have Learned From Chavez and Populist-Style Mobilization,” ZNet (February 11, 2009).


17. Paul Krugman, “The Destructive Center,” New York Times, February 9, 2009.


18. David Sirota, “Blacklisting Progressives: The Untold Story Beneath the Daschle Headlines,” Open Left (February 4, 2009), read at



19. Consistent with the wider and powerful judgment of corporate media and big money-campaign financiers.  See Paul Street, “A Very Narrow Spectrum: Even John Edwards is Too Far Left for the U.S. Plutocracy,” ZNet Sustainer Commentary (August 29, 2007), read at http://www.zmag.org/sustainers/content/2007-08/29street.cfm; Paul Street, “A Message From the Corporate Plutocracy” (February 5, 2008), posted at http://liblit.wordpress.com/2008/02/05/a-message-from-the-american-corporate-plutocracy-by-paul-street/


20. Kate Adams and Charles Derber, The New Feminized Majority (Boulder, CO: Paradigm, 2008), pp. 67-75; Noam Chomsky,  Failed States: The Abuse of Power and the Assault on Democracy (New York: Metropolitan, 2006), pp. 205-250; Chicago Council on Foreign Relations , Global Views (Chicago, 2004); Paul Street, “Americans’ Progressive Opinions v. “the Shadow Cast on Society by Big Business,” ZNet Sustainer Commentary (May 15, 2008), read at http://www.zcomm.org/zspace/commentaries/3491


21.  “The more things change, the more they stay the same?…To the barricades….”

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