I see President Obama’s victory as one not just for himself and principles of Democrats, but renewed hope that he has come to understand macroeconomics. Given that most voters do not understand the economics of fiscal multipliers, bank recapitalization, or quantitative easing, they seem to have understood enough to reject the Republican narrative that fiscal and monetary stimulus made matters worse. In exit polls, voters widely agreed that the economy was in bad shape, but were more likely to blame George Bush than President Obama for that.
If Barack Obama had been defeated by Mitt Romney, the explanation would have short and to the point: the economy defeated the President, not Mitt Romney. If I were advising the Romney campaign, Mr. Romney’s primary message would have been to continually bludgeon away with ads that pointed to President Obama, a good man, took a bad economy and made it worse.From there, the propaganda machine of the far right would do the rest: laser focus on unemployment stuck at around 8% and four straight years of trillion-dollar deficits.
Political pundits and demographers have cited a host of other factors to explain President Obama’s victory however: the wide margin of support from Hispanics, his response to Hurricane Sandy, the Romney’s debacle of misleading messages in Ohio regarding the auto bail-out, the statistical expertise of the most sophisticated, targeted ground game in history. Karl Rove’s now famous Election Night meltdown in real-time on FOX clearly showed that he did not understand that, yes, votes were still going to come in from Ohio, but they were going to be from neighborhoods full of Democrats, in counties full of Democrats, and that Romney’s were already in and counted. Ohio was President Obama’s.
Also significant was that by Election Day, the stock market and consumer confidence were back at levels last reached before President Obama took office, and unemployment finally nudged below 8%. In the exit poll, four in ten voters said the economy was getting better and 88% of those voters went for President Obama.
Undoubtedly, luck played a part in President Obama’s re-election as well. Had the euro crisis intensified rather than subsided somewhat late in the summer, had Middle East tension sent oil back to $140 per barrel, had the housing market taken just a few months more to show signs of improvement, President Obama would now be faced with an entirely different dynamic.
Facts, would have been irrelevant regarding :
- America has actually outperformed the typical post-crisis economy
- The U.S. economy has outperformed almost every other major developed country since the crisis
- Britain, which pivoted more quickly to austerity, fell back into recession this year
President Obama’s loss would have vindicated the opposing theory that stimulus is ineffective and government-generated uncertainty is the main thing holding the economy back and Republican austerians in Congress who would have taken credit for putting Mr. Romney in the White House, would be poised to slash huge amounts of governmental, non-defense spending.
President Obama’s Weakness is America’s Weakness
President Obama, having a legal background, gave me a good deal of trepidation about how he would deal with cleaning up Wall Street in his first term. Given his almost certain lack of knowledge in dealing with macroeconomics (economic realities of governmental fiscal policies) I felt certain that the traditional American lack of understanding in macro vs. micro would be a problem. Those fears were exacerbated when president Obama brought in Timothy Geitner (Treasury) and Larry Summers (Economics Advisor). I was prepared to move to move to South America had Alan Greenspan re-emerged. Fiscal cliff aside, I think now is the best possible time for President Obama to address, what I feel, was his most glaring Achilles heel after being elected in 2008.
Of course, Rubin quickly convinced President Obama to appoint Rubin protégés to the three most important economic positions in the new administration: Timothy Geithner as Treasury secretary, Lawrence Summers as national economic adviser and Peter Orszag as director of the Office of Management and Budget. For good measure, the administration named Mary Schapiro, the head of the Financial Industry Regulatory Authority, Wall Street’s dysfunctional self-regulatory organization, as chairman of the Securities and Exchange Commission.
Wall Street Whiners
Not only did these men and women fail to achieve President Obama’s stated campaign goals, they instituted a disgustingly Wall Street-friendly set of policies:
- Big banks continued to be bailed out
- Dodd-Frank financial reform act continues to get watered down as its specific rules are hammered out
- Not a single Wall Street trader, banker or executive has been held criminally liable for actions leading up to the financial crisis
- The Standard & Poor’s 500 (SPX) has more than doubled since its lowest point in March 2009.
The Federal Reserve has no more ammunition with regard to monetary policy: there is no wiggle room left with the liquidity rate because it’s already at the zero mark, so The Federal Reserve Bank can no longer cut interest rates targets for inter-bank transactions to buoy the economy by pumping dollars into the capital markets. The Fed has kept interest rates at all-time low levels (a gift to Wall Street and a pall on savers).
Despite the royal treatment, Wall Street clearly thinks it is not enough. The hostility between the financial sector and Obama has never been greater. Eight of Mitt Romney’s 10 top donors in the election were Wall Street firms.
So, President Obama, the time has come for you to do in your second term what many people hoped you would do in the first: Institute meaningful reform on Wall Street. I have given up on watching Wall Street executives walk out of their lavish offices in chains for having ruined the economy and cost millions of Americans their pensions, houses and dignity.
A crucial first step is to get rid of the left over residue of the Rubin-Altman connections. And please, don’t pay attention to the GOP members who cling to their antiquated economic policy beliefs (see: GOP Wanting Less Regulation is Like Crooks Wanting Fewer Cops).
And President Obama, please bring in new people who not only understand macroeconomics, but how Wall Street really works; and also have dedicated their careers to changing it.