By Fadhel Kaboub
When British economist and public intellectual John Maynard Keynes wrote his famous essay entitled “The Economic Consequences of Mr. Churchill” in 1925, the British economy was still suffering the consequences of WWI, and was slowly sliding into the worst economic depression in world history. Today, as the Great Recession continues to devastate millions of people’s lives in the United States, Americans will decide in a matter of days whether they want Mr. Obama to continue on as President for another four-year term, or elect Governor Romney to replace him in the White House. As an economist who is committed to social justice, I would like to offer a brief assessment of President Obama’s economic policies during his first term, and speculate on the likely direction that the U.S. will take under a second term Obama administration versus a possible Romney White House.
President Obama came into power with massive popular support at home and abroad, with a lot of hope for real change in the way Washington operates, and especially with hope for the millions of Americans who began losing their homes and their jobs in 2007 and 2008. Instead of capitalizing on his election momentum to clean up the financial system and put forward a comprehensive and bold jobs program, President Obama surrounded himself by Wall Street economists such as Larry Summers, one of the leading figures behind the 1999 Banking Modernization Act, which unleashed Wall Street into the subprime lending frenzy that brought down the system in 2008. Obama’s bailouts mostly went to Wall Street, and relied on tax cuts rather than direct job creation.
Next, Obama wasted his political capital on a failed healthcare reform that amounted to the biggest subsidy to the health insurance industry in the history of the world. Obama’s political capital was big enough to buy him the best single-payer healthcare system in the world, but alas he settled for a minor reform, and gave a lot of ammunition to those who would like to scale back all social and medical support to the most vulnerable groups in society.
Furthermore, Obama stood on the sideline as workers in Wisconsin and Ohio (and more recently, Chicago’s teachers) were building a strong momentum for a social movement to fight back against the Tea Party and the ALEC-sponsored anti-labor laws across the country. Instead of jumping on such opportunities to support workers, President Obama again preferred to please his Wall Street supporters, hoping for their backing in the 2012 election.
Finally, Obama’s economic consequences and the weakness of his economic policy record have given plenty of ammunition to the Tea Party and Governor Romney to attack him and to argue that government-led economic recovery is a failed strategy. Romney can now sell his free market mantra to the average American hoping for a better future; a future that Obama’s administration refused to deliver, by choice.
A second term Obama may be far more flexible in spending his political capital on the progressive agenda. The problem, however, is that the social movement to get him reelected may not be there for him on November 6, and even if he is reelected, that movement may not be enthusiastic and energetic enough to back him up after he failed to deliver on his 2008 promises.
A Romney White House will be Obama’s worst economic consequence. Neoliberals love taking office during an economic crisis because it gives them the best excuse to cut government spending. They will begin by cutting the most valuable programs to the least fortunate members of society, especially the homeless, the mentally ill, the poor, ethnic communities, and all those with no power to politically retaliate. This is why it is so crucial to organize not just before elections, but most importantly after the elections, regardless of who wins next week. The anti-deficit hysteria will be used to erode what is left of the American welfare system under the careless watch of both Democrats and Republicans.
Dr. Fadhel Kaboub is an Assistant Professor of Economics at Denison University, a Research Associate at the John F. Kennedy School of Government at Harvard University (MA), the Levy Economics Institute (NY), the Center for Full Employment and Price Stability (MO), and the International Economic Policy Institute (Canada). Dr. Kaboub’s research focuses on job creation programs, monetary theory and policy, and the political economy of the Middle East. His work is available online at www.kaboub.com