The 2010 Midterm Elections, a Referendum on Obama?

Two years after the historic elections that brought Barack Obama to the White House and conferred control of Congress to the Democratic Party, the American electorate is called upon to decide on the future make-up of our legislative body.  It is a contentious race marked in particular by the rise to the political forefront of a new phenomenon, the Tea Party.  Catching onto the fervor and anger that animate this movement, The Republicans vowed to make this race a referendum on the Obama Presidency.  This is an age-old tactic used against incumbents to force them to run on an indefensible and unpopular record.  As recently as two years ago, the Democrats used it with much success against George W. Bush and his Congressional allies.  This time around, the Grand Old Party (GOP) is trying to administer the same medicine to Obama and his Party and hopes to triumph at the polls this November.  What is it about the President’s record that makes the Republicans believe they can succeed?  And why are the Democrats running away from his record? What is it about Obama’s politics that electrifies the Republicans against him and cools his relations with the Democratic Left?

 The Crisis

The four months that preceded President Obama’s inauguration were rocked by a financial crisis, the impact of which was so sudden and profound that it sent all sectors of the economy into a frenetic downward spiral.  America’s economic and financial hegemony was called into question.  Some twenty years after the fall of Communism, the dissolution of the capitalistic system appeared ineluctable.  The fate of Capitalism and the world’s largest economy rested on the shoulders of a young president, a former junior Senator from Illinois who only served a half-term in Congress.  No presidency has had, upon its inaugural, to face such monumental challenges.  But as his successful campaign for the White House suggests, Obama had no shortage of ingenuity, decisiveness and calculated risk-taking in his arsenal.  Right off the bat, his Administration sent signals that a do-nothing Congress was not an option.  He engaged the 111th Congress early on by relentlessly pushing through his high-stake legislative agenda.  Quite a contrast with Congresses of the past two decades, when major legislations were scarce–welfare reform, immigration reform, and tax cuts being a few of note. These past Congresses were famous for passing trivial pieces of legislation such as a “National Corvette Day” bill on June 26, 2008 introduced by Rep. John Shimkus (R-Ill).

 It all started in September 2008.  All too often, people seem to forget the chain of events that preceded the fatidic date of January 20, 2009.  To put things in perspective, let’s briefly recap the salient features of that period.  Specifically, the banking and financial system was in tatters; stock markets from all over the world plunged; Lehman Brothers went under, leaving Washington scurrying to the rescue of other mega financial institutions.  The mortgage-backed securities that reigned supreme until a few months prior plummeted and dragged the fortunes of our financial institutions to the ground.   The Federal Reserve Bank and the US Treasury intervened to save eight major ones from imminent bankruptcy.  Major disruptions occurred in the industrial sector of the economy, asphyxiated by the sudden credit drought.  Cash-starved companies scrambled to finance their working capital needs, even to make payroll.  Massive layoffs took place overnight.  The auto industry, a staple of American know-how and industriousness, was in a shambles. GM and Chrysler were bankrupt and needed strong cash infusion to survive and salvage the economy of cities and towns that depended on the auto industry.  Washington finally acknowledged the recession that started almost a year earlier.

 President Obama’s First Twenty Months

 How quickly do we forget!  From Candidate Obama to President Obama, in the span of three months, the economic situation deteriorated so that, in January 2009, the nation lost some 600,000 jobs.   Massive layoffs of teachers, police officers, and firefighters were forecast by state and local governments; GDP for the quarter that ended on 12/31/08 fell to a dismal -6.3%, the lowest since the first quarter of 1982. That was the tableau staring at Obama:  a situation that called for not a band aid but for a scalpel to surgically remove the tumor that drove the American economy to the brink of catastrophe. Decisive action was necessary to ward off the looming depression, stem the flow of layoffs, and prop up demand.  A month into his presidency, Obama signed into law the American Recovery and Reinvestment Act (ARRA) or “Stimulus” to infuse $787 billion into the economy and stabilize it.  In addition, Obama moved swiftly with a rescue package for GM and Chrysler and the installation of a new management team for GM.  With the economic effect of the multiplier, the demise of GM and Chrysler would have trickled down to other sectors of the automobile secondary markets, dealerships.  While the Republicans criticize the Stimulus and blame the 10% unemployment rate on Obama’s policies, most economists agree that the Stimulus has had a positive impact on the economy and argue that unemployment could have doubled, had teachers, police officers, firefighters, and construction workers been laid off.  This is what was at stake.  No responsible government should stay idle in the face of such catastrophic events and leave it to the invisible hand of the markets to cure the ills that they are responsible for in the first place. Even George W. Bush got this right, despite the unbridled brand of economics he was practicing.  To his credit, he initiated the bailout.

Obama’s measures restored America to its status of preeminent economic power.  In fact, while many economists predicted that the recession would last until 2011, by all economic measures it ended in June 2009. Real gross domestic product (GDP), the ultimate measure of a country’s economic activity, has been growing quarter after quarter since, rebounding remarkably from the -6.3% Obama inherited.  According to the Bureau of Economic Analysis, real GDP grew 3.7% in the first quarter of this year and 1.7% in the second quarter America remained indisputably and by far the largest economy and the envy of the world, though some would like to make believe otherwise.  The auto industry was saved from extinction.  GM repaid its entire $8 million loan portfolio plus interest and is profitable.  The banking industry has fully recovered; the banks have paid back $170 billion of the $245 billion loaned by the Fed, including dividends and interest.   By the end of next year, they are on pace to repay the loan in its entirety, and buy back their securities from the US Treasury.  Such exploits, achieved against all odds and even against experts’ predictions, should be heralded and trumpeted all over America.  The U.S. was the first country to come out of the recession and, once again, led the world on the path of economic recovery.  However, except for China and Germany, the world’s economy had not significantly recovered from lingering recessionary pressures.  Greece’s default, along with the woes of Spain, Portugal, and Italy served as a painful reminder of the frailty and instability of world economic realities, and in a way slowed the pace of our recovery.

Healthcare reform is another milestone in American politics.  For decades, the reform of the health delivery system in the United States had vexed many Administrations—the latest being Bill Clinton’s.  The rise in insurance premiums, the growing number of uninsureds, the use of pre-existing condition as criterion for denying coverage, the increasing healthcare share of the GDP and impact on the Federal deficit called for the overhaul of our healthcare system.  To that end, the Patient Protection and Affordable Care Act of 2010, later amended as Healthcare and Education Reconciliation act of 2010 is note-worthy, as it makes insurance more effective and affordable, extends coverage and eliminates insurance companies’ discriminatory practices based on pre-existing condition, guards against their abuses that have led to high personal bankruptcy rates.  Not well known about this legislation is its education rider.  In effect, this act has an education component which provides for cheaper student loan packages, by cutting commercial banks out of the lending business and empowering the Department of Education to undertake those loans.  It also increases Pell grants for less fortunate students.

The economic crisis exposed the flaws inherent in our system of governance, the inadequacies of our financial rules and regulations. That is why financial reform had to go in lockstep with other measures.  The promulgation of the Restoring American Financial Stability Act of 2010 is an important step ensuring the reform of the financial sector and safeguarding against the corporate greed and risky practices that brought the economy to its knees.  In the previous decade in particular, the financial sector evaded all regulations.  Though the SEC was chartered to regulate the industry, it had no teeth to enforce existing regulations, to rein in the speculative tendencies of Wall Street analysts, to stem the flow of new instruments supposedly designed to hedge against risks (“derivatives”).  The excessive use of financial leverage, which glorified debt as a success formula for growth and earnings-per-share, made it possible for companies to rely solely on borrowing as a financing mechanism.   Commercial banks strayed away from margin requirements and ventured into areas of risky loans.  Credit cards companies used creative finance fee schemes to gouge their customers. The institution of a Bureau of Consumer Protection within the Federal Reserve is a welcome move to call out such practices and remedy the torts caused to individuals and families.

Another legislative success of Obama’s is the Small Business Jobs Act of 2010.  Acknowledging the importance of small businesses in the structure of our economy, the Act aims at making financial resources available to them in a universe marked by credit drought, and propping them up as growth engine of the economy.

 President Obama’s Other Successes

By all standards, Obama has had a successful presidency so far.  Aside from his astounding legislative successes, he took decisive actions to assert his position as the Chief of the Executive branch and the Commander-in-Chief.  He ended combat operations in Iraq, technically ending the war—as he promised during his campaign for the presidency.  He restored the image of American diplomacy abroad by forging a new partnership with our allies, based on mutual respect and equity.  One of his first acts as President was the announcement of the dismantlement of the Guantanamo Prison, a symbol of a United States estranged from its famed principles of due process.  From Cairo, he tendered the olive palm to the Muslim world and engaged it in the struggle against AL Qaeda, hoping to throw a wedge between the majority of the Muslims and the few radical elements of Islam.  From his first trip abroad to Canada, he showed the new engaging side of the American diplomacy.  While his presidency was in its infancy, he showed the world how prepared he was to engage the international press corps and his command of facts.  Later on, his trips to Europe and Asia unveiled a side of the American presidency these countries had not seen for a decade…   He brought America back to the world as a reliable, respectful, confident partner.  Notable successes marked his foreign policy; the historic treaty he signed last April with President Medvedev of Russia on the reduction and non-proliferation of nuclear weapons—something that eluded many an American Administration before him—is noteworthy.  He redefined our strategic relationship with Pakistan, making that country a more reliable partner in the fight against Al-Qaeda and the Taliban.  He scored more successes against these two organizations—Al-Qaeda, in particular, whose leadership has come under increasing attacks from our military.  More Al-Qaeda leaders have been struck By Obama than Bush.  Pakistan has never been more cooperative, thanks to his pressure and new standards for accountability.  The Middle East is relatively calm.  There have been no eruptions or punitive incursions into Gaza, Ramallah, or southern Lebanon–the likes of which we witnessed during last decade and brought along utter destruction to these populations.  There is still a standstill in Iran, but through diplomatic pressure, he is rallying more international support to his position toward sanction.  North Korea is still at the negotiation table.  In Soudan, Congo, and Nigeria, the situation has not escalated.  We are not living the heightened state of nervousness that was so predominant in the past decade, when conflict hotbeds sprang from the world over and made the international scene into a keg of powder ready to explode at any moment…  If anything, Obama’s approach to foreign policy has calmed spirits down.  This approach is more strategic than tactical, attacking the terrorist network from all angles, cutting supply routes, obliterating their safe havens, etc.  Other domestic successes have been relegated to oblivion.  How can we forget the fanfare that surrounded H1N1, the porcine flu crisis of 2009?  H1N1 was christened by the World Health Organization (WHO), an agency of the United Nations, as a pandemic and took the lives of some 17,000 people worldwide.  The airwaves were invaded by media organs poised to make it Obama’s crisis and to draw a parallel with Bush’s Katrina.  This was a test for Obama’s preparedness. So swift and deliberate was his response that the crisis never reached the pandemic proportions that were predicted:  vaccines were developed, stocks of them made available, vaccinations scheduled.  The whole thing died down and dissipated from everyone’s memory, so that in August 2010 WHO declared the crisis over.  How quickly do we forget!  Obama’s command of the issues was on display when he faced the House Republicans’ questions on healthcare at their retreat.  When they invited him on short notice at the heart of the healthcare debate to the lion’s den, there was no telling that the Republicans’ intent was clearly to embarrass him.  However, analysts were unanimous in their assessment that Obama schooled John Boehner and consorts in their own backyard.  That episode showed how knowledgeable, confident, secure and brave he could be, and that he had what we expect of a President.  Never mind that Carl Rove thought he was arrogant!

 The Conservative Opposition Axis

Despite these stunning successes, President Obama’s Party stands to lose its majority in Capitol Hill; the Republicans are winning the message battle. Recent polls suggest that the American electorate favors them over the Democrats 55% to 45%.   That the GOP managed such a reversal two years after suffering a crushing defeat at the polls is a testimony to its craft.  And that the voters suddenly became oblivious of the fact that the Republicans’ unruly policies brought the country to the edge of the abyss is incomprehensible.   Most disheartening is the timidity shown by the Democrats to the point of letting the GOP steal their thunder.  By the time of President Obama’s inauguration, the Democratic camp was beaming with optimism and exultation:  technically, they enjoyed a filibuster-proof majority of sixty votes in the Senate—58 Democrats plus 2 independents who caucus with them—an advantage that would guarantee legislative passage of the White House agenda.  Alas, the Democrat’s elation proved to be short-lived.  The Republicans, who emerged from the 2008 debacle as a decapitated Party, saw that void quickly filled by right-wing radio personality Rush Limbaugh.  The conservative commentator found himself at the helm of the Republican machine, vociferating insults and his hope that Obama failed.  His voice was so powerful that no one in the Republican camp showed the backbone to stand to his outrageous remarks and far-fetched theories.  The few who dared call him out on his deleterious rhetoric had to crawl to his feet the next day to make amends and beg for mercy—including the Chairman of the Republican Party, Michael Steele.  Limbaugh’s voice found an echo in the ranks of the Tea Party movement, mobilized against the rescue of the financial sector, the auto industry, and the economic Stimulus package.  The Republicans also benefited from the unequivocal support of the Fox Network to the cause of opposing the Obama Administration.  Rupert Murdoch’s network offered the Republicans a rallying platform from which they could reach out to their millions of viewers.  That was the first time in the media annals of the U.S. a major media outlet has so openly sided with a political party and against a Washington Administration.  To this, the Democrats had no response; they were caught off-guard.  If they thought that their electoral success would have stymied Fox’s influence in the national political discourse, they had then badly miscalculated.  Never before had a media organ so overtly thrown its weight in the balance of the electoral process, and the shaping of policy.  Once again, the Democrats have proven unable to hold a majority in Congress.

The powerful Limbaugh-Tea Party-Fox axis caught the Democrats flat-footed, and empowered the Republican Party to the point that it is in serious contention to reclaim the majority in at least one chamber on Capitol Hill.  This axis acts as the head of the Party.  With such backing, the Republicans could afford to be the Party of NO–No to the Stimulus, No to healthcare reform, No to the dismantlement of the Guantanamo prison, No to financial reform, No to small business credit, No to student loan reform, No to immigration reform, No to energy reform, No to gays in the military, No to extending unemployment benefits, No to closing the tax loopholes benefiting companies exporting jobs overseas.  They have blocked key cabinet level nominations, deferred indefinitely the confirmation of high-level judicial appointees.  They have used the “filibuster” weapon routinely to kill legislations.  In the past, such obstructionist posture was never considered a virtue in American politics; it would have valued the perpetrators the wrath of the voters.   Not this time, however, because their obstructionism is powered by the high voltage of an influential media outlet that makes no apology for openly opposing the White House. 

 Discontent in Democratic Ranks

President Obama’s constituencies, for their part, put up no credible fight against the mounting assaults of the right wing media and their acolytes. They make no secret of their lack of enthusiasm during this election season, in sharp contrast with the mass support they gave Candidate Obama two years earlier and that ensured his Presidency. They are as perturbed by the President’s stubbornly centrist position as frustrated by his courtship of the Republicans despite their overt strategy to torpedo his initiatives.   How did they get to that point?  In the eyes of the Democratic Left, Obama committed some “sins” deemed inexpiable.  That side of the Party is viscerally “anti-Cheney” and longs for the day when the former Vice-President is tried for crime against humanity for being the cheerleader-in-chief of the unwarranted Iraq war. These democrats were dismayed over the President’s meddling in the province of the Attorney-General and preempting Eric Holder’s possible strike against Dick Cheney.   Obama hinted at the very beginning of his Presidency that his Administration should not pursue the indictment of officials of the Bush Administration for falsifying the intelligence in the run-up to the Iraq war.  By extending this olive branch to the Republicans, he was hoping that they would see it as a goodwill gesture on his part and win their vote on key legislations.  Liberal Democrats would have none of it:  indicting Cheney was paramount, as he was the architect of the Iraq folly that cost so much in blood, treasure, and world peace.  They equated Obama’s action to naïveté, pandering to the Republicans, and compromising on the very principles upon which he built his campaign—Change, Openness, Transparence.  For them, this fool-hardy and reckless act that took the lives of so many human beings (Americans and Iraqis) was worthy of prosecution to ensure that never again the Executive abuses its power, usurps the prerogatives of the other branches of government, and bilks the American people to fulfill its fantasies–Dick Cheney was to be put on trial, pure and simple.  That Obama tried to thwart this natural outcome was tantamount to treason.  Treason toward the ideals that animated his campaign.  Treason toward the principles he vowed to uphold as President.  Constitutional Law purists were disturbed by his political posturing on the matter, the more of it that he was a Constitutional Law professor.  By short-circuiting the action of his Attorney-General, he himself over-stepped his constitutional boundaries; he interfered with the activity of the Attorney-General’s office who, supposedly, is independent from the White House.  It was also at a time when a Court in Spain took an unprecedented step in indicting Cheney in absentia for crime against humanity.  Currently, the Spaniards have an arrest warrant against Cheney, if he ever steps foot on their territory.  The left was hoping that the Obama Administration would follow suit.  This pass to the Right has in effect emboldened Cheney himself who was defiant, and taunted the White House at every opportunity he had, leveling criticism against the President and undermining his Administration’s efforts.

The relations between Obama and his natural allies were further soured by the healthcare debate, when he walked away from the Public Option.   The Left was of the opinion that the plenipotentiary healthcare industry, led by insurance companies and pharmaceuticals needed another force to counter their power.  That force was a “Public Option”—a non-profit public insurance company that would be able to compete with the insurance industry and offer a viable alternative to ever-rising premiums, selective coverage and discriminatory practices.  Only a public option, the Liberal aisle of the Party argued, could hold the healthcare industry in check, break its monopolistic power, force it to lower costs and abandon its nefarious practices.  without that, the Liberals go on, it is wishful thinking that the almighty insurance industry will relinquish their profit and voluntarily cut costs.  Obama buckled down under pressure from the united front presented by the Republicans.  To salvage the bill, he renounced the public option to the chagrin of Liberal Democrats.  Aside from the Republicans, Obama had to contend with some restive elements of his own Party:  the “Blue Dogs”, conservative Democrats from Republican and Independent districts who tend to vote alongside the Republicans and boast their independence from party line.  In the Senate, these Blue Dogs held significant sway because they were key to the magic 60 votes necessary for safe passage of any legislation.  Sixty Democratic votes, the so-called filibuster-proof majority, could defeat any Republican attempt to derail the legislative process even when every single one of their members would vote against a bill introduced by the Democrats.  So, the Blue Dogs had considerable political capital, which they used to hold the Party hostage.  Time and again, they aligned with the Republican Minority against the passage of key Democratic legislations.  Obama and Harry Reid, the Senate Majority Leader, courted the “Blue Dogs” especially when it became clear that they would not win the support of a single Republican to pass the healthcare overhaul bill. At that juncture, the Left cried out for Reconciliation—a legislative process that requires a simple majority of 51 votes in the Senate as opposed to the 60, subject to a ratifying vote by the House of Representatives.  Again Obama discarded the voice of the Left and insisted on passing the bill with 60 votes.  One of the Blue Dogs, Senator Ben Nelson of Nebraska, who was instrumental to the passage of the legislation, held out until he obtained special Medicaid concessions for his constituents.  This was denounced by people from all political persuasions as a “backroom” deal, as a symbol of what Washington stood for.  Such a controversial move tarnished Obama’s image of change promoter.  Ironically, the courtship of the Blue dogs proved to be unnecessary:  the fragile majority of 60 was broken by the surprise election of the Republican Scott Brown in Massachusetts to occupy Ted Kennedy’s seat in the Senate.  This humiliating defeat of the Democrats almost threw healthcare reform out the window.  To save the bill, the Democrats were forced to resort to Reconciliation, after having so vehemently opposed it.  The bill passed and signed into law by the President in March 2010.  However, it was a watered-down, emasculated bill that was more an insurance reform than true healthcare reform.  This left a sour taste in the mouth of the Democrats to the left, such as Howard Dean. 

The Left’s disillusion with Obama was exacerbated by his decision to allow oil drilling in some coastal areas of the countries.  In their estimation, he caved in one more time to the criticism of the “Drill, Baby, Drill” choir headed by the Sara Palins, Dick Cheneys of the world.  This was a clear breach of the understanding he had with his supporters not to go that route.  The mantra of his energy policy was to reduce our dependency on fossil fuels, move away from drilling, and develop new sources of energy.  Liberal Democrats find it difficult to grant him attenuating circumstances as regards “Don’t ask don’t tell”, still in effect in the Military.  If anything, they are confused by the mixed signals he has sent lately regarding the fate of the policy of admitting gays to the Military.

 The Republican Alternative

 Obama’s public stand against the desiderata of the Left did not sit well with the latter, who threatens to sit out the election.  If such threats were to materialize, what would it mean for the Obama agenda? What is the alternative proposed by the Republicans?  What do they stand for?

One clear thing is the penury of Republican ideas.  Their panacea to the woes afflicting our economy is none other than… Tax Cuts.   Against the number one economic issue marking the slow recovery of the American economy—an unemployment rate of almost 10%–they are again proposing the Almighty Tax Cuts to the top 2% of the population.  In their thinking, such tax benefits should trickle down to the common mortals in the form of jobs and personal income growth.  Recent history of the decade just past proves this to be a fallacy.  Two rounds of tax cuts enacted by George W. Bush did virtually nothing in net job creation and were marked by a decline in net personal income.  Yet again, the GOP is asking for a chance to do it over. The tax cut formula has not worked before and will not work this time either.  These tax benefits incentivize the recipients of big piles of cash to invest in blue chip stocks on Wall Street.  Large and mature corporations such as blue chips do not create jobs; on the contrary, they shed jobs.  Blue chips typically operate in saturated and highly competitive markets, where growth in their core operations is limited due to the shrinking of market share. Their formula for growth relies on mergers and acquisitions.  Once their cash flows or their balance sheets improve, they seek out takeover targets. And as soon the takeover is finalized, they look for synergies. Simply put, in the synergistic model 1 plus 1 equals 3–which may sound aberrant; in fact, it means that, if carefully calibrated, a takeover can be so transformative that 2 people should be able to do a job originally done by 3.  Usually, when put to the test, workers react along the lines of such expectation.  This can be explained by a variety of factors: psychological pressure (fear of being next), personal drive, learning curve effect (productivity gain resulting from experience), and technological advances.  When this mix works, companies achieve the same or higher level of output even with less headcount.  So, the synergistic effect of mergers, acquisitions, buyouts, takeovers is loss of jobs.  Statistics bears this theory out.  Nothing excites Wall Street more than the prospect of headcount reduction or layoffs.  Note that every time a publicly traded company announces layoffs, its stock price follows with an upswing move.  They may use such terms as restructuring, reengineering, rightsizing.  In Wall Street parlance, it all equates to layoffs, early retirement—which will cause stock prices to go up.  As an October 3, 2010 article of the Wall Street Journal “Propelling the Profit Comeback: Retooling, Downsizing” indicated, all those profits have been achieved thanks to layoffs and downsizing.  

The Republicans are rehashing the policies that basically killed jobs in the past decade.  From July 1999 to July 2009, virtually on George W. Bush’s watch, the annual job growth rate declined from 2% to .01%.  Net job creation amounted to a paltry 121,000 out of a labor force of 109 million, according to Bureau of Labor Statistics.  Still according to the BLS, from 2000 to 2008 (the Bush years), 369,000 new private jobs were created.  Compare this to the 1.7 million created from 1992 to 2000 during the Clinton era.  In terms of jobs lost during the Bush years, the manufacturing industry topped all sectors with a whopping 3 million (Source: Reuters, State of the Union 2008:  By the Numbers).  This article shows some revealing statistics that make one wonder, “What are the American people thinking?”  This was happening while mergers and acquisitions were at their heyday, and Bush “demanded a refund on behalf of the taxpayers” and filled the pockets and coffers of rich Americans and Blue Chips.  All this happened at the height of an Administration reputed for its pro-business stance, its penchant for an unregulated economic environment, for its laissez-faire attitude that brought the country to the edge of the precipice.  If jobs were created during the Bush years, they were overseas.  Bush’s economic policies  eased the way for these companies to ship jobs overseas—manufacturing to China, services to India– and allow them to move from the high costs of doing business here (mainly due to the increasing costs of healthcare) to low-wage, environmentally-deficient, non-unionized overseas labor markets.  What it all means for the Republicans—and that is why they are fighting tooth and nail  to make these tax cuts permanent and promote even more of them–is the prospect of increased profits, higher dividends for their rich constituencies.

Playing up the populist card, the Republicans accuse the Democrats of promoting class warfare and resort to such buzzwords as “Socialism” or “Socialist medicine” to rally gullible folks to their inflammatory rhetoric. The fact of the matter is, under Obama, corporate profits have risen to historic proportions.  Quarter after quarter, corporate profits have risen.  According to the Bureau of Economic Analysis, a unit from the Commerce Department, corporations posted an increase in profits of $196 billion in the first six months of this year.  In absolute terms, corporate profits are on pace to reach $1.2 trillion by year’s end.    Corporate cash flows increased by $61 billion in the second quarter and $33 billion in the first.  It is estimated that companies are hoarding some $1.6 trillion in cash (New York Times, October 5, 2010).  The argument in the opposing camp is that the anti-business climate instituted by the Obama Administration makes it difficult for companies to invest at this time.  How disingenuous!   Larry Summers, Chairman of Obama’s Council of Economic Advisers, protested the anti-business label the Right and Wall Street attempt to affix to the President’s image, and affirmed that since 2008, corporate profits have grown 65% (Business Week, June 24, 2010.) But do not expect these companies to engage in any investment spree or hiring anytime soon.  They are hiding behind all sorts of pretexts.  First, it was the healthcare legislation which was stuck in Congress.  Healthcare has passed; yet no action on their part.  Secondly, they could not do anything until the financial reform bill was enacted.  Financial Reform was passed in the summer; still no action on their part. At this juncture, these companies are sitting on the sidelines, with their list of take-over targets, waiting for the situation to clear.  They are not venturing into the economic fray, convinced as they are that the Obama Administration’s current focus on regulation deters their corporate ambitions and that they will receive their tax cut from the Republicans. They see no value in aiding Obama’s economic initiatives.  In fact, they are not exactly sitting idle, relying on heavenly manna; they are actively working toward the downfall of the Democratic Congress.  The Supreme Court gave them the tools to do so when earlier this year it rendered its infamous decision on Citizens United v. Federal Election Commission allowing unrestricted flow of corporate funds into the electoral process, thus affirming the “First Amendment rights” of corporations and rich individuals. These two groups are throwing the weight of their treasury into the race and supporting en masse Republican fundraising efforts.  Rupert Murdoch, Fox News Chairman, for his part injected an unprecedented $1 million into the coffers of the Republican apparatchik.

 Turning the Clock Back vs. Moving Forward

One thing remains certain:  unemployment will remain high for at least for another year, regardless of which Party gets control of Congress in January 2011.  The real choice is between yesteryear rehashes and tomorrow’s solutions.  The economic landscape is quickly changing and calls for new growth paradigms.  The problems confronting us are structural.  Short-term gimmicks will not address the long-term challenges of a global economy.   To use an analogy, the scars are so deep that many reconstructive surgeries will be necessary to bring the face back to normal.  To tackle tomorrow’s challenges and ready ourselves for the new economy, now is the time to work on the necessary structures.  The jobs of the future will not necessarily be in the traditional sectors.    Through proper structures put in place, the U.S. can position itself for competitive advantage in the search for, and commercialization of, new energy technologies.  Already, China and Germany, two countries that came out of the recession in a relatively strong position, are heavily investing in new energy areas.   A “Drill, Baby, Drill” 112th Congress with a Republican majority is out of step with this reality.  A Republican Congress, whose economic plan revolves only around tax cuts, is bound to miss out on tomorrow’s economic opportunities.  A Republican Congress with strong ties with the Tea Party movement will likely view government spending as a heresy.   In this context, however, government has a role to play in chartering a new course for the nation’s future, in channeling resources towards areas of real growth and economic prosperity, yet mindful of environmental impact.  Let us forget not that the history of the internet goes back to government involvement—smart government.  The Republicans want to turn the clock back.  We need to move forward with healthcare reform and not repeal it.  Our infrastructures need to be upgraded; the painful specter of collapsing bridges, the likes of which we witnessed in Minnesota some three years ago, will continue to haunt our memories and possibly recur.  Tax cuts, in and of themselves, do not fix bridges, or build roads.  In this climate, it is incumbent upon government to make the structural changes susceptible to prepare the United States for the challenges of the new world.  This preparation involves significant investments in research–medical, environmental, energy, spatial, technological.  The other tenet of the preparation lies in educational reform. Never mind that the Republicans, in their retrograde thinking, want to wrest education out of Washington’s purview to put it within the States’.  That would work:  fifty separate and for sure unequal standards–Can’t beat that!

 Shed No Tears!

No Administration counted so many high-stake legislative achievements in its first twenty months in the White House with so little preparation time:  the Stimulus package, health insurance overhaul, tax cuts for incomes under $250 thousand, rescue package of the auto industry, financial reform, small business jobs bill, among others.  Yet, Obama faces challenges from all sides of the political spectrum.  Various interest groups from his own Party take issue with him.  They feel that their agenda was preempted by his focus on the economy and healthcare.  Gays and Latinos do not hide their displeasure that “Don’t Ask Don’t Tell” and Immigration had been slighted.  The Liberals take exception to the unwarranted concessions he made to the Republicans on healthcare and financial reforms.  The fact of the matter is that taking on immigration and gay issues at a time the country was reeling from its economic woes would not be a good way to expend political capital.  The most strident criticisms of the President come, of course, from the Opposition axis—Republicans, Tea Party, Fox News.  This Axis showed how prolific and effective it can be when it comes to personal attacks on the President’s legitimacy, to giving large audience to the idiotic Birthers movement, or to opposing his agenda.  By contrast, in terms of its political and economic arena, the right wing Axis displays a striking penury of ideas.  (Remember the flimsy Republican healthcare plan in response to the Democrats’:  a few pages.)  There are, for all practical purposes, two themes that are dear to the Republicans.  They emerge from their positions: the ubiquitous tax cuts and reduction of the size of government.  Their contention that tax cuts can resolve the unemployment problem is fallacious.  Statistics on the Bush years contradict such assertion.  Federal deficits are an important issue to contend with.   At the heart of their hypocrisy is their fight to prolong George Bush’s tax cuts to the wealthiest, which will add to the deficits.  Most disappointing is the attitude of the incumbent Democrats who chose not to run on the President’s and their own achievements.  They are reluctant to stick to a cause, no matter how noble.  Reforming healthcare, reducing the ranks of uninsureds, offering the little guy well-deserved protection from the abuses of the all-powerful insurance industry—that is a cause worth fighting for.  Holding Wall Street accountable, protecting consumers from the exactions of credit card companies, implementing much needed regulations to insure against executives’ greed and reckless risk-taking—that is a just cause.  Extending unemployment benefits for those out of work against the will of the Republicans who at the same time want to extend the tax cuts for the rich—this is the courageous and right thing to do.  Giving college students a break by increasing Pell Grants, cutting the banks out of this business, and granting better payment terms – that is the fair thing to do.   Taking on powerful special interest groups opposed to a new environment policy, new energy initiatives that brighten our long-term economic prospects, while improving quality of life on the planet—that is the intelligent thing to do.  Legislating on shutting down tax loopholes that allow big business to ship jobs overseas and leave large swaths of unemployed in urban labor markets—that is the sensible thing to do.  Instead of campaigning on these achievements and noble attempts, the Democrats recoiled in the face of the uninhibited Republican attacks hell-bent on fixing a socialist epithet on such actions.  But, these are all noble causes worth fighting for.  Worth losing a Congressional seat for.  Should they fall, let it be with a bang! At least they will have the courage of their convictions.  How unfortunate is it that the Democrats, in their infinite cowardice, distanced themselves from the President and the causes that strike at the very core of Democratic ideals!  It is pitiful that, instead of engaging the Republicans on these terrains, they saw it safer to indulge in character assassination—like in Kentucky, where the Democratic candidate revived the silly Aqua Buddha story from his opponent’s college years in an attempt to win votes.  This is a page from Karl Rove’s political smear book, for God’s sake!  On that score, the Democrats deserve to lose.  And no one should shed a tear over their loss.  And, who knows!  President Obama might even do better without them at the helm.  After all, he knows how to succeed against the odds.   He shall triumph.  Again!

In my personal observation, human beings are of two kinds:  those who spare themselves and those who dare themselves.  That President Obama was willing to expend so much political capital on such controversial pieces of legislation so early in his term speaks to his dedication to the task of leading the destiny of the nation in difficult times, irrespective of the consequences for himself.  As such, he belongs in the category of those who dare themselves.  For that alone, he deserves high marks.  If we add the list of his successes, controversial as they may be, his Presidency has so far been impressive.  Any other President with his record of achievements in such a short tenure would have been elevated to the firmament of American politics.  That he, instead, draws the ire, the suspicion, or the unease (euphemism for… hatred) of so many, particularly from the Right makes you go…  Hmmm!  What is behind all that?

 

 

 

 

3 Commentsto The 2010 Midterm Elections, a Referendum on Obama?

  1. Joel Dure says:

    Eloquent, explosive account of the successful two years of president Obama coupled with the stench of the hypocrisy of the right…
    Mr. Cantave clearly captured the political landscape of our time. His personal question on what is behind all
    these attacks finds its answer in the nightmarish time in which the right-wing finds itself. The right-wing is still struggling with what they have taught impossible in USA politics, the oval office as the residency of a Black Brother. I congratulate Mr. Cantave on a brilliantly written piece. I look forward to reading his next article on the results of the coming elections.

  2. Guy Occident says:

    Mon cher Etzer,

    Congratulations for this masterpiece! It’s an excellent overview of the current political situation in the US. You captured well the essence of the first 2 years of the Obama administration with all of its achievements. Unfortunately, they are not seen as such by the majority of the voters who have spoken last Tuesday.

    What could or should have been a tremendous success is perceived rather as signs of arrogance of an elitist government living in a bubble in Washington, usurpation of power from a Manchurian Candidate or unwanted interference of government hands in the “well-heeled” capitalist machinery. Obviously this is wishful thinking… How quickly we have forgotten the dark days of September 2008 when the system was on the brink and the machinery failed for all practical purposes! Yet, the Republicans have been able to convince the majority of the voters that the economic problems facing the country today are the results of Obama’s policies. In that sense, they have been very effective in disseminating their message through their media network (Fox News and Talk Show Hosts).

    At the core of the Republican Economic Policies, there are 2 simple ideas that become the mantra of the Republican philosophy over the past 30 years: Tax cut in good times or bad times and minimal business regulations. The idea of repeated tax cuts has been hammered and engraved in the subconsciousness of the American people so much so that it becomes a sacrilege for any politician, democrat or republican, to deviate from this orthodoxy. However, on a parallel path, there is no serious attempt to reduce or limit the growing internal (Social Security, Medicare) or external obligations (Afghanistan, Iraq, worldwide outposts) of the federal government. This state of disequilibrium cannot be sustained in the long run.

    The next 2 years are going to be extremely difficult and challenging for the Obama Administration. He will have very few options open to him and limited margin to maneuver with a hostile Republican Congress and a more aggressive right-wing network that is fully aware that the King was fatally wounded.

  3. Etzer Cantave says:

    Mon cher Guy,

    Again, I’ve got to say, “Quelle plume!”
    Thank you for your thoughtful commentary. It is very encouraging. This week is going to be crucial, in that it will give us an insight into what the next 2 years will look like.