Another gift of this speech is the reassertion that government exists to redress our grievances rather than exacerbate them. His is a bold reincarnation of the wisdom of Franklin Delano Roosevelt that the Democratic Party had all but abandoned. Obama's insistence that government, rather than just the "free market," should set needed priorities is refreshing and important, particularly in light of his emphasizing the changes needed in education, health care and energy efficiency -- the three areas that a short-term view of economic growth systematically neglected since the New Deal.
So, he was great, and when I was just listening to the speech, I was quite enthralled, as were those around me. But on reading his remarks, I have questions.
Speaking of the financial crisis, he observed, quite correctly, "... it is only by understanding how we arrived at this moment that we'll be able to lift ourselves out of this predicament." Then he went on to observe, "Regulations were gutted for the sake of a quick profit at the expense of a healthy market." Leave aside that his top economic advisers, particularly Lawrence Summers, were responsible for that gutting.
Maybe they have reformed and will now do the right thing.
But the right thing begins with a recognition that it was deregulation, specifically the ending of all statutory regulation of the "hybrid instruments," that allowed for the exotic financial products that have turned so toxic. Just read the language of the Commodity Futures Modernization Act, which Summers as treasury secretary pushed and which he got then-lame-duck President Bill Clinton to sign.
When Obama stated, "I ask Congress to move quickly on legislation that will finally reform our outdated regulatory system," he missed the point. The system is not outdated -- it is a get-out-of-jail-free card for Wall Street bandits. Unless we return to the New Deal-created rules that separated the activities of banks, stockbrokers and insurance companies and put them under tight regulation, we are doomed to a repeat of this meltdown.
The other problem with the speech is that while Obama made some fleeting references to getting rid of Cold War-era weapons and did promise an end to the Iraq disaster, he once again left open the door to the United States being trapped in an even more treacherous quagmire in Afghanistan.
At some point, if he is to make good on his promise to cut the deficit by half within four years, he will have to confront the military-industrial complex, which now obtains much larger annual budget allocations than when President Dwight Eisenhower issued his famous warning.
Currently, military spending makes up 60 percent of the federal government's discretionary budget. Let me offer one example of why the president must begin to turn swords into plowshares if we are to have a sound economy. That example concerns his bold call for spending $15 billion a year on the entire program to develop alternative sources of energy. Sounds like a lot of money, but it isn't when one considers that an almost equal amount, $14 billion, for Virginia-class submarines -- worthless in fighting landlocked terrorists -- was pushed through the Congress in the month before Obama took office.
The critical test for Obama will be to break that incestuous circle of influence, particularly the clout of the bankers and the war profiteers and the other top lobbies that pay off both parties, and put the public interest first.
© Creators Syndicate
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Albion Monitor February
27, 2009 (http://www.albionmonitor.com)
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