Photo: Official White House Photo by Pete Souza
The Washington Post’s White House economics reporter Zachary A. Goldfarb recently published two articles that show very different sides to President Barack Obama, but both sides share one remarkable thing in common: they present a President whose policies are actually driving America toward increasing inequality of wealth, regardless of whether that is this President’s intention.First, there is President Obama’s conservative side, which has continued President Bush’s bail-out of Wall Street, while also continuing his refusal to help the people who took out trick mortgages from those mega-banks before our housing market crashed in 2008.
On Thanksgiving Day, November 22nd, Goldfarb headlined, “Economists, Obama Administration at Odds Over Role of Mortgage Debt in Slow Recovery,” and he reported that “Former budget director Peter Orszag has said ‘a major policy error was made.’
And Christina Romer, formerly Obama’s top economist, … has said … that there needs to be a bigger focus on reducing debts – a process known as ‘principle reduction.’ … But although the new Obama administration had hundreds of billions of dollars in unspent financial bailout funds available to use, it decided against any significant program to reduce the debts of underwater homeowners,” despite their being underwater due to having been victimized by a housing bubble that the bailed-out banksters had actually created and profited enormously from.
Goldfarb continued: “The administration did not see” as worthy of even considering a plan that might have the potential of “cratering the financial system by forcing banks to absorb huge losses.” In other words: Obama’s actual top concern, amounting to an obsession, was to protect those mega-banks, and their executives, and the holders of their bonds, and these mega-banks’ counter-parties.
They – and not the public – were “the financial system,” in Obama’s view, and thus, must be prevented from any further “huge losses,” regardless of any economy-shattering frauds that those banksters might have perpetrated. The direct victims of those frauds must bear the losses from them.
In other words: despite Obama’s rhetoric against “trickle-down economics,” he shows himself here as a top-down type of guy, one who believes, above all, in the aristocracy, and doesn’t much care about these underwater homeowners, or any other victims of banksters (such as the purchasers of mega-banks’ trashy AAA mortgage backed securities).
To him, causing losses to the people who had tanked the economy would have been “cratering the financial system.” So, he chose, instead, to crater the bottom 99.9% of the economy, not this fraction of the top 0.1%. And this also explains why he refuses to prosecute any banksters – it would harm “the financial system,” in his view.
Goldfarb continued: “‘I think the missed opportunity to forgive principal at the end of 2008 and beginning of … 2009 was the biggest mistake the administration made in trying to deal with the crisis,’ said John Geanakoplos, a Yale economist who proposed a plan to reduce principal. … Other economists – from both parties – were making the same point around the time Obama came to office.
“[Alan] Blinder, a former Clinton administration official, and Martin Feldstein, a former Reagan administration official, developed plans calling on the government to commit hundreds of billions of dollars to restructure millions of mortgages with lower interest rates and principal balances.” All to no substantial effect, even today.
But this Obama, the conservative Obama, is only one of his political sides. The very next day, on the 23rd, Goldfarb headlined about the liberal side, “How Fighting Income Inequality Became Obama’s Driving Force,” and he wrote that, “Beneath his tactical manoeuvring lies a consistent and unifying principle: to use the powers of his office to shrink the growing gap between the wealthiest Americans and everyone else.
If presidents set missions for themselves that are greater than winning the partisan battle of the moment, then this is Obama’s.” Goldfarb wrote that, “Obama’s rhetoric reflects an acute awareness of recent research. The data show that rising inequality is largely the result of a changing economy that handsomely rewards people with better skills or credentials – a college education – and leaves people with a basic education at a disadvantage.”
“‘The idea was to promote opportunity and mobility and not equality of outcomes,’ Jared Bernstein, a former White House economic adviser, told me in a conversation about Obama’s approach. ‘Where inequality came into the mix is the recognition that we’ve gotten to the point that inequality is blocking opportunity.'”
The man who set up President Obama’s team of economic advisors was Harvard’s Lawrence Summers, and his view of things is thoroughly concordant with this President’s. On 15 June 2012, Bonnie Kouvassi at huffingtonpost, bannered “Larry Summers: We Need To Focus On Inequality of Opportunity,” and presented video of him teaching at Harvard, saying, “I think we can accept, I think we should accept inequality of results, recognising that those who earn more are in a better position to contribute more to support society.”
Summers attacked those who criticised America’s extreme inequality of wealth, and he praised at length “those who are in a better position to contribute more to support society.” He sounded exactly like the actions but not the rhetoric of Obama, whose chief economic advisor he had been. Obama, like Summers, simply admired the rich and educated, as being superior to people who were poor and uneducated.
This is the reason why Obama didn’t prosecute any of the banksters: they are very rich, and very educated; or, at least, extremely smart (which is the key here: if you’re smart, you’re good, and if you’re not smart, you’re just meat for the people who are). Obama is an elitist liberal; he is a conservative liberal, no progressive at all.
Summers’s view that, in a nation of such extreme wealth-inequality as America, inequality of opportunity can be reduced without also reducing inequality of wealth, is not just false, but absurdly false: In a country with such extreme wealth-inequality, inequality of opportunity is largely the result of inequality of wealth. Addressing the latter without also addressing the former is doomed to fail.
These are two parts of an integrated whole. Aristocrats will always have lots of opportunity to provide unfair advantages to their supporters and children, which unfairly disadvantages the far more numerous children of the poor. Not just tutors, but SAT prep courses, and all the rest. While poor children must find a job to make money, rich children are receiving lots of “enrichment,” which will get them into elite schools – and their parents can pay the tab there, too.
Summers is many things, but naive isn’t one of them. He would have to be stupid not to know that the children of the rich predominate in his classrooms, and at other elite universities, such as Princeton, Stanford, and Yale.
Summers’s statement – “I think we can accept, I think we should accept inequality of results, recognising that those who earn more are in a better position to contribute more to support society” – expresses the noblesse oblige viewpoint, which has long predominated amongst aristocrats, who have sent their sons to Ivy League institutions, when the sometimes more gifted children of the poor have been consigned to “careers” of digging their ditches or tending their shrubs – or working in their factories while the police whom those aristocrats paid were cracking skulls of union labour-organisers.
Even at state universities, there is this inequality of opportunity. On 22 April 2004, The New York Times headlined “As Wealthy Fill Top Colleges, Concerns Grow Over Fairness,” and reported that 55% of freshman students at the nation’s 250 most selective colleges and universities came from parents in the top 25% of the nation’s income.
Only 12% of students had parents in the bottom 25% of income. Even at an elite state college, the University of Michigan, “more members of this year’s freshman class … have parents making at least $200,000 a year [America’s top 2%] than have parents making less than the national median of about $53,000 [America’s bottom 50%].” Where the selectivity is even greater, the discrimination against the poor is even steeper than this.
A few weeks later, on May 31st, BusinessWeek reported (p. 68) that, “At the country’s top 146 colleges and universities, only 3% of the student body are from families in the country’s bottom quarter of wage-earners.” (That statistic came from Table 1.1 on p. 69 of the March 2003 Century Foundation paper, “Socioeconomic Status, Race/Ethnicity, and Selective College Admissions,” which is on the Internet. Those 146 elite institutions were the ones that were in the top 10% in selectivity. By contrast, a full 74% of the students at these 146 elite institutions came from homes in the top income-quarter.
This study also showed that unselective colleges have far higher percentages of low-income students, and have far lower percentages of wealthy students, so that they’re far more integrated socio-economically.) Generally speaking, students from poor families don’t get to meet students from rich families, until maybe later in life, when the former encounter the latter as a low-level employee encounters, and is briefly introduced to, the owner of the company for which he works.
A person’s social contacts are large determinants of the opportunities that will be presented to him, and college is a place where these social contacts are often made among the aristocracy. Colleges, especially the elite ones, have been the prime networking institution for the aristocracy. The United States today is anything but an equal-opportunity society. This nation is instead rather rigidly stratified, and becoming more so all the time (thanks largely to its elite academic institutions).
On 24 June 2004, The New York Times headlined “Top Colleges Take More Blacks, but Which Ones?” and answered its title question by saying that these colleges are overwhelmingly admitting rich black children from aristocratic families in Africa and the Caribbean; not poor U.S. Blacks. Harvard, according to the article, was magnanimously “planning” to spend the grand sum of “$300,000 to $375,000 a year to recruit more low-income students and provide more financial aid to these students.” This puny effort was mere PR hypocrisy, nothing that would significantly change things.
In fact, Harvard was actually trying to hide its discrimination against poor Blacks: when some black Harvard students sought to explore this question, “Harvard officials had discouraged them from collecting the data on who the black students were.” Harvard, like almost all elite universities, has always been a bastion of the aristocracy, against the poor – an institution to rigidify socio-economic stratification, not to reduce it. And Harvard, obviously, didn’t want this to become widely known.
A few months later, 13 September 2004, the Times published an op-ed on this subject, titled “The Legacy of Legacies,” from Jerome Karabel, the author of the then-forthcoming book, The Chosen: Admission and Exclusion at Harvard, Yale, and Princeton, 1900 to Today. Karabel’s essay told of an attempt by a Yale dean of admissions during the 1960’s to reduce “legacy admissions” – students who were admitted because their father, uncle, etc., had been students there.
That dean tried to have the college participate in the nation’s new, civil-rights-era, Scientific Age morality, which honours equality of economic opportunity, instead of continuing the old Religious/Aristocratic morality, which honours aristocracy. “The reaction of the alumni,” Karabel, a UC Berkeley sociologist, wrote, “was swift and furious. By the end of 1966, the alumni were in open revolt,” so that, “In 1967, William F. Buckley … declared that Yale had ceased to be the ‘kind of place where your family goes for generations.'” Buckley complained that, “the son of an alumnus, who goes to a private preparatory school, now has less chance of getting in than some boy from P.S. 109 somewhere,” which was a lie, because Yale was still granting aristocratic favoritism – but merely a reduced one – to the already favoured sons of this elite school’s alums. Yale’s aristocratic alumni threatened the University with cutting off their enormous contributions to its already vast endowment.
By 1970, this dean of admissions was replaced, legacy admissions were reaffirmed with a vengeance – so that sons of the rich were granted even more favoritism than they had previously enjoyed – and “Yale’s chief competitors, Harvard and Princeton, took due note, … and neither ever tried an admissions policy remotely as meritocratic” as what the aristocrats had defeated at Yale. “Recently, both Harvard and Princeton have admitted legacy applicants at a rate more than triple that of non-legacy applicants.” This was nothing less than an economic war by the aristocrats against everybody else. They won it, and they were determined to keep their victory.
However, starting in 2007, Harvard, Princeton, Dartmouth, Stanford, and some other elite institutions, opened wide the doors to students from low-income families who were so exceptional that they met those institutions’ normal admissions standards; low-income students were now admitted on full scholarships. Democrats in Congress were making rather threatening statements against what those institutions had been doing; change was virtually forced.
Summers was quoted in Ron Suskind’s 2011 Confidence Men as saying in 2009, “One of the challenges in our society is that the truth is kind of a disequalizer. … One of the reasons that inequality has probably gone up in our society is that people are being treated closer to the way they’re supposed to be treated.” In other words: Summers believed that the enormous and increasing inequality of wealth in America reflects more than in prior eras the enormous inequality of worth among individual citizens: the super-rich are just super-terrific, and the poor are just super-terrible. This super-elitist attitude is fully expressed in Barack Obama’s policies as President, but it doesn’t match his super-hypocritical rhetoric, though all of these things are “super” whatever they are.
As elitist as Summers is, and was, he’s a raving populist compared to Obama. On 19 September 2011, the former Clinton-Administration economist, Brad DeLong, blogged “Obama Develops His Own View of the Jobless Recovery,” and pasted in some excerpts from Suskind’s then recently issued Confidence Men. DeLong being a professional economist, he included the most revealing passage concerning Obama’s view of the nation’s economy as he entered office and during his first years in office, the passage that actually explained his entire economic policy. This passage referred to the President’s two leading economic advisors, Christina Romer and Lawrence Summers:
Both … were concerned by something the president had said in a morning briefing: that he thought the high unemployment was due to productivity gains in the economy. Summers and Romer were startled.
‘What was driving unemployment was clearly deficient demand,’ Romer said. ‘We wondered where this could have been coming from. We both tried to convince him otherwise. He wouldn’t budge.’
Summers had been focused intently on how to spur demand, and on what might drive a meaningful recovery. Since the summer, in meeting after meeting, he’d ticked off the possible candidates, and then discussed them – ‘it won’t be construction, it won’t be exports, it won’t be the consumer.’ But without a rise in demand, in Summers’s view, nothing else would work. What’s more, in such a sluggish, low-demand environment, Summers felt that banks probably shouldn’t be lending. ‘No one wants banks to offer credit to people who shouldn’t be taking on more credit.’
But productivity? The implications were significant. If Obama felt that 10 per cent unemployment was the product of sound, productivity-driven decisions by American businesses, then short-term government measures to spur hiring were not only futile but unwise.
The two economists strained their shared memory of dozens of meetings: had they said something he’d misconstrued? At one point, Summers had mentioned how Keynes once wrote in a 1938 letter that the labour movement depressed productivity, and maybe Obama saw that the disruptions in the economy from the Great Panic gave employers an opportunity – an excuse, essentially – to harvest latent productivity gains.
After a month, frustration turned to resignation. ‘The president seems to have developed his own view,’ Romer said.
In other words, as the first of the many reader-responses to this posting said – and DeLong’s blog is regularly read by large numbers of Democratic economists, so these comments were mainly from professional economists who were on the liberal side of that very conservative profession – “Obama is now on record as to the right of Larry Summers on stimulus vs. deficit reduction.
At that point, we are beyond ‘Obama as Rubinite’ or ‘Obama as blue dog’ and well into ‘Obama as GOP mole’ territory. This disgraceful shill for global capital has destroyed the Democratic party for a generation.”
Another said: “And I was always joking about Obama as the ‘Manchurian Candidate’ from the U of Chicago [a notoriously right-wing faculty]. Productivity? Really?”
Another said: “Law and economics [the associated far-Right UC viewpoint in political theory] background. Depressing.”
Another said: “I’m totally blown away. … To read that he espouses crank nonsense like this is frightening.”
Another said: “Omigod. Larry Summers [the discredited conservative Democratic economist] looks good [by comparison to the President he advised].”
The only economists who still thought that high unemployment was the result of increased economic productivity were people like Glenn Hubbard, who had headed George W. Bush’s Council of Economic Advisors. One of Harvard’s prominent champions of aristocracy, Niall Ferguson, also publicly defended this view on 2 November 2011, when Yahoo News headlined an interview with him, “Poor Public School Education Not Wall St. to Blame For American Inequality.” In other words: (democratic) government is to blame; what is needed is more private schools – and more rich people, to send their kids to them. First come the rich; then come the students; then come their employees. It’s trickle-down, all the way. That’s the way to greater equality of income and wealth.
On 2 October 2012, Bloomberg News headlined “Top 1% Got 93% of Income Growth as Rich-Poor Gap Widened,” and Peter Robison reported that, “The earnings gap between rich and poor Americans was the widest in more than four decades in 2011, Census data show, surpassing income inequality previously reported in Uganda and Kazakhstan,” both of which countries are well recognised to be plutocracies.
Barack Obama makes sense: He believes that the rich are rich because they’re better than everybody else, but that the way to make everybody else that good is to pour more money into universities, so that, … oh, and did somebody point out?:
Obama’s 2008 “Top Contributors” were employees of: (1) University of California, (2) Goldman Sachs, (3) Harvard University, (4) Microsoft Corp, (5) Google Inc., (6) JPMorgan Chase, (7) Citigroup, (8) Time Warner, (9) Sidley Austin LLP, (10) Stanford University. His 2012 “Top Contributors” were employees of: (1) University of California, (2) Microsoft, (3) U.S. Government, (4) Harvard, (5) Kaiser Permanente, (6) Stanford, (7) Deloitte, (8) Columbia Univ., (9) Time Warner, (10) DLMA Piper.
As for the people who were suing the mega-banks for fraudulent mortgages, Obama and his henchman Geithner (and henchman Eric Holder at “Justice”) have been treating them like filth.
Investigative historian Eric Zuesse is the author, most recently, of DEMOCRATIC vs. REPUBLICAN ECONOMICS: NO CONTEST – Democrats Always Better, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.
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