Be My Guest

A “Shellacking” or a Failure to Communicate? – Guest Column by David E. McClean, Ph.D.

Mr. Obama characterized what happened this past Tuesday as a “shellacking.” Well, that’s one way to look at it. But in that construction are the seeds of a fatal misinterpretation. If he takes away the wrong message, the progressive agenda will be in serious jeopardy, as will be his presidency.

In the course of the various campaigns across the country, the Republicans effectively, in many cases, saddled Mr. Obama with the old big spending and big deficits charge. But why didn’t the Democrats constantly point out that the deficit was growing under Bush’s watch, that the TARP was the original idea of George Bush’s Treasury Secretary, and that Bush himself effected a series of stimulus injections into the economy?

Somehow, that wasn’t “wasteful spending.” So long as a Republican does it, it never is, right? When the two unnecessary, wasteful and (some would say) criminal wars are brought up as examples of gargantuan wastes of lives and treasure, as black holes for American dollars, the Republicans prefer to look at their shoes and say, “Well, now, let’s not look backward. Let’s just move ahead.”

And the Democrats comply, for some odd reason. They cave to the “Let’s Support Our Troops” mantra so as not to appear soft or weak on “defense” (which meant, under the Bush Doctrine, pre-emptive offense).

While Mr. Bush spent trillions of dollars on unnecessary wars (the tally includes actual expenditures and future costs), the Democrats continue to allow the Republicans to silence them out of fear of the Republican charge of weakness. And the Republicans get away with it every time.

Let’s not look backward? Let’s move ahead? OK. When we look ahead, we see a fiscal nightmare, a steaming pile of fiscal wreckage. How did it come to be? The policies of the Republicans and “Dubya” put it there. And are we simply to forget that as though it were ancient history?

The Republican hypocrisy regarding their concern for “the bankrupting of future generations” is one of the absurdities of the political moment. It is hypocrisy because it is their policies and their failures to regulate properly, that, in large part, are now what jeopardizes those future generations. As I recall, under the last Democratic administration, the fiscal prospects for future generations looked fairly bright indeed.

Mr. Obama and the Democrats are called anti-business. So why didn’t they say, during campaign season, “Hell no, we are FOR business! That’s why we introduced 16 different tax cuts and tax incentives for small business. That’s right, 16 different tax reductions and incentives!”

Mr. Obama and the Democrats came to the aid of many banks and the auto industry (which were about to go over a cliff and take the country with them), and that ought to count as “pro-business” and “pro-jobs” as well, since the cascade effect of massive failures in those sectors would have hit the thousands of small businesses and workers who depend on them (tool makers, printers, delis, label makers, waitresses, messengers, etc.), as well as pushed-up the unemployment numbers not insignificantly (which would have cost the government countless more billions in unemployment benefit claims).

“Cash for clunkers” was a pro-business initiative, although castigated by ideological market libertarians as causing “artificial” demand. But all stimulus creates so-called “artificial” demand. The so-called Quantitative Easing (“QE”) of the Fed creates “artificial” demand.

To quote President Obama on this point, from many months ago, “That’s what stimulus is!” Fortunately, the Fed is not controlled by lunatics, and can move forward with its own version of stimulus in the form of QE.

Mr. Obama and the Democrats get blamed for the current budget deficit, which is north of a trillion dollars, as well as a run-away national debt (now north of $13 trillion, and rising). These are indeed frightful numbers, and we must do something about them, quickly.

But are they the fault of the Democrats and Mr. Obama? The fact is that much of the deficit is due to the policies of “Dubya” and his Republican enablers, who were so afraid of the next 9/11 that they turned on the money faucets (or should I say, pulled out the credit cards) to buy as much false security (in the form of military adventures) as they possibly could, rather than take a more intelligent approach to the international criminals that terrorists actually are.

To clean up the mess that the Bush years brought upon us, and to direct the country out of a deep recession, massive stimulus was needed. This is a basic and established tool of Keynesian economics, and much of Europe is applying the same strategy to stabilize and jump-start its economies. (What fools we all must be.)

It is a passing emergency action, not “another big government program” as the Republicans like to say it is to continue to saddle the Democrats with the label of “big spenders.” In fact, well over $300 billion of the stimulus package was tax cuts and tax incentives (see below).

And, as it turns out, it was the Republicans, in their protracted pouting and political strategy of non-cooperation with the “fascist-socialist-leftist” Mr. Obama, who resisted participating in a deficit reduction commission, which Mr. Obama had to call into being by Executive Order.

Mr. Obama and the Democrats get blamed for high taxes. But Mr. Obama and the Democrats cut taxes for over 95% of working families, and this is confirmed by a number of fact checking organizations, including PolitiFact: “We cut taxes. We cut taxes for 95 percent of working families. We cut taxes for small businesses,” Mr. Obama said in the last State of the Union Address. “We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college.” The final stimulus package contained well over $300 billion in tax cuts and tax incentives for individuals and small businesses.

Mr. Obama and the Democrats get blamed because the Bush tax cuts might expire on their watch, unless action is taken to extend them. The Bush and Republican sunset provision in the Bush tax cuts has morphed, as if by magic, into “a Democratic Party tax increase.” How convenient. But this discussion has been misframed.

The Bush law, which enacted enormous war time tax cuts for the wealthy (which has contributed greatly to the current deficit), contained the seeds of its own demise. Seeds planted by Mr. Bush, not Mr. Obama. If taxes return to pre-Bush-tax-cut levels, that is Mr. Bush’s fault, not the fault of Mr. Obama and the Democrats.

If it was Bush’s and the Republicans’ tax cut, why won’t the re-set of taxes to the status quo ante be, also, Bush’s and the Republicans’ doing? Of course, if the Bush tax cuts do not sunset, there will be a new hole blasted in the federal budget deficit — on some estimates a $5.04 Trillion1 hole, over ten years.

Of course, the Republicans, who live on Visa cards issued by the Treasury, would love to be budget balancers and tax cutters, all at the same time. They just can’t seem to get it through their heads that you can’t address the fiscal mess of deficits and a national debt that is over $13 trillion and, at the same time, call for yet more tax cuts – on top of those already enacted by Mr. Obama over the past 20 months.

You can’t bleed government at a time when it is highly leveraged. Of course, and last on this point, even most honest Republicans know that Mr. Bush created much of the current fiscal mess. Mr. Bush and Mr. Cheney have as much to do with the creation of the odd-ball and so-called “Tea Party” as any disdain for Mr. Obama’s person or politics.

Mr. Obama and the Democrats get blamed for “dumping” all sorts of new regulations on the poor, hapless financial sector (the Dodd-Frank law). Heavens, why would anyone want to do such a thing to that collection of “innocents”?

Perhaps it is because the worst economic downturn since the 1930s is largely attributable to that sector? The market fundamentalists on CNBC and FOX continue to lament
the “uncertainty” that exists in the sector, “making it hard for executives to plan,” while all the new regulations required by Dodd-Frank are worked out, as though the system is collapsing under the weight of self-doubt.

Well, tough. The financial services sector can’t have it both ways. If it really wanted to avoid “all sorts of new regulations” it would have policed itself much better than it did. It behaved like a bunch of adolescents; it is awash in taxpayer money; and now it wants to cry that Daddy has come up with some new house rules that will take a year or so to sort themselves out. Again I say, tough.

Mr. Obama and the Democrats get blamed for Fannie and Freddie — and Barney Frank is the particular whipping boy for the Republican brief against those organizations. Why, they say, if the damned Democrats didn’t try to engage in “social engineering” so that people who couldn’t afford houses could afford them, Fannie and Freddie would not be living off of the government teats today!

But the liquidity that those entities provided was not the problem (in fact it helped GDP growth significantly over the years), just as credit default swaps, per se, were not the problem. Nor was securitization of mortgages, per se, the problem.

But in typical simplistic fashion the Republicans hold forth, framing and spinning their way along to further some weird agenda that has something to do with “tyrannical government.” The problem was that the system had become full of knaves in the form of bankers and mortgage brokers, and extremely poor risk management practices throughout.

The failure to create better risk management practices from loan origination through to securitization by the GSEs (Fannie and Freddie) to better rating controls by the rating agencies was, largely, the problem. Were there borrowers who tried to game the system? There certainly were. But it is up to responsible professionals in the system to stop the games and to detect the fraud. There are gamers in every system.

Of course, too many people were benefitting from the money party that was going on – even people who saw how things would eventually end – to take the punch bowl away. Blaming brown and black people in Cleveland, OH. or Islip, NY is just one of those framing things that Republicans are known for (which is why the party remains largely a party for whites only, and probably wants to stay that way, despite their efforts at “diversity” and their now-not-so-new pitch man, Mr. Steele).

But it’s a lie and it deflects attention away from the bankers, the lawyers, the traders and the real estate brokers who make up a good chunk of the Republican base. Much easier to place the blame for the economic collapse on poor folks trying to get and keep their first homes. And, wasn’t it George W. Bush who touted the “ownership society” and home ownership as salutary goals — the best ways to create personal wealth for self and family?

Mr. Obama and the Democrats get blamed because health care reform (“Obamacare”) is supposed to greatly expand the size of the federal government. The fact is that health care reform relies, largely, on existing, private insurance companies and the private insurance system (not a happy outcome for Obama’s left flank, to be sure).

When the health care bill passed, the stocks of many insurance companies actually went UP, not down in the face of their supposed eventual demise. Reform, or “Obamacare,” simply made sure that the social contract that we all share as Americans is honored when it comes to, at least, our basic needs – the need for food, for shelter, the need for medicine, the need for medical attention when sick.

The broken system (which is still broken, even after “Obamacare”) which repeatedly breached this contract was finally addressed, with only a modest long-term cost to the insurance industry, and the potential for some substantial gains as new premiums flood into the system.

So, why were all of these things not made clear during the mid-term campaigns? It appears that the Democrats, including Mr. Obama, were, once again, outflanked by the sharp, clear and simple rhetoric of the Republicans.

No more really need be said. Indeed, one of the problems of self-identified liberals and progressives is that we can’t resist the need to add our cherished little nuances and verbal footnotes, which proves to be our Achilles’ Heel over and over again. There is no doubt but that the outcome of the mid-term elections would have been very different if the facts, pointed out above, were repeated, in simple language, over and over again, non-stop, for the past six months.

Instead, Democrats let themselves get outdone by the Republican spin machine, which mechanically repeats its same two messages — cut taxes, kill the terrorists — ceaselessly. And so now we can watch the Republicans attempt to slap around our President, who already seems to be all too willing — for the sake of some naive peace — to appease, because, as he says, he and his agenda took a “shellacking” on November 2nd.

That the Dems took a “shellacking,” in terms of losses, is their own fault. It is their fault that they did not stick to the facts and to their accomplishments over the past two years.

It is their fault that the Republicans were permitted to frame the debate. It is their fault that so many of them were effete and tepid in the face of Republicans who never are (although they have, as mentioned, only two ideas — or so it seems).

On the other hand, for Mr. Obama to characterize what happened on Tuesday as a “shellacking” is to concede too much, and is to interpret erroneously. What took a “shellacking” was a caricature of the Democratic party’s policies and legislative successes.

That’s very different. When Mr. Obama was elected, he was elected with a mandate, and the country wanted much of what he gave it. His handling of the economic crisis will most certainly be recorded in the history books as nothing short of competent and mature, under difficult circumstances.

If, during the campaigns, the country was clearer on what his administration and the Democrats actually accomplished over the past twenty months, the House would still be controlled by the Democrats (or if control had to shift to the Republicans, it might have been by much smaller numbers).

This notion that mid-term elections always shift control is a dogma of political thought. It is often true, of course, but it need not always be true. In the case of the most recent elections, the failure to prevent that from happening, once again, has more to do with the inability of Democratic candidates to stay on point — and to know the points to stay on — than the hand of fate.

And this may prove tragic for the country, and to the good society for which liberals and progressives continue to fight.

David McClean is a philosopher and a member of the Newark, NJ faculty of Rutgers University, and ocassionally teaches at other colleges and universities. He is also the founding principal of The DMA Consulting Group, a Wall Street compliance, risk and goverance consultancy. You may read more of his commentaries at


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