Is there any hope for Obama?

In the previous post, I pointed out the surprisingly strong early backing that Obama has received from Wall Street, which raises the obvious question: Why would Wall Street invest so heavily in him? One reason is that the business sector always covers its bets so that whoever wins, they have ties to them. But another major reason is that the pro-war/pro-business interests in the US cannot get all that they want from Republican administrations. The Republican Party is too closely identified in the public mind with big business to overcome the public’s suspicion that they always are seeking to enrich the big moneyed interests at the expense of the poor. Some of the desires of big business can only be met by Democratic presidents and Congresses, who have managed to convey the impression that they are the party of ‘the little guy’, and thus can neutralize some of the suspicions and do things that Republicans cannot.

Thus many government actions that big business interests sought, like the deregulation of airlines, trucking, and railroads were done by a Democratic president, Jimmy Carter. It was also a Democratic president Bill Clinton that was able to push through the anti-labor NAFTA and the anti-poor ‘welfare reform’ legislation. A Republican president would have met stiff opposition if he had tried to do any of these things. It was also Clinton who signed off in 1999 on the repeal of the Glass-Steagall Act which was passed in 1933 in the wake of the Great Depression to prevent banks from overinvestment in the stock markets. The act created a firewall between commercial and investment banking activities, and banking and investment interests had chafed at the restrictions. The repeal of this act in 1999 is partially responsible for allowing the reckless behavior of the banking sector in the current subprime mortgage crisis where the boundaries between traditional safe banking activities (such as issuing mortgages) and more risky and speculative activities (such as investing in the stock market) became obliterated.

So what might Wall Street want from a President Obama that they are willing to invest heavily in his candidacy? One possible reason is Social Security. Wall Street has for a long time tried to get its greedy hands on the massive amounts of money that exists in the Social Security trust fund. At present those funds are invested in government securities. The financial people on Wall Street would love to see that trust fund ‘privatized’, meaning that the money could be invested in the stock market. Such a huge amount of money entering the stock market would make stock prices soar, making the big investors immensely wealthy, and would also generate vast amounts of money in commissions to the big brokerage houses and investment banks as these huge sums of money traded hands repeatedly. The scale of the transactions would dwarf even the subprime amounts.

When Bush was re-elected president in 2004, he announced that the big goal for his second term was to privatize Social Security (although he called it ‘reform’ since the word privatize evoked a strong negative reaction). To try and achieve this goal, he repeatedly tried to scare people by saying that the fund was going broke and that the present generation of young people would pay into the system but not get anything out when they retire and that something drastic (i.e., privatizing) needed to be done to save it. This was, and is, a lie. As I will discuss in a future post, more sober economists have pointed out that the Social Security trust fund is in quite healthy shape and could be made even more solvent far into the future with just minor tinkering.

Bush failed spectacularly in his attempts to panic people into privatizing Social Security because of fierce opposition to his plans, opposition that was fueled by well-founded suspicions that what he was really interested in was not the long-term health of Social Security but merely to enrich Wall Street interests. Bush has quietly shelved that policy ambition in his lame-duck administration and no longer talks about it. But it would be a big mistake to think that Wall Street has also shelved its plans. They think big and long-term, and the Social Security prize is huge. I suspect that they think that a President Obama, being seen as progressive, might be able to push through the kind of Social Security changes they want. These changes will, of course, be euphemistically called ‘reforming’ or ‘saving’ Social Security, instead of the more accurate ‘looting’.

To be fair, Obama has said he opposes privatizing Social Security and has (rightly) called for the lifting of the current income cap on the payroll tax (a move that Clinton opposes). But by talking about a Social Security ‘crisis’ that needs major action to rescue it, he is adopting the rhetoric of those who are urging privatization and that is dangerous because it can create be used to fuel a sense that something drastic needs to be done. This should be countered vigorously.

Economist Paul Krugman takes Obama to task on this issue:

Lately, Barack Obama has been saying that major action is needed to avert what he keeps calling a “crisis” in Social Security — most recently in an interview with The National Journal. Progressives who fought hard and successfully against the Bush administration’s attempt to panic America into privatizing the New Deal’s crown jewel are outraged, and rightly so.

This is why voting someone into office is never enough. You have to keep an even more vigilant eye on your person especially after they have been elected and keep their feet to the fire to make sure that the special interest groups that swarm like ants all over the federal government don’t hollow out your candidate, leaving him or her just an empty shell of campaign promises.

Both Clinton and McCain are touting their own “experience”, that they are people who rely “not just on words, but on work” but I am not sure this is a winning strategy for either of them. Voters don’t seem to get too excited about the message “Vote for me. I will work hard” or “Vote for me. I have been around for a long time”. To my mind, the absurd charge by Obama’s opponents that he is “inexperienced” could well be his best and most appealing quality to voters, because that means that there has not yet been enough time for him to be completely enmeshed in the web that is spun around politicians by the war/business interests, and in which milieu both Clinton and McCain are completely at home. Thus there are some small grounds for hope that it may not be too late to rescue Obama from the clutches of the pro-war/pro-business and Wall Street interests.

But the sad truth is that we are now at the very point in American electoral politics that the ruling pro-war/pro-business party strives to reach as soon as possible, where the remaining candidates with any chance of winning do not differ greatly on major policy issues, and the voters are encouraged to get excited about some hot-button issues (which you can be sure will come up soon), or minor differences, or their styles and other trivialities. This makes voters forget that their real policy choices are very limited and that, in effect, the presidential election is over as far as substantive issues are concerned.

That does not mean that one should not vote. McCain will be a truly awful president, though he may not plumb the record-breaking depths of Bush who currently has an astonishingly low 19% approval rating according to one recent poll, and keeping him out of the Oval Office is a worthwhile goal. And in that particular respect, Obama has a decisive advantage over Clinton since recent surveys suggest that Obama has a better chance of beating McCain than Clinton does. This may be because, as one commentator said, “Clinton divides the left and unites the right, while Obama unites the left and divides the right.” That is an obvious oversimplification, but is valid enough to be significant factor.

But I always find it depressing that I am usually forced to end up voting on the basis of who is the least-worst candidate, never for the one that holds any really promise of winning on a platform of real change.

So although I do not usually vote in primary elections, come Tuesday, March 4, 2008, I will vote for Barack Obama in the Ohio primary, basing my decision on the hope that he is not already corrupted beyond redemption.

POST SCRIPT: Combating the negative myths about Canadian health care

One of the big propaganda efforts in the US has been the way the Canadian single payer health care system is falsely denigrated in order to perpetuate the lie that the US has the Best Health Care System in the World, when in actual fact it is bloated, expensive, wasteful, inefficient, inadequate, and corrupt. (See here for a series of posts on health care.)

Earlier I linked to the first of a two-part series by Sara Robinson that combats the myths about the Canadian system.

The second part is now online.


  1. Anonymous says

    I don’t think that’s a problem with single-payer, in particular, it’s just a problem in general. We’re human, I’m sure we won’t have a perfect system, but surely it will be better than what we’ve got.

  2. says

    I am curious to know whether you found -- among the crop of candidates who started contesting for the primaries -- one person who came close to your views of a promising candidate?

  3. says

    One of the only other potentially convincing arguments I’ve seen for Obama was made by the author of the xkcd webcomic, and it’s about technology and openness.

    You made it fairly clear yesterday that the point about Obama refusing lobbyist/wall street money is incorrect. But that aside, I’m happy to see a politician actually seek out policy input from someone like Lawrence Lessig. If Obama would also consult, e.g. the AAAS (and actually act on their advice) I’d seriously consider a vote.

  4. says


    One thing I’ve noticed with health care comparisons is that those who favor the US system never compare aggregated statistical data (per capita cost, longevity, infant mortality, etc.). Instead, they always provide, like this article, anecdotes of individual cases. Such cases are useful if they illustrate and make concrete actual data. They do not make the case by themselves.

    As I said in my series of posts on single payer health care, with huge complex systems like this, there will always be isolated situations where one system can be made to look good or bad. But that does not make the case.

  5. says


    The candidate who came closest in policy terms to what I would like to see was Dennis Kucinich. He was followed by John Edwards. Barack Obama was third.

  6. says

    I’m not an American, but like most of the world, subjected to the American economy and I could only wish that it will show some signs of healing after the elections.

    I was trying to dive into the whole election thing and go through the candidates, then realized that politicians are politicians, and that by the end of the day they are they will eat their young for survival.

  7. James Chang says

    Yet there is no Social Security lockbox. The government is currently using the surplus in the Social Security Trust Fund to fund federal programs, replacing it with future IOUs. Of course, when the balance of the trust becomes a deficit in the future, the government does not include its figures in their annual budget deficit outlook.

    Lifting the cap is only a short-term solution, and it could lead to efforts to increase the payroll tax itself.

    Reform is definitely necessary and I believe young workers who won’t see their Social Security benefits when they retire should have a right to opt-out out of this federal entitlement program.

  8. says


    Programs like social security and single-payer health plans cannot function with op-out provisions because they depend upon spreading the risk randomly over the population. You either have all in or not have the system at all.

    I will be looking in detail at the social security “lockbox” issue in the posts on social security next week. It is not as big a problem as is made out.

  9. James Chang says


    But then we are pretty much giving anyone under the age of 30 a heavy burden. Over 78 million baby boomers will be retiring, and the ratio of worker to retiree will drop. It’s like all we can hope for is that young workers start building up their 401k because that’s the only retirement egg we can look forward to instead of social security.

    Please look at David Walker, the Comptroller General, who is leaving the GAO. He has warned Congress about the Social Security Trust Fund myth. It’s too bad he is leaving. He is probably one of the very few appointees that has tried to warn about our future financial crisis.

  10. says

    Most home loans do not fall into the category of subprime mortgages, it is proliferated in the early part of the 21st Century. About 21 percent of all mort­gage originations from 2004 through 2006 were subprime, up from 9 percent from 1996 through 2004.

  11. says


    It is true that there is no trust fund in the sense that the money is kept in a separate account. It is also true that the rise in baby boomer retirements changes the income-expenditure ratio. But that does not mean that there is a crisis. I will discuss this in detail in next week’s post.

  12. says

    I appreciate your decision to support Obama in the recently to be held presidential election which seems justified as he satisfies your least-worst candidate criteria best. In addition to this he has not touched yet the corrupt political world and there is a greater chance of his approval as he unites the left and divides the right.

  13. Anonymous says

    I am curious about the hypothesis stated in the first paragraph. While your previous post presents concrete evidence of Obama receiving cash from Wall Street, I am curious if their are similar contributions simultaneously being extended to McCain. Afterall, Wall Street has been known to hedge their bets…

  14. says

    Oh, absolutely. My premise was that everyone already knew and realized that both Clinton and McCain were in the pockets of Wall Street interests, so I did not emphasize it. I was just trying to point out that Obama was not free from its tentacles either.

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