The Obama Presidency and the Great Recession: Political Economy, Ideology, and Public Policy

Abstract

Barack Obama campaigned for and was elected president amidst an economic and financial crisis many called the worst since the 1930s and during a dramatic drop in support for the incumbent Bush administration. Many liberal and progressive voters hoped that the crisis of capitalism would lead to a sharp break with neoliberal public policies on the domestic front, perhaps in the form of a “New New Deal.” What have been the results as we move towards the presidential campaign of 2012? This article explores the distinct nature of Obama's political economy and how it has shaped his approach to the economic stimulus, banking and financial regulation, and health care reform. It is argued that Obama's centrist approach, his quest for “business confidence,” and the clout of powerful private economic interests (“capital”) have resulted in as much continuity with, rather than departure from, neoliberalism.

Notes

I would like to thank Bill Grover and the New Political Science Editors and reviewers for comments and suggestions.

¹ Binyamin Appelbaum and Catherine Rampell, “From Spending to Cuts, While the Economy Stalls,” New York Times, July 31, 2011; Jon Cohen and Dan Balz, “Poll Shows Americans Oppose Entitlement Cuts to Deal With Debt Problem,” Washington Post, April 20, 2011; Michael Cooper and Megan Thee-Brenan, “Disapproval Rate for Congress at Record 82% After Debt Talks,” New York Times, August 4, 2011.

² Jeffrey A. Winters and Benjamin I. Page, “Oligarchy in the United States?,” Perspectives on Politics 7:4 (December 2009), p. 732; Lawrence R. Jacobs and Desmond S. King, “Varieties of Obamaism: Structure, Agency, and the Obama Presidency,” Perspectives on Politics 10:3 (September 2010), p. 793.

³ G. William Domhoff, Who Rules America? Challenges to Corporate and Class Dominance, 6th ed. (New York: McGraw-Hill, 2010), pp. xiii–xiv.

⁴ For a clear discussion of demand and resource constraints in capitalist democracy, see Erik Olin Wright and Joel Rogers, American Society: How It Really Works (New York: W.W. Norton, 2011), Chapter 16. Quotes are from pages 344 and 346. Other analytical tools are structural theories of the presidency and radical political economy. For examples, see William F. Grover, The President as Prisoner: A Structural Critique of the Carter and Reagan Years (Albany: State University of New York Press, 1989); Arthur MacEwan and John A. Miller, Economic Collapse, Economic Change: Getting to the Roots of the Crisis (Armonk, NY: M.E. Sharpe, 2011).

⁵ Thomas I. Palley, America's Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession (New American Contract: A Project of the New America Foundation, June 2009), p. 4.

⁶ John Bellamy Foster and Fred Magdoff, “Financial Implosion and Stagnation,” Monthly Review (December 2008), p. 10. On the growing domination of the US economy by finance, see Kevin Phillips, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism (New York: Viking, 2008).

⁷ Simon Johnson, “The Quiet Coup,” The Atlantic (May 2009), p. 50. See also Jonathan Kirshner, “Business As Usual: The Next Wall Street Collapse,” Boston Review (January–February 2011), pp. 61–65.

⁸ Dean Baker, Plunder and Blunder: The Rise and Fall of the Bubble Economy (Sausalito, CA: PoliPointPress, 2009); Dean Baker, False Profits: Recovering From the Bubble Economy (Sausalito, CA: PoliPointPress, 2010); Jo Becker, Sheryl Gay Stolberg, and Stephen Labaton, “White House Philosophy Stoked Mortgage Bonfire,” New York Times, December 21, 2008.

⁹ Timothy A. Canova, “Legacy of the Clinton Bubble,” Dissent (Summer 2008), p. 41.

¹⁰ In different ways neoliberalism, financialization, and globalization are connected to systemic contradictions of the capitalist political economy by Walden Bello, “Wall Street Meltdown Primer,” Foreign Policy in Focus, September 26, 2008, < http://www.commondreams.org/view/2008/09/26-5>; Robert Brenner, “The Economy in a World of Trouble, Against the Current 139 (March–April 2009); John Bellamy Foster and Robert W. McChesney, “Listen Keynesians, It's the System!,” Monthly Review, April 2010; John B. Judis, “Stop Blaming Wall Street,” New Republic, August 4, 2011, pp. 8–11.

¹¹ Jo Becker and Christopher Drew, “Pragmatic Politics, Forged on the South Side,” New York Times, May 11, 2008; Thomas Sugrue, Not Even Past: Barack Obama and the Burden of Race (Princeton, NJ: Princeton University Press, 2010), pp. 43–46.

¹² Ken Silverstein, “Barack Obama Inc,” Harper's Magazine, November 2006, p. 33.

¹³ Larissa MacFarquhar, “The Conciliator,” New Yorker, May 7, 2007.

¹⁴ David Leonhardt, “A Free-Market Loving, Big-Spending, Fiscally Conservative, Wealth Redistributionist,” New York Times Magazine, August 24, 2008, pp. 31–32. See also Naomi Klein, “Obama's Chicago Boys,” The Nation, June 30, 2008, p. 9.

¹⁶ Michael Luo and Christopher Drew, “Big Donors, Too, Have Seats at Obama Fund-Raising Table,” New York Times, August 6, 2008.

¹⁵ Domhoff, Who Rules America?, p. 163.

¹⁷ Michael Luo, “Study: Many Obama Small Donors Really Weren't,” New York Times, November 24, 2008; “Reality Check: Obama Received About the Same Percentage from Small Donors on 2008 as Bush in 2004,” Campaign Finance Institute, November 24, 2008, < http://www.cfinst.org/Press/PReleases/08-11-24/Realty_Check_-_Obama_Small_Donors.aspx>. See Paul Street, “Obama's Golden Rule and the Myth of the President's Onetime ‘Small Donor Base,’” ZNet, July 29, 2011, < http://www.zcommunications.org/obama-s-golden-rule-and-the-myth-of-the-president-s-onetime-small-donor-base-by-paul-street>.

¹⁸ Michael Cooper and Dalia Sussman, “Voters in Poll Want Priority to be Economy, Their Top Issue,” New York Times, August 21, 2008.

²⁰ Paul Krugman, “The Obama Agenda,” New York Times, June 30, 2008.

¹⁹ Quoted in David Moberg, “Obamanomics,” In These Times, April 2008.

²¹ Quoted in Jeff Cohen, “Obama is NOT ‘Caving’ to Corporate Interests,” CommonDreams.org , July 24, 2011, < http://www.commondreams.org/view/2011/07/24>.

²² Quoted in Dan Balz and Robert Barnes, “Economy Becomes New Proving Ground for McCain, Obama,” Washington Post, September 16, 2008.

²³ Mike Allen, “Obama May Scale Back Promises,” Politico, September 23, 2008.

²⁴ Mike Glover, “Obama: McCain Has Had ‘An Election Year Conversion’ on Economy,” Huffington Post, September 22, 2008; Scott Helman, “Obama Broadens Economic Assault on Rival's Proposals,” Boston Globe, September 23, 2008.

²⁵ “Examining the Candidates,” The Economist, October 4, 2010, pp. 29–30.

²⁶ Jackie Calmes and Megan Thee, “Voter Polls Find Obama Built a Broad Coalition,” New York Times, November 5, 2008.

²⁷ David Paul Kuhn, “Exit Polls: How Obama Won,” Politico, November 5, 2008.

²⁸ Jeff Zeleny, “Obama and Bush Working to Calm Volatile Market,” New York Times, November 24, 2008; Jackie Calmes, “Rubinomics Recalculated,” New York Times, November 24, 2008; “So Far, So Good,” The Economist, November 29, 2008, p. 14; “Off to Work They Go,” The Economist, November 29, 2008, pp. 31–32; John Harwood, “‘Partisan’ Seeks a Prefix: Bi- or Post-,” New York Times, December 7, 2008.

²⁹ Robert Kuttner, A Presidency in Peril (White River Junction, VT: Chelsea Green, 2010), pp. 6–7. On Geithner, see Jo Becker and Gretchen Morgenson, “Geithner, Member and Overseer of Financial Club,” New York Times, April 27, 2009.

³⁰ Quoted in Michael Lind, “Obama's Populist Pose,” Salon.com , January 26, 2010.

³¹ Julianna Goldman and Ian Katz, “Obama Doesn't ‘Begrudge’ Bonuses for Blankfein, Dimon,” Bloomberg.com , February 10, 2010. For commentary, see Paul Krugman, “Oh. My. God. Obama Clueless,” New York Times, February 10, 2010.

³² Quoted in Steven Mufson and Anne E. Kornblut, “President Obama Appeals to Business Leaders for Support of Administration Goals,” Washington Post, February 25, 2010.

³³ John B. Judis, “The Quiet Revolution,” New Republic, February 18, 2010, p. 15.

³⁴ Mark Engler, “Hilda Solis: Protecting Workers, Not Corporations,” Yes! Magazine, February 27, 2010; John B. Judis, “Labor and Delivery,” New Republic, March 25, 2010, pp. 9–10; Sheryl Gay Stolberg, “Obama Bypasses Senate Process, Filling 15 Posts,” New York Times, March 27, 2010.

³⁵ In his sympathetic book on Obama's intellectual influences, historian James T. Kloppenberg asks, “has [Obama] now been yanked by the chains of power back from the commitment to economic democracy proclaimed in The Audacity of Hope to the tepid economic centrism of Democratic Party insiders since the 1980s? It is too soon to say, but the early indications suggest there may be reason for concern.” James T. Kloppenberg, Reading Obama: Dreams, Hope, and the American Political Tradition (Princeton, NJ: Princeton University Press, 2011), pp. 190–191.

³⁶ Michael Leachman, “New CBO Report Finds Up to 3.6 Million People Owe Their Jobs to the Recovery Act,” Center on Budget and Policy Priorities, November 29, 2010, < http://www.cbpp.org/cms/index.cfm?fa = view&id = 3095>. For earlier progress reports on ARRA, see David Leonhardt, “Judging Stimulus by Job Data Reveals Success,” New York Times, February 17, 2010; David J. Lynch, “Economists Agree: Stimulus Created Nearly Three Million Jobs,” USA Today, August 30, 2010.

³⁷ Sewell Chan, “In Study, 2 Economists Say Intervention Helped Avert a 2nd Depression,” New York Times, July 27, 2010.

³⁸ Dean Baker, “The US Needs Money, Not Time,” Guardian (UK), July 13, 2009; John B. Judis, “Why We Need a Second Stimulus,” New Republic, June 26, 2009, < http://www.tnr.com/article/politics/why-we-need-second-stimulus>.

³⁹ During his campaign Brown claimed that the stimulus “didn't create one new job.” Quoted in David Leonhardt, “Judging Stimulus by Job Data Reveals Success,” New York Times, February 17, 2010; Sheryl Gay Stolberg, “Obama and Republicans Clash Over Stimulus Bill, One Year Later,” New York Times, February 18, 2010.

⁴⁰ Heidi Shierholz, “Job Growth Still Sputtering in Lowest Gear,” Economic Policy Institute, August 5, 2011, < http://www.epi.org/publications/entry/7417/>.

⁴¹ Paul N. Van de Water, “How Health Reform Helps Reduce the Deficit,” Center on Budget and Policy Priorities, May 10, 2010, < http://www.cbpp.org/cms/index.cfm?fa = view&id = 3178>.

⁴² John B. Judis, “Democrats Discover Their Base,” New Republic, March 21, 2010, < http://www.tnr.com/article/politics/democrats-discover-their-base>.

⁴³ Jonathan Oberlander and Theodore Marmor, “The Health Bill Explained at Last,” New York Review of Books, August 19, 2010, p. 61.

⁴⁴ Jonathan Cohn, “How They Did It,” New Republic, June 10, 2010, pp. 14–25; Lawrence R. Jacobs and Theda Skocpol, Health Care Reform and American Politics: What Everyone Needs to Know (New York: Oxford University Press, 2010), Chapter Two.

⁴⁵ John Harwood, “The Lobbying Web,” New York Times, August 2, 2009; Robert Pear, “In House, Many Spoke With One Voice: Lobbyists,” New York Times, November 15, 2009; Dan Eggen, “How Interest Groups Behind Health-Care Legislation are Financed is Often Unclear,” Washington Post, January 7, 2010.

⁴⁶ Jacob S. Hacker, “The Road to Somewhere: Why Health Care Happened,” Perspectives on Politics 8:3 (September 2010), p. 865.

⁴⁷ Lind, “Obama's Populist Pose”; Matt Taibbi, “Obama's Big Sellout,” Rolling Stone, December 10, 2009.

⁴⁸ Joseph Stiglitz, “Obama's Banking Proposals Are a Good First Step,” Los Angeles Times, January 29, 2010; Jacklie Calmes and Louis Uchitelle, “Obama Will Seek Limits on Banks,” New York Times, January 21, 2010; Eli Clifton, “Obama Unveils Broad Banking Industry Reforms,” Inter Press Service, January 25, 2010.

⁴⁹ Eric Lichtbau and Edward Wyatt, “Pro-Business Lobbying Takes on Obama's Plan for Wall Street Overhaul,” New York Times, March 28, 2010.

⁵⁰ Edward Wyatt and David M. Herszenhorn, “In Deal, New Authority Over Wall Street,” New York Times, June 25, 2010. Bair quoted in Nathaniel Popper and Walter Hamilton, “Financial Reform Package Wouldn't Change Wall Street Much,” Los Angeles Times, June 26, 2010. See also, Shahien Nasiripour, “Wall Street Smiles as Softened Financial Reform Bill Passes,” Huffington Post, June 25, 2010.

⁵¹ Robert Reich, “The New Finance Bill: A Mountain of Legislative Paper, a Molehill of Reform,” Huffington Post, July 16, 2010. See also, Binyamin Appelbaum, “On Finance Bill, Lobbying Shifts to Regulators, New York Times, June 26, 2010; Jeff Madrick, “Obama's Risky Business,” New York Review of Books blog, July 15, 2010, < http://www.nybooks.com/blogs/nyrblog/2010/jul/15/obamas-risky-business/>.

⁵² Eric Lichtbau, “Lawmakers Regulate Banks, Then Flock to Them,” New York Times, April 13, 2010; Edward Wyatt and Eric Lichtbau, “A Finace Overhaul Fight Draws a Swarm of Lobbyists,” New York Times, April 20, 2010; Eric Lichtbau and Edward Wyatt, “Financial Overhaul Bill Poses Big Tests for Lobbyists,” New York Times, May 22, 2010.

⁵³ John Bellamy Foster and Hannah Holleman, “The Financial Power Elite,” Monthly Review (May 2010), pp. 9, 13.

⁵⁴ Levin quoted in Gretchen Morgenson and Louise Story, “Naming Culprits in the Financial Crisis,” New York Times, April 13, 2011; Barry Grey, “Senate Report on Wall Street Crash: The Criminalization of the American Ruling Class,” World Socialist Web Site, April 18, 2011. The full report may be found online at: < http://www.hsgac.senate.gov/public/files/Financial Crisis/FinancialCrisisReport.pdf>.

⁵⁵ “Media Misreading Midterms: As Usual, Press Urges a Move to the Right,” Fairness and Accuracy in Reporting, November 4, 2010, < http://www.commondreams.org/headline/2010/11/04-8>; Jim Naureckas, “Hoover Wins! Corporate Media Spin Mid-term Election as Victory for Austerity,” Fairness and Accuracy in Reporting, December 3, 2010, < http://www.commondreams.org/headline/2010/12/03-6>.

⁵⁶ Christopher Phelps, “The Democrats' Problem Was Not Overreach,” Chronicle of Higher Education, November 14, 2010 < http://chronicle.com/article/The-Democrats-Problem-Was/125331/>; Kevin Zeese, “The Obama-Was-Anti-Business Myth,” Consortium News, February 10, 2011.

⁵⁷ Quoted in Jim Puzzanghera, “Business Gains a Friend: Congress,” Los Angeles Times, November 4, 2010.

⁵⁸ Quotes from Robert Scheer, “Obama Pulls a Clinton,” Truthdig, January 18, 2011, < http://www.truthdig.com/report/item/obama_pulls_a_clinton_20110118/>.

⁵⁹ Quoted in Abby Phillip and Chris Frates, “Barack Obama Urges Chamber to Put U.S. First,” Politico, February 7, 2011.

⁶⁰ Dean Baker, “The Progressive Case Against Obama's New Team,” Huffington Post, January 11, 2011.

⁶¹ Andrew Fieldhouse, “President Obama's 2012 Budget: An Analysis of Tax Policies,” Economic Policy Institute, February 14, 2011, < http://www.epi.org/analysis_and_opinion/entry/president_obamas_fy_2012_budget_an_analysis_of_tax_policies/>. See also Rebecca Theis, “President Obama's 2012 Budget: An Analysis of the Budget Cuts,” Economic Policy Institute, February 14, 2011, < http://www.epi.org/analysis_and_opinion/entry/president_obamas_fy_2012_budget_an_analysis_of_the_budget_cuts/>.

⁶² Walden Bello contends, “Obama had a tremendous opportunity to educate and mobilize people against the neoliberal or market fundamentalist approach that deregulated the financial sector and caused the crisis. Although Obama did allude to unregulated financial markets as the key problem during the campaign, he refrained from demonizing neoliberalism after he took office, thus presenting an ideological vacuum that the resurgent neoliberals did not hesitate to fill.” Foreign Policy in Focus, October 12, 2010,  < http://www.commondreams.org/view/2010/10/12-0>.

⁶³ Jeffrey Sachs, “The People's Budget,” Huffington Post, April 8, 2011, < http://www.huffingtonpost.com/jeffrey-sachs/the-peoples-budget_b_846573.html>.

⁶⁴ See Peter Hart and Julie Hollar “‘Serious’ Republicans vs. ‘Starry-Eyed’ Progressives,” Fairness and Accuracy in Reporting (FAIR), May 31, 2011, < https://www.commondreams.org/view/2011/05/31-9>.

⁶⁵ David Bromwich, “Symptoms of the Bush-Obama Presidency,” TomDispatch.com , August 18, 2011, < http://www.tomdispatch.com/post/175432/tomgram%3A_david_bromwich%2C_george_w._obama/#more>. On foreign policy, see Joseph G. Peschek, “The Obama Presidency and the Politics of ‘Change’ in Foreign Policy,” New Political Science 32:2 (June 2010), pp. 272–278.