Michael Hudson Tells It Like It Is

Naked Capitalism:  (reposted here in full with permission from the author)

Michael Hudson: My Take on Obama’s Big Win

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College,. His latest book is “The Bubble and Beyond.”


The Democrats could not have won so handily without the Citizens United ruling. That is what enabled the Koch Brothers to spend their billions to support right-wing candidates that barked and growled like sheep dogs to give voters little civilized option but to vote for “the lesser evil.” This will be President Obama’s epitaph for future historians. Orchestrating the election like a World Wrestling Federation melodrama, the Tea Party’s sponsors threw billions of dollars into the campaign to cast the President’s party in the role of “good cop” against stereotyped opponents attacking women’s rights, Hispanics and nearly every other hyphenated-American interest group.


In Connecticut, Senate candidate Linda McMahon spent a reported $97 million (including her earlier ego trip) to make her Democratic challenger look good. It was that way throughout the country. Republicans are pretending to wring their hands at their defeat, leaving the Democrats to beat up their constituency and take the blame four years from now.


Obama’s two presidential victories represent an object lesson about how the 1% managed to avoid rescuing the economy – and especially his own constituency – from today’s rush of wealth to the top. Future political annalists will see this delivery of his voters to his Wall Street campaign contributors control as his historical role. In the face of overwhelming voter opposition to the Bush-Cheney policies, the President has averted popular demands to save the economy from the 1%. Instead of sponsoring the hope and change he promised by confronting Wall Street, the pharmaceutical and health care monopolies, the military-industrial complex and big oil and gas, he has appeased them as if There is No Alternative.


If the Republican accusations are correct in accusing President Obama of steering America along the “European” course, it is not really socialism. It is neoliberal financial austerity, Greek style. His task over the next two months is to avoid using deficit spending to revive the economy.


The neoliberals whom he appointed as a majority on the Simpson-Bowles Commission already have inflated their trial balloon claiming that the government must balance the budget by slashing Social Security, Medicare and Medicaid, not by restoring progressive taxation. My UMKC colleague Bill Black calls this the Great Betrayal. “Only a Democrat can make it politically safe for Republicans who hate the safety net to unravel it” he notes.


Having appointed the Bowles-Simpson commission members who seek to shift the tax burden off business onto consumers, the President will pave the way for Bush-type privatization. In his first debate with Mitt Romney, Mr. Obama assured his audience that they were in agreement on the need to balance the budget (his euphemism for scaling back Social Security, Medicare and Medicaid). By christening this “the Great Bargain,” President Obama has refined Orwellian doublethink. It is as if George Orwell went to work on Madison Avenue.


Four years ago the economy stood at a potential turning point in the war of finance against labor and industry, President Obama could have mobilized public support for politicians willing to rescue hopes for prosperity. He could have appointed a Treasury Secretary and Federal Reserve chairman who would have used the government’s majority control of Citibank, Bank of America and other “troubled asset” holders to take these into the government sector to provide a public option. He could have written down debts to payable levels at only a fraction of the cost that was spent on rescuing Wall Street. Obama’s political genius was to avoid doing this and nonetheless keep his “street cred” as paladin defending the 99% rather than the 1%.


Having been elected with an enormous voter mandate, Mr. Obama could have reversed the sharp polarization between creditors who were pushing the 99%, industry and real estate, cities and states deeper into financial distress. Instead, his policies have enabled the 1% to monopolize 93% of America’s income gains since the 2008 financial crisis.


At a potential turning point in the direction the American economy was taking, rescue and change were averted. We have seen what will stand as a classic example of cynical Orwellian doublethink. Promising hope and change four years ago, President Obama’s role was to hold back the tide and divert voter pressure for change. He rescued the financial sector and the 1%, and sponsored the Republican privatization of health care instead of the public option, and to take $13 trillion onto the government balance sheet in the form of junk mortgages, largely fraudulent loans held by Fannie Mae and Freddie Mac ($5.2 trillion alone) and other casino capitalist gambles gone bad. Mr. Obama was Wall Street’s white knight.


The trick was to get re-elected as a Democrat rather than as a Republican sponsoring a health care plan crafted by the Koch Brothers’ Cato Institute, and putting Wall Street bank lobbyists in charge of the Treasury and (de)regulatory agencies. As a Blue Dog Democrat, how was President Obama made to look better than the alternative?


The answer is clear by looking at the alternatives being offered. The Republicans have played ball. They call him a socialist – not too far fetched when we look at how Europe’s Socialist, Social Democrat and Labour parties are backing austerity and supporting anti-labor policies, privatization sell-offs and other neo-oligarchic policies. That is what socialism seems to mean these days.


While corporate profits are recovering nicely, most peoples’ savings and the net worth of their homes is down. This is not economically sustainable. Something has to give – and voters are afraid that it will be they their wages and savings. As corporate pensions plans are being cut back or reduced in bankruptcy, their under-funding suggests that debts to retirees will not be honored – only those to Wall Street. Big fish eat little fish, and the 1% are devouring the 99%. Those who describe how this is happening are accused of class war.


It is not the old fashioned class war of industry against employees. It is a war of finance against the entire economy. And as Warren Buffett has noted, the financial class is winning. Instead of breaking up the banks, the five largest “Too Big to Fail” banks have grown even larger. With support from the White House, they used their TARP bailout money to buy smaller banks, turning the financial sector into a vast monopoly that is busy privatizing the election process so as to hold the government hostage.


What is collapsing is the idea of equity and fairness in the economy – and in the politicians that are remaking markets to benefit the 1%. Most voters opposed the bank bailouts of 2008. The Republicans were politically savvy enough not to vote for it, so that they could strike a populist stance. But Mr. Romney has not picked up this line of attack, even though it might have enabled him to defeat a president in whom much of whose constituency has lost confidence.


There is disillusionment and many young people, minorities and the “Democratic wing of the Democratic Party” have been busy writing op-eds and blogs that this time they were going to “vote with their backsides” – by staying home. And that is pretty much what the election returns showed. Their complaint is that President Obama has broken nearly every campaign promise he made to voters – but not a single promise he made to his big campaign contributors!


That is the essence of being a politician today: to deliver one’s constituency of voters to the campaign contributors. In this respect Barack Obama is America’s version of Tony Blair; or alternatively, Margaret Thatcher and Neville Chamberlain rolled into one. We need a new word to describe this – something more than simply “irony.”


It’s not just Mr. Obama, of course. It’s the Democratic Party leadership. So here’s the litmus test to watch: On what committee and at what rank will the Senate put Elizabeth Warren?


Will she be named head of the Senate Banking Committee? Will she even be on it? Is she an embarrassment to Democratic fund-raisers on Wall Street – or window dressing to help give the impression that the Party really is other than crypto-Republican.


What inspired the Occupy Wall Street movement a year ago was a spontaneous protest against not only President Obama but also the Democratic Party for its lack of real effort to stem the right-wing tide. The Democrats did not rush to the OWS defense, although some operatives tried to jump in front of the parade and steer it into the usual liberal blind alley. (They did not succeed!) Voters have expressed a wish for just the opposite policy than the Democrats’ rightward turn, but the American political system excludes third parties, not being based on proportional representation as in Europe.


“By their fruits ye shall know them.” The Democrats took labor unions, minorities and middle class voters for granted because they had nowhere else to go, thanks to Mitt Romney giving Mr. Obama wide room to move to the right wing of the political spectrum. This is the political wrestling match that is being scripted.


We can see the denouement. As in Britain, unionized public-sector labor is being singled out. Chicago Mayor Rahm Emanuel, former White House Chief of Staff, showed his colors (and incensed Progressive Democrats) last week by signing a contract with contractor of about 350 airport maintenance workers to cut back their wages by up to $5 an hour (from $15 to $10).


How will the “Not Blue Dog” Democrats respond? Will Elizabeth Warren, Bernie Sanders, Sherrod Brown, Tammy Baldwin and Alan Grayson in the Senate and House take on the President in opposing austerity and the appointment of yet more Wall Street lobbyists to his cabinet?


Here’s the dilemma the American president faces: Markets are shrinking, and consumers are having to repay debts they earlier took on during the heady Bubble Economy that crashed in 2008. Paying down these debts leaves less to spend on goods and services. Labor productivity is soaring – but not wages. While the bailout economy’s fruits are going to profits and paid out as interest and dividends, neoliberals are demanding that the retirement age be raised, not lowered, and that work hours be lengthened more, not shortened. Federal Reserve Chairman Ben Bernanke’s helicopter only hovers over Wall Street, not the rest of the economy.


The middle class that voted so strongly for Mr. Obama four years ago is being squeezed. To describe their plight, I expect the next four years to see the spread of a fresh vocabulary to describe what is happening: debt deflation and neofeudalism, while the classic terms rentier and oligarchy may become popular once again.


But neither party will use these words. Only a third party can do that. Right now its potential members are called “Independents.” A new title is needed for a new pro-labor, anti-militarist coalition that would restore the spirit of true reform, progressive taxation and the rule of law (that is, throw financial crooks in jail). The problem the economy faces is how to revive wages and consumer demand, and to write down personal debts, not government debt. Mr. Obama has joined with the Republicans in perverting the vocabulary to pretend that government is the problem, not his campaign contributors on Wall Street.





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Yep, that sums it up

Mehitabel's picture

pretty succinctly.  

I have friends who are more or less my age, with grown or nearly-grown kids who are still living at home because they're in college, or have finished college, and can't find work that pays well enough to allow them to move out and start their own lives in their own homes.  

One good friend with 21-year-old triplet daughters said to me the other day, only half-jokingly, that she expects that the girls will be living with them forever.  The girls all work, but they work at $10 per hour subsistence jobs.  That's all the work they can get.

This same woman and her husband are close enough to retirement age that they are at least thinking about what 'retirement' is going to mean to them.

If Social Security is gutted, and if Medicare is gutted, then here's what I predict.

"Retirement" to them is going to mean that they're going to keep working till they die.  They aren't going to be able to retire any more than their kids are going to be able to find anything other than subsistence jobs in the new neoliberal economy.

I am looking that same cold hard future in the face and have been ever since Obama glommed on to his wonderful "Grand Bargain" idea.  I've saved diligently for retirement, but I work in nonprofits and I've not been able to save all that much.  And what I *was* able to save was decimated in 2008 - I lost over a third of the retirement fund I'd built up.  (And oddly enough, Obama didn't step up to bail me out.  Shocking.)

So I knew I'd have to count on Social Security to augment my own retirement savings.   And even with Social Security, I've always known that my retirement income was going to be modest at best. 

With my social security income gone or greatly reduced -- well, I'm in the same boat as my friend.  Retirement  is no longer going to be an option for me.  The best I can hope for is that I'll be able to keep working basically forever and that I won't get too infirm to work or that I won't lose my job as a result of age discrimination.

I've had times in my life when my future looked bleak, but never has it looked bleaker - financially speaking - than it does today.  I have Barack Obama to thank for that.


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Mehitabel's picture

Good one.

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I foresee a lot of communes popping up in the next

Glinda's picture

twenty years, hopefully, as they will be the only way to suvive for many people.  Not unlike the "Golden Girls" setup.  So I guess the thing to do for some is to start finding friends around the same age who are in the same boat as you and hopefully with some common interests.  It's never too early to start working on it.

And when I say "you" I mean anyone in this situation, and I include myself in the same boat.

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I'm one of those boomerang kids

priceman's picture

and the parentals are not happy because I don't have the motivation for wage slavery or think it's going to lift me up the economic ladder(I know it won't but my parents believe that shit). I do odd jobs to keep my fragile existence at my residence which still "make me lazy." In a way, I'm already living under feudalism.

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Six easy steps

traveler's picture

This is a very likely scenario.

A victory by the democrats makes it possible. If Romney would have won we could expect the democrats to put up a strong resistance, to oppose it.




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I wish Greenwald and Hudson and all those smart

Big Al's picture

people on our side doing this work full time would focus on solutions now.  Reporting on the Petreaus affair and the Iran/US drone incident is all well and good but those are the same stories only different that we hear every year, all year.  From one thing to the next but no progress in taking down the oligarchy.  Nothing bold, no one will talk about the Federal Reserve/Private Central banking, or 9/11, or Article V Conventions, National referendums, etc.  Nothing outside of the box they put themselves in to maintain their own interests. Information, discussion, opinion are all good but sooner or later we have to get down to brass tacks.  I'm not criticizing, only wishing.    

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"the same stories" - I call it "where to put the swimming pool?"

Shahryar's picture

when I was a youngster, living in suburban New Jersey, my town decided to build a community swimming pool. The question of where to build it became a huge issue. Should it be put in the rich people's part of town, the poor people's part of town? Personally I figured rich people would be more likely to have their own swimming pools so a public pool should be in an area where it would be used most. The rich people (that is, rich white people) didn't want it in the poor part of town because...well, a) they (the rich ones) wouldn't go "there" and b) their money would be spent building a pool for "those people".

Anyway, it became a big deal and people weighed in on both sides as if it were the most important thing ever, replacing the previous most important thing ever.

Now this pool thing was, in fact, important because it was so tinged with racism but nobody talked about the racism angle. They hinted at it but didn't confront it.

Meanwhile the Vietnam War was going on but all people seemed to want to talk about was this swimming pool. Talking about the war was avoided, talking about racism was avoided. People ended up discussing the swimming pool in terms of traffic flow, trivializing the problem and getting worked up about the irrelevant aspects.

Then something else came up and the passion over the pool was forgotten as that next most important thing ever became the heated topic of discussion.

"But what about the pool?" I thought, "doesn't anyone care anymore?" It was then that I realized folks in my town (and by extension, the rest of the world) had no interest in really dealing with things that could be fixed, they just wanted to have little skirmishes that led nowhere.

It's comforting to know it's still the same, 45 years later.

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I tthink their ideas of solutions --

Cassiodorus's picture

involve some sort of popular uprising which they themselves can only be a small part of.  Hudson, as I recall, tried to do a teleconference with the participants in Occupy LA, though I don't think it went through. 

You can see my idea of a solution in the postcapitalism diary.

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Your solution

shaharazade's picture

is my solution but face it we are the 'far left' fringe. At this point all most people want is relief. They have been besieged for decades with this latest old/new crap, regardless of their 'demographics' and ideology. When and if the uprising ever occurs most of the people involved won't give a rats ass about  economic theories and the fail of capitalism. They just want what humans always want a way to make a buck ie: live decently without being jerked around or killed/tortured or otherwise screwed over by the greediest monkeys. Survival isn't enough, however people through out history, look to something more then a struggle against the constant onslaught of Visigoth's and Roman's something more then mere survival.  We're dreamers whether were viscous and greedy or altruistic humanist's.At least those that are not in total; and absolute survival mode.

I got nothing against any system that offers me a way live decently . I don't want to have to tie myself to any of these ism's. They all suck when implemented by the everlasting, always  power hungry biggest predictors among us, who regardless of the system end up in power . Life and the  societies which people globally have to bend to and live under is instinct driven and reactionary.. Now it operates on fear, fear of the even worse evil amongst us.. In other words I know I'm fucked here but how do I stop this. When it get's bad enough people react and they actively with draw consent as the status quo just plain isn't tolerable. (It doesn't pay a livable wage and kills/tortures you and your community too boot.) 

I think what your saying is the solution but in reality how do people,  ordinary people  get to the point where they can even look at capitalism as the problem behind their misery and destruction, which they face daily in the here and now we all live in?  When I was young'un fresh out of reading Camus, Marx and Che , into being counterculture,and a believer in socialism as the answer to all societies ills I came to a wall.   I went to a rally held at the former zoo in Portland where  the luminaries of the left 'revolution' were putting on a show. They got in the old empty monkey cages and literally pounded their chests. I thought how are these assholes any better then the ones in power? It was an eye opener on the human  lust for power and the folly of ideology be it left or right.

I don't know the solution, I see the problem as everyone with half a brain in there head does. My main concern at this point in our twisted NWO is how in the hell do we get people ordinary people of good spirit from diverse demographics and cultures and religions and knowledge to recognize basic inalienable truths. They do seem able to rise to the occasion historically, now and again.

Capitalism by any other name is just another form of  the dark anti-humanist, big killer monkey that needs to be over and over again beat back by people globally of good spirit.  Same as it always was. Can we do it yes we can! Do I believe ? Well I do no one thing this fight isn't new and it cannot be won using theoretical systems of dueling economists. It's going to boil down to will humans globally accept the inevitable darkness or throwing out the assholes who always proclaim their inevitability out again and again. So I say how do we throw these fuckers out globally is the first step.

Capitalism is going down it doesn't pay in any way but the problem I see is how do make people everywhere aware that we as humans are not limited to solutions provided by the darkest visions offered up by these monkey's who's only interest is in power and winning. Be it intellectual winning as in dueling theories of useless ism's or the livability of our world through both the human constructs of politics/culture and the reality of what we are killing  physically as well as spiritually. By spirit I mean the  human ability to look at the whole and realize we are part of it.  As for American politic's forget about it. Same with capitalism it's the fatal flaw that keeps the greedy bastards in power no matter what they call themselves.                



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Michael Hudson is with Steve Keens debt jubillee...

priceman's picture

which is an immediate solution(we have members of this site that woudl directly benefit), but they don't have any political power which is the problem and solution we need.

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No power

shaharazade's picture

no recognition as even a voice that's not mocked by both sides of the false breakdown. As far as political power goes knock your brains out but it's a big waste of time and brains. We need to stop defining ourselves as a legitimate appendage to the insanity that currently is supposedly in opposition to the worst evil ever... Stop believing there is any difference they are one and the same. They mean us harm as humans not to mention the planet,  and are united in their by-partisan grip of power. Debt jubilees will never occur nothing will help us but people who stand up and say enough.How do we get them to do this. I have no interest in anything else no compromise with the more evil or whatever they call their  counterpart across the isle. People somehow have always managed to see beyond the reality the nasty assholes through out history  present as reality  or inevitable and I just hope people globally take them on. they are not inevitable, all they offer is fail and inhumanity and at this point the destruction of our home the earth all for what?   

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No political power means no political power for anyone

priceman's picture

I don't know why you've read into my comment that I am hoping for some divine political strategy from the Democrats or Republicans to do this; I'm just saying ideally, a debt jubilee will work and has worked historically and Steve Keen does have a plan if there would ever be anyone to use it. I am saying Michael Hudson or Steve Keen are not in power and won't be, but they have the solutions if they were. But we would have to force it outside of the political system to gain political power to make it happen, because no one is talking about it at all in either party.

I don't believe historically that political power really comes from within the system. I don't know what in my writing makes you think that was what i was saying but it certainly was not what I meant. I'm just saying we have no one that is even talking about the proven solutions we need like a debt jubilee and a job guarantee etc. they're all deficit terrorists.

I certainly hope that clears it up.

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Sure does

shaharazade's picture

I never thought you did. I just am so bummed out about what we won that I'm not even making sense. I just can't operate under illusions delusions or any solutions being even considered. I mean Simpson? Bowles?  You think the vicious bankster's this administration is made up of or even the old RW ideologists they dig up like Simpson are going to ever consider a debt jubilee? No way !their main source of profit is off  bundling and trading  our debts and our global misery. Sorry to be so weird but I think the election and what  the people won is so bogus it hurts. Austerity is the way forward and we all know that it's inevitable and path to America ruling the world and is for the greatest glory of the money makers and killers as they  are ordained to inherit the world. We will be lucky if they don't sell SC outright to China and import workers from Foxconn or our debtor's prisons as they won't be a profit loss. Cruel and vicious including the  Democratic monkey's we get to vote for and elect.



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Good to know. I know. It's a Wall St government

priceman's picture

I know they won't consider it. I am bummed out too. I understand. They are indeed bungling and trading and profiting of our debt and misery. I just wanted to make sure you didn't think I have any hope in this administration, because I don't or Congress really. I have hope in people and solutions by themselves like the Rolling Debt Jubilee just announced by Occupy.

My comment was more like "If Steve Keen were presdient....Debt Jubilee on Friday..etc. :D


wyclef jean "if i was president"

Thank you, my friend.

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