Obama is not a Socialist

It's a testament to just how narrow the realm of acceptable public discourse about the economy (and politics) has become when you hear so-called serious news outlets question whether Obama is a socialist. But that's just what the mainstream media (MSM) is currently debating (I assume that means no celebrities have shaved heads or plumbers became jounalists this week).

This type of demagoguery, usually reserved for the likes of Fox News and Republican presidential campaigns, has become a serious topic of discussion on outlets such as the New York Times and ABC. There seems to be, among the MSM, a serious misunderstanding (either involuntary or willful) of what socialism is. It is not difficult to conclude that both Obama's budget and his free market tendencies quickly disqualify such a label. Both the NYT and ABC, often accused of being bastions of liberal propaganda, are not so subtely pandering to their corporatist agenda. Not only is this sort of labeling inaccurate and unfair (to both Obama and socialists), but is serves to stifle honest discussion of how to deal with the current economic crisis when the last thing we need is ideolgolical handcuffs preventing our government from doing what it should have done in November - nationalize the banks. Ironically, if we had done that from the start of the crisis, less capital would have been needed.

Interviewing with the NYT aboard Air Force One yesterday, Obama was asked the socialist question. He dodged the question but called back after the interview. His response is below:

"Just one thing I was thinking about as I was getting on the copter. It was hard for me to believe that you were entirely serious about that socialist question. I did think it might be useful to point out that it wasn’t under me that we started buying a bunch of shares of banks. It wasn’t on my watch. And it wasn’t on my watch that we passed a massive new entitlement – the prescription drug plan without a source of funding. And so I think it’s important just to note when you start hearing folks through these words around that we’ve actually been operating in a way that has been entirely consistent with free-market principles and that some of the same folks who are throwing the word socialist around can’t say the same."

And here is how it was discussed on ABC's This Week:

A Few thoughts on Obama's Speech

Several of the comments/ideas in President Obama's speech to Congress this past Wednesday (2/25/09) need clarification - for now I will focus on one. Throughout his campaign Obama placed much of the blame for the current economic crisis on "the failed policies of George W. Bush." Former President Bush certainly does warrant a considerable share of the guilt for his lack of action and his vow "to spread the dream of home ownership," which played a large role in artifically inflating housing prices. But, a name often ignored is that of Bill Clinton. While the ideology of (mostly) free market economics was brought back from the grave of Hoover by Reagan, it was Clinton that added legal muscle. In 1999, he teamed with Congressional Republicans to repeal the Glass-Steagall Act of 1933, which in effect was enacted by FDR in his famous 1st 100 Days to separate the fate of commercial banks and the stock market, and was the result of the collapse of the banking system, as well as speculation and corruption in the banking and stock markets. The 1999 Gramm-Leach-Bliley Act, as it was called, essentially de-regulated the banks, and enabled them, among other things, to invest capital in the stock market - once again directly linking the volatile stock market to the banking system and the insurance industry. In other words, any signifacant plunge in any of those markets would have an immediate and catastrophic impact throughout the US and global economy. The facts outweigh Clinton's deflection of his role.

Even worse for Clinton, as Time Magazine points out in their piece on the 25 People to Blame for the Financial Crisis, he "also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation. In 1995 Clinton loosened housing rules by rewriting the Community Reinvestment Act, which put added pressure on banks to lend in low-income neighborhoods." Adding to his track record of de-regulation, Clinton also signed NAFTA and the Telecommunications Act of 1996 into law setting off a new and unprecedented era of de-regulation.

All this creates an uncomfortable situation for Obama, who was quick to highlight Hillary's husband's role in NAFTA during the primary campaign, but not since. Perhaps he does not want to seem hypocritical considering he surrounds himself with economic advisers (both before the election and after) who adhere to the Chicago School Friedmanite Free Market ideology. Our current Secretary of the Treasury Tim Geithner, and head of the National Economic Council Larry Summers were both proponents of the 90s free market capitalism, and Larry Summers was by Clinton's side when he repealed the Glass-Steagall Act, and his advice played a key role in keeping regulation far from the derivatives market - both of which could have gone a long way to preventing the current crisis. In sight of the facts, it's not very comforting to hear Obama claim that Summers' advice "will be the foundation of all my economic policies."