NY Times, February 8, 2009
Op-Ed Columnist
Slumdogs Unite!
By FRANK RICH
SOMEDAY historians may look back at Tom Daschle’s flameout as a minor
one-car (and chauffeur) accident. But that will depend on whether or not
it’s followed by a multi-vehicle pileup that still could come. Even as
President Obama refreshingly took responsibility for having “screwed
up,” it’s not clear that he fully understands the huge forces that hit
his young administration last week.
The tsunami of populist rage coursing through America is bigger than
Daschle’s overdue tax bill, bigger than John Thain’s trash can, bigger
than any bailed-out C.E.O.’s bonus. It’s even bigger than the Obama
phenomenon itself. It could maim the president’s best-laid plans and
what remains of our economy if he doesn’t get in front of the mounting
public anger.
Like nearly everyone else in Washington, Obama was blindsided by the
savagery and speed of Daschle’s demise. Conventional wisdom had him
surviving the storm. Such is the city’s culture that not a single
Republican or Democratic senator called for his withdrawal until the
morning of his exit. Membership in the exclusive Senate club, after all,
has its privileges. Among Daschle’s more vocal defenders was Bob Dole,
who had recruited him to Alston & Bird, the law and lobbying firm where
Dole has served as “special counsel” when not otherwise cashing in on
his own Senate years by serving as a pitchman for Pepsi and Viagra.
In New York, editorial pages on both ends of the political spectrum, The
Wall Street Journal and The Times, called for Daschle to step down. But
not The Washington Post. In a frank expression of the capital’s
isolation from the country, it thought Daschle could still soldier on
even though “ordinary Americans who pay their taxes may well wonder why
Mr. Obama can’t find cabinet secretaries who do the same.”
As Jon Stewart might say, oh those pesky ordinary Americans!
In reality, Daschle’s tax shortfall, an apparently honest mistake, was
only a red flag for the larger syndrome that much of Washington still
doesn’t get. It was the source, not the amount, of his unreported income
that did him in. The car and driver advertised his post-Senate immersion
in the greedy bipartisan culture of entitlement and crony capitalism
that both helped create our economic meltdown (on Wall Street) and
failed to police it (in Washington). Daschle might well have been the
best choice to lead health-care reform. But his honorable public record
was instantly vaporized by tales of his cozy, lucrative relationships
with the very companies he’d have to adjudicate as health czar.
Few articulate this ethical morass better than Obama, who has repeatedly
vowed to “close the revolving door” between business and government and
end our “two sets of standards, one for powerful people and one for
ordinary folks.” But his tough new restrictions on lobbyists (already
compromised by inexplicable exceptions) and porous plan for salary caps
on bailed-out bankers are only a down payment on this promise, even if
they are strictly enforced.
The new president who vowed to change Washington’s culture will have to
fight much harder to keep from being co-opted by it instead. There are
simply too many major players in the Obama team who are either alumni of
the financial bubble’s insiders’ club or of the somnambulant
governmental establishment that presided over the catastrophe.
This includes Timothy Geithner, the Treasury secretary. Washington hands
repeatedly observe how “lucky” Geithner was to be the first cabinet
nominee with an I.R.S. problem, not the second, and therefore get
confirmed by Congress while the getting was good. Whether or not this is
“lucky” for him, it is hardly lucky for Obama. Geithner should have left
ahead of Daschle.
Now more than ever, the president must inspire confidence and stave off
panic. As Friday’s new unemployment figures showed, the economy kept
plummeting while Congress postured. Though Obama is a genius at building
public support, he is not Jesus and he can’t do it all alone. On Monday,
it’s Geithner who will unveil the thorniest piece of the economic
recovery plan to date — phase two of a bank rescue. The public face of
this inevitably controversial package is now best known as the guy who
escaped the tax reckoning that brought Daschle down.
Even before the revelation of his tax delinquency, the new Treasury
secretary was a dubious choice to make this pitch. Geithner was present
at the creation of the first, ineffectual and opaque bank bailout —
TARP, today the most radioactive acronym in American politics. Now the
double standard that allowed him to wriggle out of his tax mess is a
metaphor for the double standard of the policy he must sell: Most
“ordinary Americans” still don’t understand why banks got billions while
nothing was done (and still isn’t being done) to bail out those who lost
their homes, jobs and retirement savings.
As with Daschle, the political problems caused by Geithner’s tax
infraction are secondary to the larger questions raised by his past
interaction with the corporations now under his purview. To his credit,
Geithner, like Obama, has devoted his career to public service, not
buckraking. But he still has not satisfactorily explained why, as
president of the New York Fed, he failed in his oversight of the
teetering Wall Street institutions. Nor has he told us why, in his first
major move in his new job, he secured a waiver from Obama to hire a
Goldman Sachs lobbyist as his chief of staff. Nor, in his confirmation
hearings, did he prove any more credible than the Bush Treasury
secretary, the Goldman Sachs alumnus Hank Paulson, in explaining why
Lehman Brothers was allowed to fail while A.I.G. and Citigroup were spared.
Citigroup had one highly visible asset that Lehman did not: Robert
Rubin, the former Clinton Treasury secretary who sat passively (though
lucratively) in its executive suite as Citi gorged on reckless risk.
Geithner, as a Rubin protégé from the Clinton years, might have recused
himself from rescuing Citi, which so far has devoured $45 billion in
bailout money.
Key players in the Obama economic team beyond Geithner are also tied to
Rubin or Citigroup or both, from Larry Summers, the administration’s top
economic adviser, to Gary Gensler, the newly named nominee to run the
Commodity Futures Trading Commission and a Treasury undersecretary in
the Clinton administration. Back then, Summers and Gensler joined hands
with Phil Gramm to ward off regulation of the derivative markets that
have since brought the banking system to ruin. We must take it on faith
that they have subsequently had judgment transplants.
Obama’s brilliant appointees, we keep being told, are irreplaceable. But
as de Gaulle said, “The cemeteries of the world are full of
indispensable men.” You have to wonder if this team is really a
meritocracy or merely a stacked deck. Not only did Rubin himself serve
on the Obama economic transition team, but two of the transition’s
headhunters were Michael Froman, Rubin’s chief of staff at Treasury and
later a Citigroup executive, and James S. Rubin, an investor who is
Robert Rubin’s son.
A welcome outlier to this club is Paul Volcker, the former Federal
Reserve chairman chosen to direct Obama’s Economic Recovery Advisory
Board. But Bloomberg reported last week that Summers is already freezing
Volcker out of many of his deliberations on economic policy. This sounds
like the arrogant Summers who was fired as president of Harvard, not the
chastened new Summers advertised at the time of his appointment. A team
of rivals is not his thing.
Americans have had enough of such arrogance, whether in the public or
private sectors, whether Democrat or Republican. Voters turned on Sarah
Palin not just because of her manifest unfitness for office but because
her claims of being a regular hockey mom were contradicted by her Evita
shopping sprees. John McCain’s sanctification of Joe the Plumber
(himself a tax delinquent) never could be squared with his inability to
remember how many houses he owned. A graphic act of entitlement also
stripped naked that faux populist John Edwards.
The public’s revulsion isn’t mindless class hatred. As Obama said on
Wednesday of his fellow citizens: “We don’t disparage wealth. We don’t
begrudge anybody for achieving success.” But we do know that the system
has been fixed for too long. The gaping income inequality of the past
decade — the top 1 percent of America’s earners received more than 20
percent of the total national income — has not been seen since the
run-up to the Great Depression.
This is why “Slumdog Millionaire,” which pits a hard-working young man
in Mumbai against a corrupt nexus of money and privilege, has become
America’s movie of the year. As Robert Reich, the former Clinton labor
secretary, wrote after Daschle’s fall, Americans “resent people who
appear to be living high off a system dominated by insiders with the
right connections.”
The neo-Hoover Republicans in Congress, who think government can put
Americans back to work with corporate tax cuts but without any
“spending,” are tone deaf to this rage. Obama is not. It’s a good thing
he’s getting out of Washington this week to barnstorm the country about
the crisis at hand. Once back home, he’s got to make certain that the
insiders in his own White House know who’s the boss.
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