Monday, March 30, 2009

Is Barack Obama the Bob Rae of the United States?

It may seem a preposterous proposition but the political perils in the path of Barack Obama are remarkably similar to the hazards that Bob Rae confronted during his years as an NDP premier of Ontario.

Obama is in power during a period of deep economic crisis just as Bob Rae was in the early 1990s. Both leaders were swept into office by electorates that wanted to be rid of the old ways of doing things and were seeking a new and progressive way forward.

It’s hard to recall this so many years later, but when Bob Rae brought the NDP to power in September 1990, there was a surge of hope in the province. The new premier literally threw open the doors at Queen’s Park and invited everyone into the Ontario legislative building for a vast party. Rae’s job approval ratings surged so that when his face showed up on the giant screen at the Sky Dome at a Blue Jays game, the crowd cheered.

Rae was an articulate, personable young man who told people the truth in ways so different from the obfuscations of the Tories and the tortuous rhetoric the Liberals offered to defend the scandal-ridden government of David Peterson.

The great question for both Rae and Obama when they were elected was this: on whose behalf would they govern?

On the night the NDP was elected, September 6,1990, Bob Rae told a jubilant crowd that he would govern on behalf of all Ontarians. He was making a fateful choice. He was reaching out to the business community in the province and making it known that he wanted the approbation of both small and big business. From day one, Rae was shifting away from the NDP platform which included such reforms as the creation of a system of public auto insurance of the kind that had been implemented in Western Canada by social democratic governments.

During a very difficult recession, Rae was trying to migrate to the political centre, a space which would allow him to expand his left-wing political base. Over his years in power, Rae tried a great many things to make this work. He brought in labour reforms that banned strike breaking and eased the path for the formation of unions. His government established an employment equity commission in 1991 and two years later it introduced affirmative action to increase the numbers of women, aboriginals, non-whites and disabled persons in the public sector.

Rae’s government tried initially to sustain public spending to protect Ontarians from the recession and then did a U-Turn, drastically slashing spending to control the deficit. It ditched the plan to establish public auto insurance on the grounds that the economic climate was too negative and that the move would result in reduced employment in the insurance industry. In 1993, the government introduced its notorious Social Contract, which re-opened public sector contracts, froze the salaries of public sector employees and imposed “Rae Days”, unpaid days off for public employees which amounted to pay cuts. Key trade union leaders denounced the Social Contract as a betrayal.

Much of labour was furious with Bob Rae. The people who made up the NDP’s left-wing political base were disillusioned. And at the end of it all, despite his years of courting business, the business leaders prepared to support Rae could have assembled in a telephone booth. What Bob Rae did was to stake out a position in the political centre to which no one wanted to go, neither left nor right. From “dead centre”, Rae led his party into the 1995 election and political oblivion. The NDP fell to seventeen seats and third place in the Ontario legislature, its vote percentage falling from 37.6 in 1990 to 20 in 1995.

What about Barack Obama? Is he en route to becoming a “dead centre” centrist?

Hopefully not, but the danger signs are there. On a political stage much vaster than the one Bob Rae stood on, Barack Obama generated hope and the promise of change among millions of Americans including African Americans, Latinos, the young and the well-educated. He won a sweeping political victory, recasting the political map of the United States in the process.

From the beginning, Barack Obama campaigned as a centrist, promising to govern on behalf of all Americans and pledging to purge Washington of its poisonous partisanship. Working with Republicans was a key part of Obama’s political agenda from the outset.

At the time of his electoral victory, Barack Obama’s base of political support was wider than that of Bob Rae and its make-up differed in important ways. In addition to a wide swath of working class support, especially among African Americans and Latinos, Obama enjoyed considerable backing from highly educated and wealthy white voters. He also had sizeable support from elements of the business community including that of much of Wall Street. Needless to say, Bob Rae was not backed by Bay Street. It’s noteworthy that Obama’s voting base was quite different from that of Franklin D. Roosevelt during the New Deal years of the 1930s. FDR enjoyed a more solid white working class vote, backing from white segregationists in the South, a large farmer vote, but less backing from the top ranks of American business.

How does Obama make his coalition work? Does he lean in favour of the wage and salary earners in his base or does he pay heed to his Wall Street backers?

Obama ran on a program that promised broad change, including a health care plan (not universal medicare) that would ensure that every American has coverage, and an environmental policy that would bring the United States into the fight against climate change and that would reduce American dependence on imported petroleum. He also pledged, rather vaguely, to overhaul the American educational system to provide high quality education for all students. On taxes, he promised tax cuts for 95 per cent of income earners and modest tax increases for the top 5 per cent.

Hope was the central message, but whose hopes would be realized, and at whose expense? That was kept deliberately unclear in the Obama message.

Just over two months after Obama was sworn into office, the United States is seething with populist rage. Storm clouds have been forming ever since the bailouts of financial firms began in the fall. What caused the maelstrom to burst were payments of bonuses totaling $165 million to executives of the American International Group (AIG) a couple of weeks ago, in the wake of Washington’s massive bailout of AIG which cost more than $170 billion. Everywhere across the country, ordinary Americans were furious. With rising anxiety, they had numbly accepted the vast Wall Street bailouts, and the talk of trillions more dollars needed to get the financial sector and the auto industry back in business. But the idea of the bozos who had presided over the AIG plunge into toxicity receiving handouts of a million dollars each, and in some cases more, blew the lid off.

I was in California when the hurricane hit. On television, on the front pages of papers in small and large cities, in conversations in cafes, the fury was everywhere. CNN covered a busload of working people, some of them political activists, going on a tour of the palatial homes owned by AIG executives, to deliver the message to the doorstep that they were angry. They were met by security guards who halted them and so they delivered their message to the Pinkerton police. CNN titled the segment “The Lives of the Rich and Shameless.”

I couldn’t believe the difference in tone when I got back to Canada. There is plenty of anger among those losing jobs here, but since Michael Ignatieff killed the Liberal-NDP coalition and lined up with Stephen Harper on the budget the lid has been on. In Canada, so far, the anger is subterranean, more sullen than overt. And the Canadian media is about as populist as a wet firecracker.

American populism extends from left to right. As has been the case for decades, when it rears its head, populism can be anti-capitalist one moment, then racist. It can demand fairness for all one day, and can recoil in fury against the guy next door who is living on the dole the next. During the Great Depression of the 1930s, populism showed up under the banner of the Congress of Industrial Organizations (CIO), with its drive to unionize industrial workers, that of Louisiana’s Huey Long, as well as that of the fascistic Father Charles Coughlin. And Coughlin was adept at sounding ultra radical as when he urged his audience to “attack and overpower the enemy of financial slavery.”

The problem for Obama is that many of his top officials are in bed with Wall Street. Treasury Secretary Timothy Geithner, to name one prominent case, has been a Wall Street enabler for years. Mentored by Clinton era Treasury Secretaries, Robert Rubin and Lawrence Summers, Geithner was named president of the Federal Reserve Bank of New York in 2003. He was critically involved in the sale of Bear Stearns, in the bailout of AIG and the decision to let Lehman Brothers go down.

He was the principal architect of the Obama administration’s recent move to partner up with the private sector to buy up the toxic assets of Wall Street financial firms. The move, which was wildly popular on Wall Street, sparked a major stock market rally.

Let’s be clear about one thing. While right-wing populist ranters such as Rush Limbaugh salivate about the evils of big government, there is nothing big financial firms and other top corporations love more than handouts of tax dollars to them. The Obama administration’s policy toward the financial sector, so far at least, has been to shovel out the money while leaving the private bankers in charge. The president is so afraid of nationalizing the banks, a policy favoured by economist and New York Times columnist Paul Krugman among others, that he is willing to run the risk of putting Wall Street back in the driver’s seat while leaving the tax payers stuck with a mountain of bad debts.

The same thing is almost certain to happen with the auto industry. While Obama was smart enough to offer up the head of GM’s Chief Executive Officer Rick Wagoner on a platter before he bails out General Motors and Chrysler, it will be the workers and the retired auto workers who are going to pay the real price in lost jobs, devastated communities, lower pay, and lower pensions. The president insists, as in the case of the financial sector, that Washington doesn’t want to run the auto companies. What that means is that the workers and the tax payers will shoulder the burden and the private owners will be put back on the road to profitability and riches.

Barack Obama’s much touted promise to transcend the partisan divide forced his administration to cut $80 billion from his economic stimulus package. The cuts came in plans to spend money on school construction, on aid to the unemployed to maintain their health care and in the provision of food stamps, among other things. In return for these cuts to his plan, the president failed to win the support of a signal Republican in the House of Representatives, and wound up with the backing of only a handful of Republican Senators.

An exceptionally skilled communicator, Barack Obama is well aware of the anger now felt by Americans. He knows this anger could provide fuel for him to make basic, progressive reforms. But he is well aware that the anger could invigorate the Republicans and energize them for a populist, anti-Big Government, pro-tax cutting run in the midterm Congressional elections in 2010.

Barack Obama is trying to stay right in the centre, just where Bob Rae tried to stay. He could pull it off. But his constant yielding to Wall Street, and his fear of being labeled a foe of free enterprise is making him pay a huge price, both in the nature of the stimulus and bailouts he is offering, as well as in putting on hold programs to help ordinary Americans with the health-care, education, housing, reconstruction of cities, and provision of jobs they so desperately need.

Let’s hope he doesn’t end up in “dead centre” in the way Bob Rae did.


Ian said...

Great post, but it's worth mentioning the fall bailouts were not Obama's, but last minute no-strings-attached Bush bailouts.

ken said...

Rae's refusal to implement public auto insurance was also a result of provisions under NAFTA in which private insurers could demand compensation for lost profits should their business be taken over by the publc insurer.

Anonymous said...

Bob Rae could have pulled it off too, I imagine, if he'd had the power of the presidency, the Treasury Department, the Federal Reserve, etc. etc. etc. If only he could have sold billions in T-Bills (O-Bills? Bob-Bills?)to China!

Comparing a provincial premier to the US president seems more than a bit of a stretch.

My Cat Knows Better said...

It appears as though the strategy of both the Liberals and Conservatives, will be to wait, follow any lead of the Americans, and hope that there will be some pieces of the economy left to pick up when the dust clears. Not much of a strategy to be sure. Harper is in London taking credit for Canada having the strongest banking system in the world, but here at home there are daily plant closures, with their attendant job losses and the level of government inaction is without precedent.

Anonymous said...

Surprised, eh! You shouldn’t be. Obama’s voting record in the Senate was conservative. He was great at cobbling together coalitions of centre and right Republicans and Democrats – and marginalizing the few left-leaning Democrats there were.
His campaign was filled with high-sounding rhetoric and little substance. His stance on NAFTA? Just campaign positioning, his campaign manager said.
Just a week ago, he wondered why Americans were so upset at the trillion dollar,no-strings-attached bank bailout since the government was spending heavy bread on other items like the war in Iraq. In other words, he was looking for a distraction and he’s found it. It’s all there: workers taking home sizable pay cheques while pensioners get the same plus medical and dental benefits. Obama knows that breeds envy and anger amongst the unemployed and underemployed, so he talks about sacrifices or restructuring. It makes him look tough and decisive, despite the fact that cutting jobs, wages and pensions merely weakens the economy.
No, Obama was never left-of-centre. Was he like Bob Rae? Nope. Just a black version of JFK.

deejay said...

What nobody seems to be considering is that the Fed is owned by its 12 shareholder State Banks which in turn are owned by private shareholder banks notably CitiBank, Bank of America, Morgan Chase, Watchovia etc. which in turn are owned by individual shareholders, trust funds etc.
Consequently the Fed under Bush had no option but to bail out its shareholders when they were caught out in Fraud and insane greed initiated by the Fed under Greenspan.
Obama has no option but to continue the bailouts until the Banks books are fat again and the old system is re-established.
Consequences be damned!
I don't see much connection to the Bob Rae dilemna.

Anonymous said...

an excellent comparison. Still, Obama might succeed whee Rae failed because the Democratic political culture is much more potent than the NDP social democratic political culture and doesn't face the knee jerk reaction that Rae faced from business. I talked with Lynn Williams recently at a conference we were both at, and he said Rae's major mistake was in imagining the business community would support him. Would you believe, Willians understood class conflict.

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