America’s “kumbaya” moment has come and gone. The nation’s brief feel-good era initiated by Barack Obama’s stirring post-partisan rhetoric–and fortified by John McCain’s classy concession speech–has dissolved into sectarian bickering more appropriate to dysfunctional Iraq than the world’s greatest democratic republic.
Yet little of the shouting concerns the fundamental economic issue facing the U.S. today: the decline of upward mobility and income growth for the working and middle classes. Instead we have politicos battling over two versions of “trickle down” economics.
The Democrats seem bent on installing a permanent ruling mandarinate alongside a small financial aristocracy. The Republicans, meanwhile, simply want to help the rich hold onto as much of their money as possible.
Neither approach will improve prospects for the vast majority of Americans. The Bush Administration policies of low taxes–for the upper classes–and less regulation helped engender a massive asset bubble unsupported by economic fundamentals. This ultimately drove up both the current account and federal deficits and led to the severe Great Recession.
The Obama “trickle down” is, sadly, not all that different from the Bush-Paulson strategy. Like its predecessor, it endorses the bailout of giant financial institutions as the linchpin of its economic policy. It is, simultaneously, profoundly anti-democratic and anti-capitalist.
Other aspects of the Obama policy seem likely to prop up Wall Street traders at the expense of the rest of us. The administration’s big “cap and trade” proposals could prove more advantageous to well-heeled “carbon traders” than to the environment. The other big winners may be Silicon Valley venture capitalists, who– increasingly bereft of their own ideas for making money–hope to cash in on Washington-subsidized energy schemes.
Of course, not all Democrats have sold out. Sens. Byron Dorgan, D-N.D., and John Tester, D-Mont., have expressed opposition to bailing out “too big to fail” institutions. New York Attorney General Andrew Cuomo has been fearless in unveiling the enormous Wall Street bonuses–over $32.6 billion last year– handed out as firms suffered $81 billion in losses and almost drove the world economy to ruin.
Unfortunately, these are exceptions. Illinois Sen. Dick Durbin recently admitted that the banks remain “the most powerful lobby on Capitol Hill,” adding that they “frankly own the place.”
So far in 2009 the Democrats have netted nearly 60% of all campaign contributions that have come from the financial industry, now the largest sector in terms of donations. The biggest donations have gone to such influential Democrats as Sen. Charles Schumer and his sidekick, newly appointed Sen. Kirsten Gillibrand, from New York; Sen. Chris Dodd D-Conn., and Majority Leader Harry Reid D-Nev. Schumer, the Street’s leading vassal in Congress, has emerged as the rising star in the Democratic leadership. If Majority Leader Reid loses his seat–as is now possible, according to polls in Nevada–Wall Street’s main man could well end up a future Majority Leader.
Some Democrats try to have it both ways, playing populists for the peanut galleries but getting cozy with the industry when it matters. Massachusetts Rep. Barney Frank, the House Financial Services Chairman, talks tough but has a history of friendly relations with financial powerhouses. One of Frank’s own top assistants, Michael Pease, just went to work for the biggest winner since taking TARP bucks, Goldman Sachs. As left-winger blogger Glenn Greenwald put it recently: ”The only way they can make it more blatant is if they hung a huge Goldman Sachs banner on the Capitol dome and branded it onto the foreheads of leading members of Congress and executive branch officials.”
In the end the faux populist Democrats end up with policies that make Ronald Reagan’s “trickle down” seem downright Leninist. Harry Truman once quipped that “There should be a real liberal party in this country, and I don’t mean a crackpot professional one.” Sadly, it’s increasingly the latter.
The hypocrisy should open a path for the Republicans as wide as the Grand Canyon. But the ill-named Party of Lincoln still seems to think that the path to power lies in the tired old formula of ultra-patriotism, guns, abortion and religious rectitude. Screaming “socialism” may awaken the spirits of some on the old right, but it’s hard to make a convincing case when George Bush socialized banking and grew the deficit.
You certainly can’t trust big-business conservatives to stop bonuses for the TARP babies, particularly the 25 financial firms deemed “too big to fail” by the likes of Ben Benanke. Give GOP big-business leaders higher stock prices, and they will follow you anywhere. Only a few–such as Sen. Charles Grassley, R-Iowa,–have shown they are truly serious about the free market or defending the interests of the regular taxpayer.
Given this sad political picture, the best hope now is to build an alternative perspective that focuses on the basic economic issues. This would not be the media celebrated movement of moderates–Democrats-lite and Republicans-lite–who seek kumbaya through compromise. It would, instead, require a radical third tendency–neither strictly left or right–that would draw on long-term American priorities and values.
These new radicals would focus on basic issues like improving infrastructure, and primary education and bolstering the nation’s productive economy. Their inspiration would come from a long tradition of federal successes–from the Homestead Act and the WPA to the Interstate Highway and the space program. They would view the financial crisis not as an imperative for protecting the well-connected but for financial reform, decentralization and innovation.
Such an approach would address what the British author Austin Williams calls our “poverty of ambition.” Americans historically have rejected a future constrained by entrenched hierarchies. Most, I believe, would support spending money and paying taxes, if it was spent to achieve big things that would lead to a greater, more widespread prosperity and opportunity.
Just imagine if the upward of $1 trillion spent guaranteeing Goldman Sachs and Citigroup executives giant paydays had instead gone into roads, bridges, subways, buses, port development, skills training, energy transmission lines and basic scientific research. And imagine if instead of protecting Citigroup and Bank of America, we encouraged stronger local banks and solvent financial entrepreneurs to fill the breach left behind by gross failures.
Such an approach may seem extreme, but it might have wide appeal. We know, for example, that the TARP bailout is widely unpopular. Indeed, according to one survey taken earlier this year, Americans oppose continuing bailouts for banks by better than 2 to 1.
As I travel the country, I find anger is deepest among business owners who find securing loans increasingly difficult nearly a year after the original bailout. Even as the economy slowly recovers, this anger will become more pronounced with the coming bonuses doled out to those at bailed-out firms. As Sen. Grassley puts it: “My people ask, ‘When are these people going to be put in jail?'” Instead we’re paying for them to stay at the Ritz.
This article originally appeared at Forbes.
Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History. His next book, The Next Hundred Million: America in 2050, will be published by Penguin early next year.