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The End of New Deal Liberalism | The Nation

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The End of New Deal Liberalism

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We have reached a pivotal moment in government and politics, and it feels like the last, groaning spasms of New Deal liberalism. When the party of activist government, faced with an epic crisis, will not use government's extensive powers to reverse the economic disorders and heal deepening social deterioration, then it must be the end of the line for the governing ideology inherited from Roosevelt, Truman and Johnson.

About the Author

William Greider
William Greider
William Greider, a prominent political journalist and author, has been a reporter for more than 35 years for newspapers...

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Political events of the past two years have delivered a more profound and devastating message: American democracy has been conclusively conquered by American capitalism. Government has been disabled or captured by the formidable powers of private enterprise and concentrated wealth. Self-governing rights that representative democracy conferred on citizens are now usurped by the overbearing demands of corporate and financial interests. Collectively, the corporate sector has its arms around both political parties, the financing of political careers, the production of the policy agendas and propaganda of influential think tanks, and control of most major media.

What the capitalist system wants is more—more wealth, more freedom to do whatever it wishes. This has always been its instinct, unless government intervened to stop it. The objective now is to destroy any remaining forms of government interference, except of course for business subsidies and protections. Many elected representatives are implicitly enlisted in the cause.

A lot of Americans seem to know this; at least they sense that the structural reality of government and politics is not on their side. When the choice comes down to society or capitalism, society regularly loses. First attention is devoted to the economic priorities of the largest, most powerful institutions of business and finance. The bias comes naturally to Republicans, the party of money and private enterprise, but on the big structural questions business-first also defines Democrats, formerly the party of working people. Despite partisan rhetoric, the two parties are more alike than they acknowledge.

In these terms, the administration of Barack Obama has been a crushing disappointment for those of us who hoped he would be different. It turns out Obama is a more conventional and limited politician than advertised, more right-of-center than his soaring rhetoric suggested. Most Congressional Democrats, likewise, proved weak and incoherent, unreliable defenders of their supposed values or most loyal constituencies. They call it pragmatism. I call it surrender.

Obama's maladroit tax compromise with Republicans was more destructive than creative. He acceded to the trickle-down doctrine of regressive taxation and skipped lightly over the fact that he was contributing further to stark injustices. Ordinary Americans will again be made to pay, one way or another, for the damage others did to society. Obama agrees that this is offensive but argues, This is politics, get over it. His brand of realism teaches people to disregard what he says. Look instead at what he does.

With overwhelming majorities in Congress and economic crisis tearing up the country in 2009, incumbent Democrats opted for self-protection first, party principles later. Their Senate leaders allowed naysayers to determine the lowest common denominator for reform—halfway measures designed not to overly disturb powerful corporate-financial interests, and therefore not able to repair the social destruction those interests had wrought. Senate Democrats say they didn't have the votes. Imagine what Mitch McConnell would have done if he were their leader: Take no prisoners. Force party dissenters to get in line and punish those who don't. Block even the most pedestrian opposition proposals.

Democrats are not used to governing aggressively. They haven't done so for decades, and they may no longer believe in it. For many years, incumbent Democrats survived by managing a precarious straddle between the forces of organized money and the disorganized people they claim to represent. The split was usually lopsided in favor of the money guys, but one could believe that the reform spirit would come alive once they were back in power with a Democratic president. That wishful assumption is now defunct.

Obama's timid economic strategy can be described as successful only if the standard of success is robust corporate profits, rising stock prices and the notorious year-end bonuses of Wall Street. Again and again, Obama hesitated to take the bolder steps that would have made differences in social conditions. Now it is clear that the bleeding afflictions experienced by the overwhelming majority of citizens will not be substantively addressed because Democrats, both president and Congress, have chosen to collaborate in the conservative cause of deficit reduction: cut spending, shrink government, block any healing initiatives that cost real money.

Republicans, armed with strong conviction, are resurgent with what amounts to ideological nihilism. Leave aside their obvious hypocrisies on fiscal rectitude and free markets. Their single-minded objective is to destroy what remains of government's capacity to intervene in or restrain the private sector on behalf of the common welfare. Many of government's old tools and programs are already gone, gutted by deregulation, crippled by corporate capture of the regulatory agencies originally intended to curb private-sector abuses and starved by inadequate funding. The right wants smaller government for the people, but not for corporate capitalism. It will fight to preserve the protections, privileges and subsidies that flow to the private sector.

* * *

Once again, Republicans are mounting an assault on liberalism's crown jewel, Social Security, only this time they might succeed, because the Democratic president is collaborating with them. The deficit hysteria aimed at Social Security is fraudulent (as Obama's own experts acknowledge), but the president has already gravely weakened the program's solvency with his payroll-tax holiday, which undercuts financing for future benefits. Obama promises the gimmick won't be repeated, but if employment is still weak a year from now, he may well cave. The GOP will accuse him of damaging the economy by approving a "tax increase" on all workers. Senate Democrats are preparing their own proposal to cut Social Security as a counter to the GOP's extreme version. In the end, they can split the difference and celebrate another great compromise.

This is capitulation posing as moderation. Obama has set himself up to make many more "compromises" in the coming months; each time, he will doubtless use the left as a convenient foil. Disparaging "purist" liberals is his way of assuring so-called independents that he stood up to the allegedly far-out demands of his own electoral base. This is a ludicrous ploy, given the weakness of the left. It cynically assumes ordinary people not engaged in politics are too dim to grasp what he's doing. I suspect Obama is mistaken. I asked an old friend what she makes of the current mess in Washington. "Whatever the issue, the rich guys win," she responded. Lots of people understand this—it is the essence of the country's historic predicament.

To get a rough glimpse of what the corporate state looks like, study the Federal Reserve's list of banking, finance and business firms that received the $3.3 trillion the central bank dispensed in low-interest loans during the financial crisis (this valuable information is revealed only because reform legislators like Senator Bernie Sanders fought for disclosure). If you were not on the list of recipients, you know your place in this new order.

The power shift did not start with Obama, but his tenure confirms and completes it. The corporates began their systematic drive to dismantle liberal governance back in the 1970s, and the Democratic Party was soon trying to appease them, its retreat whipped along by Ronald Reagan's popular appeal and top-down tax cutting. So long as Democrats were out of power, they could continue to stand up for liberal objectives and assail the destructive behavior of business and finance (though their rhetoric was more consistent than their voting record). Once back in control of government, they lowered their voices and sued for peace. Beholden to corporate America for campaign contributions, the Democrats cut deals with banks and businesses and usually gave them what they demanded, so corporate interests would not veto progressive legislation.

Obama has been distinctively candid about this. He admires the "savvy businessmen" atop the pinnacle of corporate power. He seeks "partnership" with them. The old economic conflicts, like labor versus capital, are regarded as passé by the "new Democrats" now governing. The business of America is business. Government should act as steward and servant, not master.

This deferential attitude is reflected in all of Obama's major reform legislation, not to mention in the people he brought into government. In the financial rescue, Obama, like George W. Bush before him, funneled billions to the troubled bankers without demanding any public obligations in return. On healthcare, he cut deals with insurance and drug companies and played cute by allowing the public option, which would have provided real competition to healthcare monopolists, to be killed. On financial reform, Obama's Treasury lieutenants and a majority of the Congressional Dems killed off the most important measures, which would have cut Wall Street megabanks down to tolerable size.

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