William Greider | The Nation

President Obama discusses the federal budget at the White House. (AP Photo/Manuel Balce Ceneta)

At the start of his second term, events pushed President Obama to choose between the living and the dead. He chose dead millionaires over elderly people living on Social Security. The wealthy were given a most generous reduction in the estate taxes to be collected when they die. Social Security beneficiaries were told to live with smaller benefit checks. Instead of comforting the afflicted and afflicting the comfortable, Obama went the other way.

(Reuters/Brendan McDermid)

The Obama administration collected some crowd-pleasing headlines with its announcement that the Justice Department is suing Standard & Poor’s, the rating agency that notoriously fueled the financial crisis and crash by duping investors into buying billions in rotten securities. The government is said to be seeking a cash penalty of more than $1 billion.

Elizabeth Warren speaks at the Reuters Future Face of Finance Summit, March 1, 2011. (Reuters/Kevin Lamarque)

When new members arrive in the US Senate, they are supposed to take a seat on a back bench and listen quietly for a couple of years. That is not in Elizabeth Warren’s nature. She had been a US Senator from Massachusetts for only about a week when she broke with etiquette. Warren was outraged that AIG investors were urging the insurance giant’s directors to join them in a lawsuit against the federal government, claiming damages from the federal bailout of their company during the financial crisis.

The freshman senator sent out a tartly worded statement to her many fans and followers. “AIG should thank American taxpayers for their help—not bite the hand that fed them,” Warren wrote. The message swept the blogosphere like wild fire. The AIG directors folded the next day. It is perhaps mistaken to assume her voice alone stopped this corporate ingratitude in its tracks, but that may well be the message absorbed in Washington politics. Try not to provoke this new senator, especially on the stuff she knows a lot about. She might bite back.

Despite the media’s “fiscal cliff” hysteria and relentless propaganda from the monied interests, their “big lie” politics has lost. The people won. At least the people did not lose. This result is a promising sign for the political conflicts that lie ahead—another indication that “big money” does not always have its way. Liberal-labor progressives must make the most of this opportunity, mobilize folks for the next round of battles and force their progressive values upon the often ambivalent President Obama and other hesitant Democrats.

The phony drama over “fiscal crisis” was always designed to punish the wrong people for the nation’s economic ills. The establishment’s goal was to demonize the federal programs most valued by ordinary citizens, Social Security and Medicare, blaming them for Washington’s soaring deficits and debt instead of the collapsed economy that Wall Street produced. Most politicians, including President Obama, fell in line with this view. Every leading newspaper blindly accepted it as fact and blanked out contradictory evidence. How could these important people all be wrong? Because it turns out they were wrong.

Despite this supposed unanimity, the politicians choked, perhaps because they knew most citizens were not buying the lie. In the end, Congress and the president resolved the so-called crisis by not changing much and by avoiding harm to the people themselves. Pundits, take note: you lost this argument because people at large understood what you didn’t understand. After all the brave talk and scary warnings from fiscal scolds, elected politicians declined to damage the government programs that matter most to everyday Americans. The “big money” guys will be back again with the same fallacious claims, but they clearly lost this time.