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Leo W. Gerard

By Leo W. Gerard
International President

Symbols of the 16th president of the United States surround the soon-to-be 44th. And they did so from the beginning.

Barack Obama, formerly a Senator from Illinois, announced his plan to run for president on Abraham Lincoln’s birthday from the steps of the Old State Capitol in Springfield, the site of Lincoln’s “House Divided” speech, which launched Lincoln’s own campaign for the Senate.

Once elected, Obama assembled a “team of rivals” cabinet, as Lincoln did, including as his secretary of state, his chief challenger for the Democratic nomination, New York Senator Hillary Clinton, just as Lincoln selected for state his foremost contender for the Republican nomination, New York Senator William Seward.

Before the inauguration, Obama will pause for reflection and a concert at the Lincoln Memorial, where a somber statue sits beside the inscribed words of the Gettysburg Address. He’ll attend a luncheon featuring Lincoln’s favorite foods.  Finally, Obama will place his right hand on the same Bible that Lincoln did when he took the oath of office on March 4, 1861.

Symbols cannot, however, convey the depth of connection between their presidencies. It is crucial for working Americans that the 44th President appreciate that mere imagery such as Lincoln luncheons and concerts is insufficient. What the union needs now is for Obama to follow the philosophical footsteps of Abraham.

When Lincoln took office, most of the country was in the midst of a deep recession caused by the Panic of 1857. “It struck after a period of prosperity accompanied by higher prices, speculation and increasing powers accruing to the nation’s banks,” New York Times reporter Steven R. Weisman, wrote in his book, “The Great Tax Wars.”  It resulted, he wrote, in a run on the banks, selling on Wall Street, falling prices, declining trade and the federal government saddled with deficits and debts. The U.S. economic slump, uncontrolled by Lincoln’s predecessor in the White House, spread internationally.

Then, four weeks after Lincoln took the oath of office, the Civil War began with shots fired on April 12, 1861 at Fort Sumter, S.C.

Similarly, Obama has the wars in Iraq and Afghanistan to manage. His predecessor has bequeathed him the most serious recession since the Great Depression and the largest federal debt ever created in a presidency.  Risky speculation and deregulation caused last year’s financial bank failures that, in turn, pulled down the rest of the economy, as in 1857.

Lincoln is celebrated for preserving the union and freeing the slaves.  But that would not have been possible without his economic accomplishments. It is the philosophy at the base of those achievements that must be the prototype for change in America now.

While waging war, Lincoln also passed the Homestead Act giving land to those who would build houses on their plots and become family farmers; the Land Grant Colleges Act, promoting advanced farming methods, scientific research and access to higher education for the working classes; the Pacific Railway Act for construction of the first transcontinental railroad, and higher charges on imports to protect American industry and American workers.

The connection among these diverse laws is a respect for American workers and a belief that government should grant each American the opportunity to improve his lot by dint of hard work. Lincoln expressed this in a message to a Special Session of Congress in 1861: “This is essentially a people’s contest . . . It is a struggle for maintaining in the world that form and substance of government whose leading object is to elevate the condition of men – to lift artificial weights from all shoulders – to clear the paths of laudable pursuit for all – to afford all an unfettered start, and a fair chance, in the race of life.”

Lincoln saw himself as a person who had benefited from America’s ability to give her citizens opportunity. The son of uneducated farmers, he had only a year of formal education. He’d worked as a riverboat pilot, country store clerk, blacksmith, surveyor and postmaster. But he’d also read and studied and worked himself to the position of a reasonably wealthy small town lawyer and got elected as a lawmaker, and ultimately, president.

He also wrote, very early on, in a letter to the editor of the Sangamon Journal in New Salem, Ill., in 1836, “I go for all sharing the privileges of government who assist in bearing its burdens.”

In recent times, soldiers and workers have borne the burdens of government while the privileges accrued to the wealthy. The rich got Bush’s big tax breaks. Banks got deregulated. And big corporations escaped enforcement of federal environmental and safety regulations.

Last year financial banks and a major insurance company failed and got rescued by the federal government after Wall Street wise-guys risked untold hundreds of billions in crazy schemes. Those salvages are all on the taxpayers’ dime. The failures led to the stock market diving, which shriveled worker’s 401K retirement accounts and pension funds. They also froze credit, which ultimately contributed to 2.6 million layoffs, the highest level in six decades, as companies couldn’t get money they needed to operate. Of those, 791,000 were manufacturing jobs. As workers lost their jobs, or feared it, they stopped spending. So even less money circulated in the economy. The recession was on.

This is Obama’s crisis. And this is where he should look to Lincoln. The 16th President saw the value in “Buy American.” Many historians believe Lincoln’s higher fees on imports enriched the federal treasury, which was crucial to pay for the war, and promoted American industry, particularly the steel industry, which forged the rails for his transcontinental railroad. Those industries Lincoln promoted made America strong and employed Americans and new immigrants.

Lincoln’s railroads accomplished two goals. They created jobs during their construction and connected the country afterward. Those connections made commerce cheaper and American industry more competitive internationally.

Lincoln’s new colleges and homesteads provided opportunity to Americans while making the country agriculturally self-sufficient and scientifically advanced.

Obama has spoken of similar goals – to improve schools and lower college costs, for example.

That’s good as far as it goes. But this country was not built on sub-prime mortgages and credit default swaps. And it cannot sustain itself with an economy based on risky trading of Wall Street paper or consuming on credit. It must be productive. It must make things.

Obama’s administration, like Lincoln’s, must support industry and manufacturing and the jobs they create.

Doris Kearns Goodwin, author of the Lincoln biography, “Team of Rivals,” said after speaking to Obama about it, “There’s no better mentor for a president to look to than Lincoln’s leadership . . . Somehow, Lincoln has gotten into his heart and mind, and that can only be for the good.”

Working people across America have hope it will be good for them.

Robert Kutner

By Robert Kutner
Co-Founder and Co-Editor of The American Prospect

Barack Obama may soon find that he is committing a big sin against one of the major premises of the reigning ideology. As part of his plan to restructure the auto industry, rebuild infrastructure, and create new green industries and jobs, he will be committing industrial policy. And this will create a head-on collision with one of the cherished dogmas of market fundamentalism — “free trade.”

This clash is long overdue. For several decades, American elites of both parties have been preaching the same gospel of free trade. Supposedly, if we just leave markets alone, different countries will produce and export what they naturally do best, and import products at which their partners excel. In the tidy and oversimplified textbook world, there is no room for questions about pollution, labor standards, product safety, financial engineering, or industrial policy.

But the real world doesn’t work like the Econ. 101 fable. In much of the rest of the world, governments help their industries develop.

However, in the hierarchy of America’s diplomatic priorities, countries like China that subsidize industries (and violate human rights) get a free pass. Other nations like Japan, that basically closed their borders to most imports for several decades while they became industrial powerhouses, got a seal of approval, too. Supposedly, what we lose in jobs and industries, we make up in cheap imports.

While other nations care about what they produce, the United States disdains having industrial policies, in order to set a good example. Indeed, we have been the principal architect of the World Trade Organization, which discourages government involvement in economic development as an illicit thumb on the free-trade scale.

Now, with the crash of 2008, it is clear that the US economy was built on a financial mirage. Our reliance on asset bubbles – inflated stock and real estate prices – disguised the fact that we were not paying our way. Much of our prosperity was simply borrowed.

Having let so many industries and jobs just go offshore, we don’t make enough to pay for our imports. Instead, we have been relying on loans from foreign central banks to finance our trade imbalance.

Looking at this economic calamity, President-elect Obama has proposed several sensible policies. He wants the U.S. auto industry to reinvent itself, with government aid and government standards. He wants to incubate other domestic industries around the goal of clean energy. And he wants to spend serious money on all of this, to help avoid a depression. The only historical counterpart is the vast industrial mobilization of World War II, which finally cured the Great Depression.

But these ideas about government involvement in the economy violate the sacred dogma of free trade. If the Obama administration is serious about reviving American manufacturing industry, it is only a matter of time before a foreign government hauls the U.S. before the World Trade Organization and charges us with the crime of industrial policy.

To quote our beloved leader George W. Bush in a different context, bring it on. The current version of the W.T.O., designed by and for US multinational corporations to make it easier to outsource jobs and production, has not served the national interest. It is indeed time to use industrial policy to rebuild long neglected domestic industries; and if something has to give, let it be the W.T.O.

As a mark of the total intellectual muddle in how policymakers have thought about these issues, the fact is that we have several implicit industrial policies. For instance, American commercial leadership in aerospace is no naturally occurring phenomenon. It reflects trillions of dollars of subsidy from the Pentagon and from NASA. Likewise, U.S. dominance in pharmaceuticals is the result of government subsidy of basic research, favorable patent treatment, and the fact that the American consumer of prescription drugs is made to overpay, giving the industry exorbitant profits to plow back into research. Throwing $700 billion at America’s wounded banks is also an industrial policy

So if we can have implicit industrial policies for these industries, why not explicit policies to rebuild our auto industry, our steel industry, our machine tool industry, and the industries of the next century such as green energy and high-speed rail? And why not devise some clear standards for which industries deserve help, and why, and what they owe America in return?

The new administration is already a bit schizophrenic on the subject. On the one hand, President-elect Obama has been saying bold things about building the industries of the future. On the other hand, he just appointed as America’s top trade official Dallas Mayor Ron Kirk, a man with no serious diplomatic experience and one whose main claim to fame on the trade issue is that he has been a big booster of NAFTA, a badly flawed deal that Obama has pledged to reopen.

Kirk’s appointment was meant to signal that Obama will not challenge the current orthodoxy on trade policy. It was cheered by the U.S. business establishment. What is truly bizarre is that Obama’s reported first choice for the job was California Congressman Xavier Becerra, a critic of NAFTA and other recent trade deals. Kirk will also vehemently disagree on trade and industry with Obama’s new labor secretary-designate, Rep. Hilda Solis, another NAFTA critic.

Maybe, like Lincoln, Obama has the genius to fuse this “team of rivals” into an effective administration; perhaps he will listen to the divergent advice and forge the best course. When the historian Doris Kearns Goodwin coined that phrase to describe Lincoln’s manner of governing, she was referring to the fact that Lincoln literally brought into his cabinet men who had been Lincoln’s rivals for the Republican presidential nomination in 1860. These were people of real stature and of fierce differences, representing a party that was badly fractured on the key issues of how to save the union and whether to free the slaves.

Obama has prided himself building bridges and transcending ideology. We are now beginning to see what that means in practice–a cabinet that represents people of thoroughly contradictory views, with some members who are public figures of real consequence and others who are surprisingly weak. This pattern puts all the more pressure on Obama himself to create coherence out of the stew.

Despite these gestures of broad inclusion, there is no escaping the fact that Obama must quickly make some difficult decisions about which path to follow. And one path precludes another. He can’t have both his industrial policies and his free trade.

Robert Kuttner’s new bestselling book is “Obama’s Challenge: America’s Economic Policy and the Power of a Transformative Presidency.”

Robert Kuttner’s new bestselling book is “Obama’s Challenge: America’s Economic Policy and the Power of a Transformative Presidency.”

Column first published on The Huffington Post

David Sirota

By David Sirota
Author of “The Uprising: An Unauthorized Tour of the Populist Revolt”

Remember when Doris Kearns Goodwin and the rest of the elite media socialites took to the studios of Charlie Rose’s show to portray the opponents of the bailout as wild-eyed leftists? Seems there’s some serious bipartisan pushback going on (h/t Atrios):

WASHINGTON — U.S. Sen. Jim Inhofe said Saturday that Congress was not told the truth about the bailout of the nation’s financial system and should take back what is left of the $700 billion “blank check” it gave the Bush administration.

“It is just outrageous that the American people don’t know that Congress doesn’t know how much money he (Treasury Secretary Henry Paulson) has given away to anyone,” the Oklahoma Republican told the Tulsa World.

“It could be to his friends. It could be to anybody else. We don’t know. There is no way of knowing.”

Inhofe, who on issues like global warming is something of a know-nothing, is nonetheless absolutely correct on this one. Bailoutsleuth.com has been reporting how Paulson has tried to shroud bailout expenditures in secrecy, while Bloomberg News recently reported that Federal Reserve Chairman Ben Bernanke is refusing to release the names of the recipients of about $2 trillion in taxpayer-funded loans.

Inhofe will likely find an ally in Sen. Bernie Sanders (I-VT), who issued this press release this morning:

WASHINGTON, November 17 – Senator Bernie Sanders (I-Vt.) said today he will introduce legislation to stop the release of a $350-billion second round of the Wall Street bailout.

Sanders, who voted against the $700-billion package Congress approved in October, said he has serious concerns about how the Bush administration and Treasury Secretary Henry Paulson are spending the bailout money that was already released. He also said it was unacceptable that the oversight provisions in the bill were ignored.

When the bailout originally passed over bipartisan objections, many voices began demanding Paulson refrain from buying bad mortgages, and instead buy voting stock in banks on terms that force banks to make loans off the new capital, restrict bank salaries/dividends and protect taxpayers’ investment. Paulson partially buckled to that pressure, first a few weeks ago, then again late last week. Indeed, he discarded his original proposal (which would have been a straight-up giveaway) and began buying stakes in banks. The problem is he opted to buy non-voting stock on bad terms that do not protect taxpayers and allow bank executives to continue paying bonuses.

Now, with bipartisan congressional anger mounting, we may see a forceful legislative campaign to take back what remaining money Paulson wants to give away to his friends on Wall Street. The guy is working overtime to shovel out as much taxpayer money – our money – to his buddies before January 20th comes and he’s out of a job. It’s time to stop the kleptocracy, take back the money and spend it on a major economic stimulus to bolster the real economy here in “real America” where real people work real jobs – not simply give it away to a few financial industry fat cats in Manhattan.

UPDATE:

Check this out from the Financial Times:

A senior Republican senator is seeking an investigation into potential conflicts of interest among former Goldman Sachs executives serving at the US Treasury and whether any officials exceeded their authority by implementing a controversial tax change without the approval of Congress.
Chuck Grassley, the most senior Republican on the Senate finance committee, asked Eric Thorson, inspector-general of the Treasury, to investigate the “independence” of several Treasury officials who formerly worked at Goldman Sachs and serve as advisers to Treasury secretary Hank Paulson, the former chief executive of the Wall Street bank.