Today was econ day for Obama. TPMe has the full speech. Before I get to an excerpt, a quick thought on the intro to the speech that I won't be including below:.
Now this will come as no surprise to anyone who knows me: I love that he began his speech by placing our current events into historical context. Going back to the New Deal would have been enough for me, but going back to the debates between Hamilton and Jefferson? It's been a long, long time since we had a president who tried to speak to the nation like this, and our political discourse has the poorer for it. The specific nature of today's problems might be new, but the underlying debate is not, and it is important for the nation to understand that. We have seen these problems before and we have solved them. Not only can we learn from the past, but we can find reason for hope in it, too. It is an enormous relief to me to finally have someone who both understands this and is able to communicate it to the nation.
As for the speech itself, it was short on specifics and long on narrative. No doubt some will criticize it for that - no doubt some already have. First an excerpt, and then a response to the critics:
I think all of us here today would acknowledge that we've lost that sense of shared prosperity.
This loss has not happened by accident. It's because of decisions made in boardrooms, on trading floors and in Washington . Under Republican and Democratic Administrations, we failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practices. We let the special interests put their thumbs on the economic scales. The result has been a distorted market that creates bubbles instead of steady, sustainable growth; a market that favors Wall Street over Main Street, but ends up hurting both.Nor is this trend new. The concentrations of economic power - and the failures of our political system to protect the American economy from its worst excesses - have been a staple of our past, most famously in the 1920s, when with success we ended up plunging the country into the Great Depression. That is when government stepped in to create a series of regulatory structures - from the FDIC to the Glass-Steagall Act - to serve as a corrective to protect the American people and American business.
Ironically, it was in reaction to the high taxes and some of the outmoded structures of the New Deal that both individuals and institutions began pushing for changes to this regulatory structure. But instead of sensible reform that rewarded success and freed the creative forces of the market, too often we've excused and even embraced an ethic of greed, corner cutting and inside dealing that has always threatened the long-term stability of our economic system. Too often, we've lost that common stake in each other's prosperity.
Let me be clear: the American economy does not stand still, and neither should the rules that govern it. The evolution of industries often warrants regulatory reform - to foster competition, lower prices, or replace outdated oversight structures. Old institutions cannot adequately oversee new practices. Old rules may not fit the roads where our economy is leading. There were good arguments for changing the rules of the road in the 1990s. Our economy was undergoing a fundamental shift, carried along by the swift currents of technological change and globalization. For the sake of our common prosperity, we needed to adapt to keep markets competitive and fair.
Unfortunately, instead of establishing a 21st century regulatory framework, we simply dismantled the old one - aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight. In doing so, we encouraged a winner take all, anything goes environment that helped foster devastating dislocations in our economy.
Deregulation of the telecommunications sector, for example, fostered competition but also contributed to massive over-investment. Partial deregulation of the electricity sector enabled market manipulation. Companies like Enron and WorldCom took advantage of the new regulatory environment to push the envelope, pump up earnings, disguise losses and otherwise engage in accounting fraud to make their profits look better - a practice that led investors to question the balance sheet of all companies, and severely damaged public trust in capital markets. This was not the invisible hand at work. Instead, it was the hand of industry lobbyists tilting the playing field in Washington , an accounting industry that had developed powerful conflicts of interest, and a financial sector that fueled over-investment.
A decade later, we have deregulated the financial services sector, and we face another crisis. A regulatory structure set up for banks in the 1930s needed to change because the nature of business has changed. But by the time the Glass-Steagall Act was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework.
Since then, we have overseen 21st century innovation - including the aggressive introduction of new and complex financial instruments like hedge funds and non-bank financial companies - with outdated 20th century regulatory tools. New conflicts of interest recalled the worst excesses of the past - like the outrageous news that we learned just yesterday of KPMG allowing a lender to report profits instead of losses, so that both parties could make a quick buck. Not surprisingly, the regulatory environment failed to keep pace. When subprime mortgage lending took a reckless and unsustainable turn, a patchwork of regulators were unable or unwilling to protect the American people.
The policies of the Bush Administration threw the economy further out of balance. Tax cuts without end for the wealthiest Americans. A trillion dollar war in Iraq that didn't need to be fought, paid for with deficit spending and borrowing from foreign creditors like China . A complete disdain for pay-as-you-go budgeting - coupled with a generally scornful attitude towards oversight and enforcement - allowed far too many to put short-term gain ahead of long term consequences. The American economy was bound to suffer a painful correction, and policymakers found themselves with fewer resources to deal with the consequences.
Today, those consequences are clear. I see them in every corner of our great country, as families face foreclosure and rising costs. I seem them in towns across America , where a credit crisis threatens the ability of students to get loans, and states can't finance infrastructure projects. I see them here in Manhattan, where one of our biggest investment banks had to be bailed out, and the Fed opened its discount window to a host of new institutions with unprecedented implications we have yet to appreciate. When all is said and done, losses will be in the many hundreds of billions. What was bad for Main Street was bad for Wall Street. Pain trickled up....
I do not believe that government should stand in the way of innovation, or turn back the clock to an older era of regulation. But I do believe that government has a role to play in advancing our common prosperity: by providing stable macroeconomic and financial conditions for sustained growth; by demanding transparency; and by ensuring fair competition in the marketplace.
This is a point I have made numerous times on this blog over the years, but it cannot be repeated enough. Rhetoric is, I believe, at the root of all realignments. Rhetorical realignments are a two-step process: First you win the battle over narrative, then you engage and win the battle over policy specifics. The first step is done during elections, and the second step is done in the years in between. Language is the beginning and ending of all political fights. If you can build the frame and control the metaphor, you have already won.
Notice the way Obama leverages conservative language against the record of conservative policies? Pain "trickled up." Policies rewarded greed instead of "success and... the creative forces of the market." Policies failed to keep "markets competitive and fair." Throughout the entire speech, Obama is using the language of the conservative movement to both label its policies a failure and point the way to a new, much more progressive understanding of the way forward.
What makes this potentially a true rhetorical realignment, and not simply a return to Clinton's "New Democrat" past? Take a look at that section on telecomm deregulation again. That is all about a policy fight from the 1990s. The administration responsible for those mistakes was the Clinton administration. So this isn't just about a rejection of conservative narratives and the policy choices those narratives created. It is also a rejection of the entire Democratic Party's response to them as well. As Matt points out, this isn't a call for a third way between old school liberalism and Reagan/Bush-styled conservatism. It's a call for an entirely new understanding and approach.
Now to be absolutely clear, this is only a potential rhetorical realignment. Obama has once again delivered the goods. Its up to us, the voters, to make the rest of it happen
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