The Meaning of Obama’s Grand Bargain, John Richter

The New York Times ran an article on Jan. 21 titled “The Politics of Cohesion.” In it, the author, David Brooks, informs us that, “folks in the Obama camp hope to create a Grand Bargain, which would mean building on a culture of cohesion and tackling the issues that requires joint sacrifice, like reducing deficits, fixing Medi-care and Social Security and reforming health care.” All these problems, Brooks tells us, “were insoluble during the [Bush] era of division and distrust.” But now with the Obama presidency, there is finally a possibility they can be solved.

An internet search produced an array of articles in the Big Business press about this new strategy and its overall objectives. It appears it has been designed by key Wall Street figures on Obama’s financial team as a short-, medium- and long-term economic plan for the new administration.

One of the best explanations of Obama’s Grand Bargain was published by Gerald F. Seib in The Wall Street Journal on Jan. 16, 2009. Seib writes:

“[G]etting Congress to agree to spend billions of dollars and cut billions more in taxes to stimulate the economy right now is, politically speaking, relatively easy. The harder part will be trying to follow that up by creating what is coming to be known in Obama circles as a Grand Bargain: getting everyone to agree to clean up the nation’s budget mess in a really big way. …

“For this Grand Bargain to work, all sides would agree to sacrifice some part of their agenda. The price they would agree to pay would be unhappiness – temporary, perhaps, but real – among their constituents and favorite special interests. Their reward would be a cure for problems everybody knows they’d have to deal with a few years down the road. … This is why the opening of the Obama era next week will be a time of … great opportunity.”

But what kind of great opportunity is this, according to The Wall Street Journal, the official mouthpiece of finance capital? Seib continues:

“President George W. Bush could never get Congress or the nation to buy into his call to reform Social Security, noble though the effort might have been. … These times are different. The test of Mr. Obama’s presidential leadership is whether he can convince his own party, the Republican opposition and the public that pain also represents an opportunity to do more than muddle through.”

Okay. So far we have the following scenario: All sides – particularly special interests (which is how the trade union movement is known in such circles) – have to sacrifice some part of their agenda if we are to “clean up the budget mess” and cure our long-term ills … and this will require, among other things, “reforming” Social Security, something Bush could not get the Congress to buy into.

It would appear that we’re looking here at a “great opportunity” for the bankers and the speculators – not for working people.

Three-Legged Stool

The Wall Street Journal article lays out the first phase of the Grand Bargain, using the imagery of a three-legged stool. Seib writes:

“The first leg of the stool is to be an economic-stimulus package in the range of $800 billion. The second leg is to be the second, $350 billion half of the financial-markets rescue package Congress approved last year. Š The third leg is a legislative package to overhaul regulation of the financial markets – to create greater transparency for investors, so that the Congress and the public will begin to feel that tax dollars are not being thrown down the same black hole that swallowed the nation’s 401(k)s.”

Working people have already seen two of the first legs of this strategy: The first includes a $275 billion tax cut – make that a gift – to the corporations. This is a holdover of the Bush era that will do nothing to stimulate the economy, as most economists have noted. It is a sop thrown to the Republicans to get them to buy into the Obama stimulus plan – which they are refusing to do anyhow. They are demanding more tax cuts – and permanent tax cuts. Negotiations over these demands are taking place with Republican senators as this article is written.

The second leg is a $350 billion bailout to the bankers and speculators, though with more “transparency” this time, so that the taxpayers don’t get the impression the funding is going down the same sinkhole as the first batch of $350 billion. But transparency or not, the bankers are refusing to provide any significant credits to the “real economy.” They are hoarding their bailout funds – and/or pursuing mergers and acquisitions – in the hope of riding out the recession in better shape than their competitors. They say so themselves.

An article titled, “U.S. Banks Keep Hold of Bailout Cash,” (New York Times, Jan. 19) quotes the bankers who have received the first tier of the bailout money: “An overwhelming majority of the banks saw the bailout program as a no-strings attached windfall that could be used to pay down debt, acquire other businesses or invest for the future. …

“‘With that capital in hand, not only do we feel we can ride out the recession,’ said Walter Pressey, president of Boston Private Wealth Management, ‘but we also feel that we’ll be in a position to take advantage of opportunities that present themselves, once this recession is sorted out.’”

Some of the bankers, in fact, are using their bailout funds from the government to organize a campaign to fight the Employee Free Choice Act (EFCA), a piece of legislation that is absolutely vital to the trade union movement. (Source: The Huffington Post, Jan. 27)

So much for phase one of the Grand Bargain. Not much “sacrificing” so far by the captains of industry and finance. They are making out like bandits. Now enter phase two.

Seib writes:

“With a deficit that is now acute, the case for overhauling government to make it more efficient and less wasteful also is more pressing. That means there could, for example, be real support for … finding government programs that can be eliminated and attacking congressional earmarks more seriously.

“But those aren’t the places where the big money is to be found to address the yawning deficit. The big money lies in the defense budget, in interest on the national debt and in entitlement programs, specifically Medicare and Social Security.”

Yes, there is plenty of money for a workers’ recovery plan in the defense budget – but with Obama’s request for more troops and funding for Afghanistan and with high-level militarists and admirals in the new administration, it is highly unlikely that we are going to see the Pentagon free up any funds to help solve our state and municipal budget crises. No, it seems that phase two of the Grand Bargain – that is, the long-term cure – is really about going after entitlement programs, specifically Medicare and Social Security.

Seib doesn’t hide this objective:

“Here’s where the Grand Bargain could come in. Like Humpty Dumpty, the budget is going to be broken anyway. In putting it back together, would retirees be willing to accept that idea of having more prosperous seniors pay a monthly premium to receive their Medicare health coverage? Would liberals accept cuts in their favorite social programs?”

The call to further erode Medicare and Social Security is an outrage. Ever since 1984, when Congress – with full bipartisan support – passed the Social Security Tax Act, the government has been able to open the Social Security “lock-box” and tap into federal pensions to finance the U.S. national debt, the wars in the Middle East and the tax cuts to the rich. Economist Jack Rasmus, using official government statistics, estimates that $4 trillion have been stolen – literally stolen – from the workers’ payroll taxes and from their retirement pay.

Defense of Trade Union Independence

The bankers and speculators are hell-bent on resolving the “budget mess” on the backs of working people. This is the meaning of the Grand Bargain.

The bosses and bankers have pulled out all the stops to rescue their own, to shore up their own class interests. This should be expected. In the context of the deepening recession, they have no choice but to step up their attacks against working people.

But to succeed in their effort, especially in the aftermath of the historic election that brought Obama to the presidency, the bosses need to co-opt the trade unions into joining them in implementing these attacks through the kind of “labor-management cooperation schemes” that were so destructive in the auto industry, or through the kind of “roundtable agreements” organized by new Secretary of Education Arne Duncan in Chicago as a means to dismantle many of the city’s public schools. [See article below.]

For the trade unions to wage a concerted struggle for a recovery plan that puts the interests of working people first, it is essential that they remain independent instruments of struggle to advance the specific interests of their members – that is, independent of the bosses and the politicians who do their bidding. This is their mandate.


“Corporatism and the Case of Arne Duncan”

One Obama cabinet nomination that met with strong support from the labor movement was the nomination of Arne Duncan, past superintendent of the Chicago public schools’ district, for Secretary of Education.

The strong support for Duncan by the top leaders of the country’s two teachers’ unions – the National Education Association (NEA) and the American Federation of Teachers (AFT) – is at once appalling and revealing. It’s appalling in that Duncan has been a strong proponent of three education directives dear to the Bush administration and to the right wing: No Child Left Behind (NCLB), charter schools, and merit pay for “high-performing” teachers.

NCLB is all about testing. Schools that fail the new mandated tests can fire their teachers and become privatized, with their union contracts voided. Everything is thus geared toward teaching to these tests, at the expense of basic education and critical thinking. The “merit pay” is wielded here to entice teachers to have their students get high test scores.

Author Greg Palast describes how Duncan implemented NCLB at Collins High in the Lawndale district of Chicago:

“Teachers there work with kids from homeless shelters from an economically devastated neighborhood. Believe it or not, the kids don’t get high test scores. So Chicago fired the teachers, every one of them. Then they brought in new teachers and fired THEM too when, surprise!, test scores still didn’t rise.” — J.R.

Many of these failing schools were then turned over by Arne Duncan to the Army, the Navy and the Marines to run as charter schools. These are schools that continue to receive public funding but function as private schools in that they are not bound by District policy on curriculum or union collective-bargaining agreements and standards. In the case of the high schools run by the military, they function essentially as recruiting grounds for the warmakers!

So how is it that the teachers’ unions could possibly applaud the Duncan nomination? This is what’s so revealing: It’s largely because their local chapters in Chicago have been co-opted by Duncan into participating in the “roundtable agreements” with the administration, the military and the “business community.” Duncan makes it possible for teachers to have a seat at the table, these local union officials argue. – J.R.

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