Matt Taibbi’s latest screed, “Obama’s Big Sellout,” will undoubtedly be a big hit on the Web with the swelling legions of critics who believe the president is actively engaged in selling out the working man for Wall Street plutocrats. But baked into the narrative are enough misrepresentations — all designed to make Obama look as bad as possible — that it’s hard to take it seriously as a useful contribution to the ongoing discussion about how properly to fix the U.S. economy. It’s the classic Taibbi approach: vastly and sloppily overstate the case in absurd, over-the-top rhetoric while ignoring any possible counterargument.
Let’s start with a minor nit, Taibbi’s treatment of Austan Goolsbee, the University of Chicago economist who was one of Obama’s chief economic advisors during the campaign. Taibbi describes Goolsbee as a “populist” who was exiled to “Siberia” after the election. Meanwhile, Taibbi also criticizes Obama for retreating from his campaign promises to renegotiate NAFTA. Left out of the story is that Goolsbee achieved notoriety during the campaign precisely because he told Canadian government officials not to fuss about Obama’s NAFTA promises — dismissing them as just rhetoric. That’s hardly the stuff of populism. It also might have been fun to ask Goolsbee what he thinks of Taibbi’s overall thesis, since he’s been one of the toughest and most eloquent defenders of Obama’s overall strategy to date.
Next up, a much more serious point. Taibbi writes: “Neil Barofsky, the inspector general charged with overseeing TARP, estimates that the total cost of the Wall Street bailouts could eventually reach $23.7 trillion.” Here, Taibbi is doing the likes of Sean Hannity and Lou Dobbs, who both went nuts over this number, completely proud. The fact is, the $23.7 trillion number is ridiculous. Not only did Barofsky himself note that it was overblown, but it also included the total potential cost of government programs that never even got started or have already been canceled. Furthermore it assumes a financial cataclysm that would make the Great Depression look like a kindergarten water fight. Let’s outsource to the New York Times’ Floyd Norris:
[The number] assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless. It assumes that every bank in America fails, with not a single asset worth even a penny. And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.
It would also require the Treasury itself to default on securities purchased by the Federal Reserve system.
A responsible writer might also at least nod to the fact that a hefty percentage of TARP outlays have been or will be repaid to the tune of hundreds of billions of dollars, which chisels away at some of the meaning of the word “giveaway,” but that’s not Taibbi’s style.
Taibbi also ridicules a major early address by Obama on the economy, picking on one sentence: “Credit is the lifeblood of the economy,” he declared, pledging “the full force of the federal government to ensure that the major banks that Americans depend on have enough confidence and enough money.” To Taibbi, this means that Obama was simply going to encourage Americans to start binge borrowing again, and maintain the Bush status quo “of keeping a few megafirms rich at the expense of everyone else.
This passage betrays an amazing failure to recall exactly what was happening to the U.S. economy in the months after the presidential election, and during the first quarter of 2009. The economy was in utter freefall, in large part because everyone, from the biggest banks to the the lowliest consumer, was afraid to borrow or spend. Corporations that depended on short-term loans from banks to fund daily expenses were suddenly getting shut out, forcing a chain reaction of layoffs and liquidity squeezes that threatened to drag the entire economy even further down a disastrous spiral. The great achievement of the Obama presidency in those first few months was to effectively stabilize that situation, unlock the credit crunch, and halt one of the great financial panics of our time. As Obama noted himself last week, using taxpayer money to bail out the banks was incredibly unpopular and “galling.” But we’d all be a lot angrier and unhappier now, and unemployment would be a lot higher, if we’d stepped back and allowed Citigroup or Bank of America to fail.
Then there’s just silly stuff, like describing Alan Greenspan as “a staggeringly incompetent economic forecaster who was worshipped by four decades of politicians because he once dated Barbara Walters.” Staggeringly incompetent he may well be, but is the latter half of that description even funny?
Naturally, there is a lot of meat to Taibbi’s larger themes, such as the overrepresentation of Wall Street in Obama economic policy making — though strangely, Taibbi never even mentions Christina Romer, one of the top three Obama economic policy advisors, albeit the one who just happens to be the least connected to the financial industry. It’s also absolutely worth harping on the spectacle of how efforts at financial reform have been undermined over the course of the year, although from my vantage point, the administration has proposed plenty of good things that have then crashed against the rocks of congressional resistance and maneuvering.
But the co-optation of regulatory reform by Wall Street is an important story, and one that needs to be pressed at every point. It would be nice though, if the left could pursue that story without flaunting the same cavalier attitude toward the complexity of the economic challenges faced by the current administration that we are already so familiar with from the right.