Monday, July 19, 2010


     Democrats and liberal commentators are crowing about Obama's legislative success with "bold" and "ambitious" plans. The "successes" cited are the Economic Stimulus, the Health Care Reform bill and now the Financial Reform bill. Certainly, the simple fact that these bills made it through Congress in the face of strong GOP opposition puts them in the "good win" column. But with legislative majorities in both houses and just enough Republican moderates in the Senate to preclude filibusters, it would seem that passage of major legislation should be expected especially since Obama is in the first two years of his administration and Democrats who might disagree with parts of each bill are loath to shoot him in the foot and add to the wide spread impression that he is a few bricks short of a load in the leadership area. It is true that the scope of these bills is enormous and will profoundly effect the U.S. economy for decades.

     But what exactly do these legislative "successes" mean? Have they established Obama as a powerful and effective President?; a visionary who will leave a legacy of accomplishments beneficial to the American people? Will they give him a strong platform on which to run for a second term in 2012? Celebrating Democrats may want to save their champagne for New Year's Eve.

     According to the July, 2010 CBS News Poll, three fourths of Americans said the Stimulus bill had not improved the economy. The Gallup Poll in July found that only 30% of Americans felt that the economy was getting better while 65% said it was getting worse. On a more personal level, two thirds said Obama's economic policies had no effect on them versus only thirteen percent who said they had been helped by them. Thus, only 40% of Americans approve of Obama's "handling of the economy".

     While some Democrats are talking about a second stimulus bill in the face of stubbornly high unemployment figures, in answer to the polling question: "Which is better for getting the economy moving again?", only 37% of Americans said more "government spending", while 53% agreed with the Republican position which is "cutting taxes".

     While the Health Care Reform bill has receded into the background for now, largely because it's major provisions don't kick in until 2013-14, this "legislative success" only has the support of 38.3% of the people while 50.5 percent oppose it (Real Clear poll averages).

     So that leaves the Financial Reform bill which has just passed both houses of Congress.

     It's hard to say how big a role Obama played in the formulation or passage of this bill. It is Senator Chris Dodd's (D-CT) bill. He and his staff wrote it, and while that alone may give some cause for concern, it is clear that ignoring the circumstances and regulatory insufficiencies that contributed to the melt down of the financial and banking industry in the U.S. would be sheer folly. The Republican leadership is still in political opposition mode and thus have, as expected, harshly criticized the bill. But their criticism has been fairly non-specific and comes across as the much over done generalization of "all government regulation is bad". Only three Republican senators voted for the bill, the two moderate lady senators from Maine, Senators Snowe and Collins, and the newly elected senator from Massachusetts, Scott Brown. Again, the Republican leadership hopes to make the bill a 2010 election issue, condemning it as an anti-business intrusion, but they may be on the wrong side of this one. The CBS News Poll found that 57% of people feel that "bank regulation should be increased" while only 35% disagree. The bill is no doubt overly broad, and may give to much rule making discretion to bureaucratic regulators but no one could logically argue that the banking and investment industry hasn't dramatically changed over the last decade and that the government's regulatory role needs to catch up. The economy won't wait and a flawed recovery would put the whole weakened system at risk once again. Republicans, if they manage to gain majorities in Congress can make modifications to the legislation once it has a chance to be evaluated.

     Simply put, the main provisions of the bill address the worst recent failures of the financial system.

1. A council of senior regulators is established to "detect risks to the financial system."
2. A new consumer protection bureau along with new regulations is established.
3. New powers to constrain or dismantle troubled companies are established.
4. More financial companies will be brought under government oversight.
5. The new and "exotic" realm of derivatives which played such havoc in the recent crisis, will be subject to regulation.

     Of course, any effort can be overdone or abused but a framework which can be improved is better than no framework at all, so Obama and the Democrats, with the public on their side, can claim a policy "victory" on this one. Whether it represents a positive political trend is more problematic. Obama's overall job approval is still only 44% with 46% disapproving and perhaps, more foreboding is the new Washington Post-ABC News poll that found that 6 in 10 voters lack confidence in the president to “make the right decisions for the country’s future.”

No comments: