Paul Krugman & Obama: The Final Straw?
After President Obama told Bloomberg that he doesn't "begrudge" the kingly compensation awarded to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon ($17 million) or Goldman Sachs CEO CEO Lloyd Blankfein ($9 million,) Paul Krugman was in despair over the state of cluelessness in the White House. (MIT's Simon Johnson, writing at response:: Shock, dismay, anger.
"First of all, to my knowledge, irresponsible behavior by baseball players hasn't brought the world economy to the brink of collapse and cost millions of innocent Americans their jobs and/or houses. And more specifically, not only has the financial industry has been bailed out with taxpayer commitments; it continues to rely on a taxpayer backstop for its stability.... The point is that these bank executives are not free agents who are earning big bucks in fair competition; they run companies that are essentially wards of the state. There's good reason to feel outraged at the growing appearance that we're running a system of lemon socialism, in which losses are public but gains are private. And at the very least, you would think that Obama would understand the importance of acknowledging public anger over what's happening."
Tough to quibble with any of that. These are the same folks whose institutions nearly destroyed the global financial system. Taxpayers who bailed them out only to watch sundry CEOs receive exorbitant compensation packages would be excused for wondering whether the rules of the game are permanently tilted in favor of the plutocrats. But Krugman's portrayal of Obama relies on excerpts that present a misleading picture. The White House has since sent out full transcripts of the interview and as Plum Line's Greg Sargent noted, the president's comments were far more nuanced than the headlines headlines blasting Obama.
The interview makes clear that Obama still wants something done to check the proliferation of wild bonuses and he's selling that counter-measure as a pro-business measure. Blowing kisses to Wall Street doesn't cost him anything and if he mollifies suspicions, so much the better. Krugman has repeatedly voiced frustration with the White House's gradualist approach, Obama's not Ralph Nader. He's a pragmatist and right now, he figures that the pragmatic thing to do is get as much of Wall Street on his side before push comes to shove. And yes, that probably is going to cost him with the liberal-left base of the Democratic Party.
All of which sets up a very interesting dynamic. Ed Morrissey of the conservative blog, Hot Air, nicely explains the dilemma facing his party: While Wall Street helped fund Obama's march to the White House, the left wing of the Democratic Party provided the foot soldiers and the passion for someone they viewed as a real agent of change. After the fizzling out of healthcare reform, what happens if he again disappoints them when it comes to financial regulation? Here's Morrissey:
"If he abandons that effort now, Obama and Democrats can expect a lot less energy from the Left and less money from a disillusioned Wall Street who saw him more as a pragmatist before the election. He could get a few of the Wall Street defectors back on board with a new embrace, but he'll lose the people who made him a political phenomenon."
Period.
Update: The White House Responds
Under the heading "Clearing Up the Bonuses Confusion," the White House blog addressed the Krugman kerfuffle.