Tag Archives: midterm elections

The White House Needs Elizabeth Warren, Now More Than Ever

By Simon Johnson

The White House today is under pressure, with insiders asking: After the strong showing of the Republicans in the midterm elections, should the president move to the right or to the left?

This is entirely the wrong way to think about the problem – the administration needs to get beyond its mental framework of early 2009, which led it sadly astray with regard to the financial sector.  The President needs to find people and themes capable of cutting across the political spectrum; specifically he needs to promote strongly the ideas of Elizabeth Warren – what we need in financial services, above all else, is much more transparency.

The premise – and central mistake – of the Obama administration in 2009-10 can be summed up in what the president said to leading bankers on that fateful day, March 27, 2009: “My administration is the only thing between you and the pitchforks”. Continue reading

Phony “Fiscal Conservatives” – In The Midterms And Beyond

By Simon Johnson

Should we take seriously people who, in the current US political debate, argue that they are “fiscal conservatives”?  No.

These self-labeled conservatives are very far from even being willing to discuss the real issues – let alone make proposals that would have significant effects.  As Peter Boone and I argue on Bloomberg this morning, US “fiscal hawks” are just pretending.  Perhaps this will prove effective in the midterm elections, but then they will face the music – what exactly will they put on the table that will make any difference at all?

Unless and until you are ready to really reform the financial sector, you cannot be taken seriously in the fiscal space.  It’s the big banks that blew up the economy, caused a devestating recession, and pushed up debt by 40 (forty) percentage points relative to GDP

None of today’s “fiscal conservatives” showed up to work hard on constraining global megabanks over the past 18 months.  They have repeatedly and explicitly earned the right not to be taken seriously.

Here’s the full Bloomberg link: http://www.bloomberg.com/news/2010-11-01/u-s-fiscal-hawks-turning-french-commentary-by-peter-boone-simon-johnson.html

Foreign Money, National Security, And The Midterm Elections

By Simon Johnson

Campaign contributions by non-citizens are a huge issue lurking behind the midterm elections; they will be even more important in 2012.  Think about the economic dynamics:

  1. Americans have a long-standing and well-founded aversion to foreign involvement in their politics, and it is well-established that this can happen in part through corporate “commercial” structures.  Thomas Jefferson objected to Alexander Hamilton’s plan for a national bank in part because he feared this would become a stalking horse for the British in some form (see Chapter 2 of 13 Bankers for the context).  Dubai Ports World was not allowed to invest in the United States – for reasons of perceived national security.  You may or may not think that case was handled well, but we have the CFIUS process to vet foreign direct investment for good reason.
  2. The Supreme Court has determined that corporations can make political contributions virtually without limit, apparently not understanding or not caring that (a) management has a fiduciary responsibility to shareholders, (b) globalization means more foreign shareholders on average (for privately held companies and funds, as well as publicly traded companies), and (c) at the margin, key strategic shareholders – the people who provide extra capital when the chips are down – increasingly tend to be foreign.  Think about the role of Sovereign Wealth Funds in providing funds to our banking system in 2007-08, or the fact that Citigroup goes cap-in-hand to Saudi Arabia every decade or so.
  3. During the Reagan years and again, even more, under the Second President Bush, the US ran a large current account deficit – reaching 6 percent of GDP before the 2008 crisis (and still around 3 percent of GDP).  You may think this a technical detail that is largely irrelevant to the political process, but you would be wrong.  We finance our current account deficit with capital inflows from abroad or, to put that more plainly: Foreigners buy and hold financial assets in the United States.  Some of those assets are US government obligations but traditionally and increasingly non-US people have also acquired claims on corporate entities – including common or preferred stock. Continue reading

Does The Obama Administration Even Want To Win In November?

By Simon Johnson

Increasingly, senior administration officials shrug when you mention the November mid-term elections.  “We did all we could,” and “it’s not our fault” is the line; their point being that if jobs (miraculously at this point) come back quickly, the Democrats have a fighting chance – but not otherwise.

It may be true, at this point, that there is little fiscal policy can do that would have effects fast enough; and monetary policy is out of the administration’s hands.

But ever so quietly, you get the impression the Obama team itself is not so very unhappy – they know the jobs will come back by 2012, they feel that Republican control of the House will just energize the Democratic base, and no one will be able to blame the White House for getting nothing done from 2010 on.

When you push them on this issue, they snap back, “Well, what do you want us to do?  What’s the policy proposal that we are not pursuing?”  But this is exactly the wrong way to think about the issue.

Continue reading