Obama, banks and Republicans

Fascinating stuff related to President Obama's reform of the banking system; a long but very worthwhile article by New York Magazine about the relationship between Obama, the banks and the Republican party. Paul Krugman in the New York Times has a very much shorter article about the same subject here. The Democracy in America column in the Economist covers both articles here.

In essence, the Obama administration prevented the collapse of the global banking system in 2008-9 by bailing them out to the tune of billions of dollars through the Troubled Asset Relief Program. The administration resisted calls for radical change from the left, and have proposed changes which are significant, in that it is designed to prevent a repeat of the 2008 experience, but not revolutionary. This has annoyed large numbers of the American people who are bitter because of massive unemployment and a weak recovery, and has also annoyed the banks who wanted to return to business as usual.

After supporting candidate Obama in the 2008 election to the tune of millions of dollars, they have turned to support the Republicans again, to the tune of millions. To quote Krugman:

So far this year, according to The Washington Post, 63 percent of spending by banks’ corporate PACs has gone to Republicans, up from 53 percent last year. Securities and investment firms, traditionally Democratic-leaning, are now giving more money to Republicans. And oil and gas companies, always Republican-leaning, have gone all out, bestowing 76 percent of their largess on the G.O.P.

These are extraordinary numbers given the normal tendency of corporate money to flow to the party in power. Corporate America, however, really, truly hates the current administration.

This is a problem for the GOP because Obama's reforms will be supported by a large number of Americans because the new law will be seen as punishing the banks for their past misdemeanours. The Republicans have a problem because they are traditionally in favour of big business not being stymied by too much government oversight, and are being tarred as being in the pockets of the big banks.

This is why the party discipline that was so much in evidence on the right over Obamacare, and which narrowly came to bring the administration's momentum to a halt at the end of last year, has wilted under the pressure. Populist movements are "anti-socialist" medicine and anti-bank. The GOP has a problem as the November mid-terms, and the 2012-race approach.

I'll quote the last paragraph of the NY magazine article:

...Wall Street, too, is engaged in some seriously perilous (and mildly deranged) thinking, which reflects not just its political naïveté but its all-distorting insularity from … reality. The populism now stirring in America is bipartisan, ecumenical. No politician of any stripe can afford to ignore it. The Republicans running in 2012 will be contending with or catering to it, too; they’re unlikely to offer Wall Street any safer harbor than Obama has. Yet the best barricade against the pitchfork platoons is an improving economy. And if it comes, not only will Obama stand a good chance of reelection, Wall Street’s amnesia may well kick in—just in time to fall in love all over again.

In Krugman's analysis there is also a problem for the Democrats in November too; populist sentiment against them thanks to health-care reform, balanced against the left's annoyance that a revolutionary change in Wall Street hasn't happened. In his analysis Obama has to occupy the middle ground between Wall Street and populist reformers. Fascinating stuff as the mid-term elections approach.

Useful background for anyone contemplating decline or renewal of parties (both are being buffeted by the populist left and right, which are in fact the "base" of both parties, and this has an effect on the policies of both), party discipline in health-care reform and bank reform votes, and in Presidential power.

Obama and healthcare reform - opinions

There were extraordinary scenes when Obama finally succeeded in getting his health-care reform bill through Congress on 21st March this year, and subsequently signed it into law; a major plank of his domestic agenda had successfully been implemented. The vote itself was interesting; as previously noted, the final vote in the House was 219 to 212 – Republicans voting against along party lines, with 34 Democrats voting against too. In the Senate the previous Christmas Eve the vote went 60-39, with Democrats and Independents voting for and Republicans voting against.

All of which demonstrates very clearly how party discipline is a funny thing – on this issue it is strong for the Republicans, but weak for the Democrats in the House. Possibly, it also shows how divided Americans as a whole are about health-care. This is the major issue which is exciting the Tea Party movement. It may just reflect how worried some Democrats in the House are about their chances in the mid-terms in November.

Useful stuff for any question about Congress, party discipline, Presidential power and the like.

In terms of the points of view, two opinions are striking – that of the Democrats who argue that it is only a thorough reform of the health-care system by government that the poor and uninsured will be covered. For Republicans, health-care reform is too expensive and smacks of socialist government (although the latter is possibly a rather extreme casting of the policy).
A useful summary of the two view points here in the Guardian, which characterises the vote as a “monumental achievement”:

… at its heart the story is about the tension in American society between the individual and the community – whether we are just a loose confederation of individuals who should be left alone to pursue self interest, or something more than that, a community of citizens with mutual ties and obligations.

More about the opinions of the two main parties soon.

Synopticity

A brief note about synopticity – a major focus of A2 Gov and Pol under Edexcel. It is a significant part of the marks for the essay (12 out of 45 for Assessment Objective 2). Ultimately they want to probe the candidate’s understanding of viewpoints or perspectives on the question, and at the highest level clearly appreciating the

“nature of the view points and how they shape political analysis and result in competing arguments and rival conclusions”

Edit 13/03/2015:

Essentially the examiner is looking for a good argument. For marks at the top of level 3 (for the synoptic part of Assessment Objective 2) ideally you argue both sides of an issue, to show the pros and the cons of a particular theme. For example, if you are writing an essay on the effectiveness of the US Supreme Court you need to explore the pros and the cons of judicial review. You are not actually trying to explain the Conservative / Republican / Democratic / Liberal view point on an issue.

Obama and Bank reform

So, Obama has managed to get through his reform of the Banking industry through the Senate, and this bill will go through the reconciliation service following on from a similar, but different, bill passed by the House in December. Ultimately, he has managed a remarkable thing; getting some very radical changes to fundamental parts of American life through Congress in the first few years of his presidency.

Great analysis of the core parts of the bill from Robert Peston here. Interestingly, the Senate vote largely went along party lines, except for 3 Republicans who jumped ship (the vote was 59 to 39). It was close – a vote to decide to end debate and vote on the bill only passed by 60-40. There will be plenty of haggling yet to come, but the most useful part for G&P students will be the points-of-view from the two main sides in the debate – Republicans, largely on the side of the Banks, and the Democrats who claim largely to be on the side of the American public (“main street, not wall street”).

Of course, there is the argument that what benefits the banks, and what give them the ability to make money and grow will benefit the American public in the long-run. Set against that is the problem that these banks have been bailed out to the tune of billions of not trillions of dollars thanks to the Troubled Asset Relief Program, or TARP, which was made necessary by the credit crunch.

Banks have been doing their best to prevent the bill from coming in to being effectively (according to this piece in the left-leaning Observer), and Republicans have been saying that Obama’s plan will severely hit bank’s ability to make money in creative ways because government oversight will limit it. This piece by the Wall Street Journal suggests that it’s all a piece of political theatre by the Democrats to shore up their vote in November’s mid-terms, and not really valuable as an exercise in banking reform. Although, arguably, it’s just another strand in the stop-the-bill movement. The extraordinary right-wing commentator Rush Limbaugh claims here that it will drive business out of the country, and also gives regulatory power to the executive from the legislature.

Essentially, big business = good, big government = bad.

By contrast, Democrat Senator for Montana writes in the left-leaning Huffington Post that the Bill is a win for “main street” against the banks too big to fail. He trumpets the benefits of the Bill, and also reveals that he was against the bailouts of the banks (“because I don’t believe in bailouts”) despite the fact that this action possibly saved the global banking system from collapse.

In short, big government = good, big business=bad.

Elsewhere, the NY Times writes that some on Wall Street are phlegmatic about the whole thing, happy that the reform won’t be too punitive and can be softened, while accepting that some reform was inevitable.
All of which is useful for G&P students when answering a question on the opinions of the two different parties, on Congress and the passage of law, and on the power of the Presidency.

US political parties - ignoring the centre

Recent news that the Tea Party movement has made definite in-roads into the mainstream Republican party with the selection of Rand Paul as the Republican candidate for the Kentucky Senate seat.
Very good analysis of Dr Paul's policies here and an interesting piece about the implications of the Tea Party movement here by the "Democracy in America" blogger in the Economist.

For G&P students this is all useful stuff because it emphasises how political parties are increasingly relying on very vocal groups and excluding the large number of "independent" and moderate voters. The Tea Party movement may have won the primary, but this does not necessarily translate into a win for the Republican party:

Last year's New York state by-election comes to mind. A conservative populist ousted a moderate Republican, and subsequently lost the Republican seat to a Democrat... All this said, it remains likely that the Democrats will take a whacking in November. But an organised and disciplined Republican Party offering a viable set of alternative policies—think 1994's "Contract With America"—would whack them a lot harder. Instead, populist anger has enraged people against Democrats, with few tangible benefits to Republicans so far.

The Tea-party does not have an organisational centre or a clear set of policies, all of which encourage a wide-range of anti-government types to support it, but does not lead to success against a clear set of policies which could be supported by a significant number of independent voters.

There is a very interesting (if very long) analysis of the state of the parties in the New York Review of Books. A couple of things struck me:

The ideological polarization between Republicans and Democrats that surveys pick up is owing almost entirely to the radicalization of those belonging to the shrunken Republican base. (As of 2009, only a quarter of Americans identified themselves as Republicans, the lowest figure since the post-Watergate years.)

Democrats have edged slightly more left on political and economic issues, whereas the views of independents, the largest and fastest-growing group of voters, have not changed much over the years. While well over half of Republicans say that they would like their party to move further to the right, just as many independents wish it was less conservative or would stay where it is.

All of which is useful for any question asking about the importance of political parties in the US - the decline / renewal argument which we can add into the established information.

The Conservative party

A typical exam question may ask for a comparison between David Cameron’s Conservatism with Thatcher’s Conservatism, or even with “One-nation” conservatism. Any recent information can be used, and this question has suddenly got a whole lot easier and more interesting with the formation of the Lib-Con coalition.

There are the obvious similarities – the party is still right-of centre and overall believes in the power of the market to allocate resources, and that Britain should be strong in terms of foreign policy and have a nuclear deterrent, and is suspicious of further erosion of UK power towards the EU. Examples of Thatcherite policies could be the privatisation of state industries under Thatcher & Major (British Airways in 1987, British Rail in 1994).
Cameron has not advocated nationalisation of industries beyond those already done under Labour and its attempts to prevent financial melt-down (for example Northern Rock, LloydsTSB-RBOS-Halifax) although these are special cases and were supposedly done for economic rather than ideological reasons. He has not clearly demonstrated a wish for further privatisation, except possibly for the Post Office and for the banks currently owned by the tax-payer to be returned to private ownership when possible.

One shouldn't forget the Miner's strike of 1984-5, and the reform of Union legislation which the government brought in and the profound impact this had on unions and their members. Click here to find an article by David Blanchflower, former member of the Bank of England's Monetary Policy Committee about this issue.

A view of the Thatcher-era reforms here by Simon Heffer, Conservative supporter and collumnist in the Mail from a few years ago. The article does point out that the Thatcher Union reforms have largely not been touched since.

“The Big Society” was a Cameron theme from the election, which is a startling contrast to Thatcher’s “There is no such thing as society” (see here for more of the interview this quotation was taken from). In this way Cameron is returning more to the “One-Nation conservatism” of Disraeli more than the ideologically strong Thatcher period. Thatcher for example was a strong believer in monetarism and in the power of liberty and freedom of the individual (“This is what we believe” – Thatcher had a copy of F A Hayek’s “The Constitution of Liberty” in her hand as she spoke).

Thatcher was less of a pragmatist than Cameron – as we can see in his pragmatic approach to coalition with the Lib Dems; he was happy to rip up parts of the Conservative manifesto in his desire to get a deal (eg the Lib Dem policy to prevent anyone earning £10,000 or below from paying income tax is now government policy). Cameron did have flag-ship policies on supporting the family through the tax-system, and in raising the inheritance-tax threshold, and these were typical conservative right of centre policy-making. These policies have now been scrapped under the coalition government. See the link above for further analysis.

There are certain caveats one should mention – the credit-crunch and the £163bn black hole in the public finances have limited the government’s room for manoeuvre, and coalition government is necessarily a compromise between differing parties.

There have been many comparisons between Cameron and Disraeli, not only because of the "one-nation" ideology, but also because of the great Victorian statesman's impact on the direction of Conservatism. I won't explore that too much here as it is slightly outside the scope of this blog, but it is useful background which can be mentioned in any analysis of Conservative traditions.

The 2010 election

It is obvious that no one party has total control of the House of Commons, despite a very large swing to the Conservatives and a loss for Labour of almost 100 seats. At least one commentator has called this almost as bad as the loss in the 1983 election.

Negotiations are on-going between the three main parties as to what the next step is; plenty of analysis and guess-work is available in most media, including the blogs listed on the left hand side of your screen. Minette Marrin in today's Sunday Times, and Andrew Sullivan both mention the extraordinary fact that the Conservative party would have won the election if Scotland's results were excluded, and that there is only one Tory MP north of the border. The analysis seems to suggest that a Tory administration which cut government spending severely would play into the hands of the SNP who could claim (quite legitimately) that the government had no mandate to perform these cuts north of the border. This would call into question the Union itself.

All of which is useful stuff for G&P students answering any question about why the British electoral system can be criticised. I would like to highlight the difference in result between the 2005 election where Labour won a clear majority with 66 seats on the basis of 35.3% of the vote, and the result of the 2010 election where the Conservatives won more of the vote with 36.1% but didn't win an overall majority with 307 seats.

The poor showing of the Lib Dems on 62 seats was a bit of a shock, but may reflect the fact that in the FPTP system we don't vote for the party leader but for members of their party to represent us; we make judgements about who to support based on a whole heap of local issues, rather than necessarily the national picture.

A key reason for having the FPTP system is that it tends to produce strong government, except that in this case it hasn't. Analysis from the BBC's Robert Peston suggests that coalition government would only happen in the event of a further financial crisis since there are significant obstacles to a stable government being created based on the voting done on May 6th, and more importantly further obstacles which may prevent government making the massive cuts necessary. As pointed out by him and Stephanie Flanders elsewhere there is currently little evidence that any party has got a credible plan to cut the deficit. Should the stock markets open on Monday thinking just that there will be severe problems in the city in terms of stock prices and the like.

Since economic policy is outside the scope of this blog and of the G&P course, I'll merely call attention to the events in Greece, and the potentially dire consequences to the UK, and the EU if a solution is not found. The Economist magazine's "Intelligence Unit" has suggested that a second election later this year is likely.

By way of contrast to the seriousness of the above, The Sun's front page on Saturday was very clever and funny.