Published on TheHill.com on September 17, 2013
Congressional Democrats have defected from President Obama on three key issues in recent weeks, a sure sign of his looming lame-duck status.
First, 111 House Democrats refused to fund the National Security Agency surveillance program despite heavy pressure from the administration and House Minority Leader Nancy Pelosi (D-Calif.).
Then, it became evident that Obama would suffer enough Democratic defections in the House, and possibly also in the Senate, to imperil his resolution to allow the use of force in Syria.
And this week, Obama was forced to reconsider his likely nomination of Larry Summers to be the chairman of the Federal Reserve Board, under pressure from Democrats who wanted Fed Vice Chairwoman Janet Yellen instead.
These defections, from what had been a solid phalanx of Democratic support for Obama, signal the waning of his power and approaching lame-duck status only nine months into his second term. And on three key issues — surveillance, war and crony capitalism — Obama has become suspect in Democrats’ eyes.
The revelations of NSA spying, initially brought into public view by Edward Snowden, have cut right across party lines, enraging Tea Party small-government advocates and ACLU civil libertarians alike. The fact that the 111 Democrats who voted against NSA funding were joined by 94 Republicans in their opposition shows how strong this coalition of outsiders has become.
The Syria war vote that never happened also showed the inroads that the anti-establishment coalition has made among Democrats. While House Republicans lined up to pledge to vote “no” on the resolution allowing U.S. airstrikes in Syria, most Democrats reported themselves as undecided pending the president’s speech to the nation on Sept. 10. When Obama was shown up by Russian dictator Vladimir Putin and his speech fell flat, it was so evident that he couldn’t deliver Democrats that Senate Majority Leader Harry Reid (D-Nev.) quietly shelved the resolution to await a U.N. vote.
But it is the Summers nomination that best illustrates the president’s loss of clout among members of his own party. With increasing evidence that income inequality has flourished and widened under Obama, Democrats are impatient with his courting of Wall Street and his appointment of crony capitalists to key posts in Treasury and the Fed.
Under former President Clinton, 45 percent of all new personal income went to the top 1 percent. Under former President George W. Bush, it was 65 percent. So far under Obama, 95 percent of the income has gone to the richest 1 percent.
Why? The main blame falls on the cascade of moneymaking opportunities the Fed and Treasury have made available to America’s rich people. It began with our leaving the gold standard under former President Nixon and swelled with the futures markets that speculate on T-bill interest rates. When Clinton allowed the repeal of Glass-Steagall, largely on Summers’s advice, the gambling ratcheted up. Now banks could use federally guaranteed depositor money to bet on iffy investments.
With the Fed shipping $85 billion each month to Wall Street, brokerage executives and bank officials can earn vast sums by gambling on derivatives. With not much loan demand to soak up the currency, the bankers gamble with the money, and the too-big-to-fail policy implicit in the Troubled Asset Relief Program underwrites the betting.
Summers has come to epitomize this crony capitalism, and his association with it has rubbed off on Obama. Democrats finally rebelled. It is this administration’s policies that are widening the income gap.
Yellen, the Fed heir apparent, is no better than Summers. Her tenure as vice chairwoman of the Fed under Bernanke is enough to signal her support of crony capitalist gambling. She is likely to hold interest rates down, nominally to encourage job creation but in reality to provide free money to Wall Street’s government-guaranteed derivatives gambling casino.
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