Wednesday, December 16, 2009

Obama's tiny change we can believe in

Business Times - 17 Dec 2009

Obama's tiny change we can believe in

Lack of progress on healthcare and financial reform shows it's business as usual in Washington


US PRESIDENT Barack Obama and his aides have described their effort to reform an ailing and costly American healthcare system as the centrepiece of the ambitious social and economic programme of a president who had promised during his election campaign that it would not be 'business as usual' in Washington. When he occupied the White House, he pledged to deliver 'a change we can believe in'.

Indeed, the popular narrative among Mr Obama's supporters has been that a major overhaul of the nation's US$2.5 trillion healthcare system - America being the only large industrialised country where access to healthcare is not guaranteed by the state - would be another milestone in the implementation of a progressive agenda that goes back to president Theodore Roosevelt's attempts to regulate the large corporate behemoths.

Modest attempt

But as members of Congress debate several proposals to reform the healthcare system, they are also preparing to leave Washington for the Christmas recess. So it seems that notwithstanding the historic election of the Change President, it is still business as usual in the city.

Even under the best-case scenario where Congress approves healthcare legislation before the end of the year (Mr Obama had promised to get one passed in August) - a Big If! - the expectation is that the final bill will look more like a modest try to fix the health-insurance system, as opposed to the ambitious healthcare reform promised by Mr Obama.

The final bill is expected to extend coverage to 30 million uninsured Americans and bring to an end some of the more notorious industry practices such as refusing coverage to those with pre-existing medical conditions. But the legislation will probably lack any mechanism to force private companies which will continue to dominate the system to reduce their costs.

If anything, the private companies will be among the main beneficiaries of the new legislation since the federal government will now be paying them in exchange insuring low-income Americans. Earlier plans to establish a government-backed public insurance system ('public option') to compete with the private insurer and to extend the current government system that provides health insurance to the elderly (Medicare) to those between the ages of 55 and 65 - two ideas that according to opinion polls enjoy the support of majority of Americans - have been dropped under pressure from the insurance industry and its allies on Capitol Hill.

Among those allies of the industry were several of the 60 Democratic senators, who made it impossible for the White House and the Democratic leadership to win the support of enough senators (60) to get an earlier draft that included the public option. In fact, aware of the balance of power in their party, the more progressive Democrats had refrained from submitting an even more ambitious plan for a 'single-payer' healthcare programme, under which the government, like in Britain, will have control over the system.

Some critics have blamed Mr Obama for the fact that the Democrats who are in charge of Congress will not be able to pass the more ambitious and progressive healthcare plans. But it is doubtful that a more forceful lobbying by the White House would have made much of a difference when one takes into consideration the political realities in Washington: American companies exert enormous power over both Republicans and Democrats through their active lobbying and huge contributions to the lawmakers' re-election campaigns. In a way, Mr Obama's strategy for the healthcare reform was based on the assumption that no legislation will be approved in Congress without the support of the health-insurance industry.

Indeed, that American businesses have the power to derail serious attempt by the White House and Congress to restrict their power has been clearly demonstrated by the failure on the part of Mr Obama and the Democrats to press for a major overhaul of regulations that affect the financial sector in the wake of the meltdown in Wall Street. This was another component of Mr Obama's reform agenda during the election campaign.

The fact that Mr Obama decided to select two insiders with close ties to the financial industry - Tim Geithner and Larry Summers - as his top economic advisers, reflected his recognition that Wall Street would be able to sabotage any dramatic efforts to impose new restrictions on the banks and the financial institutions. From that perspective, Mr Obama's somewhat schizophrenic posture over Wall Street's conduct - bashing the financial titan during television interviews and public forums, while adopting a more conciliatory approach towards them during private meetings and negotiations - has really not been surprising.

Mr Obama seems to adopt a populist anti-Wall Street rhetoric as part of an effort to placate an angry and economically distressed public as well as the members of the progressive wing of his party. At the same time, when it comes to negotiating new rules pertaining to the financial industry, Mr Obama and his aides adopt a Let's-Make-a-Deal approach towards Wall Street.

Hence, in a television interview on the highly watched '60 Minutes' on CBS Sunday night, Mr Obama described the bank executives 'fat cats'. Appearing on the CBS news programme '60 Minutes', Mr Obama acknowledged the anger that seems to dominate the American public's attitudes towards Wall Street.

He referred to the Wall Street financiers as 'fat cat bankers', and noted sarcastically: 'They're still puzzled why is it that people are mad at the banks.'

'Well, let's see,' Mr Obama continued, 'you guys are drawing down 10, 20 million dollar bonuses after America went through the worst economic year that it's gone through in decades, and you guys caused the problem. And we've got 10 per cent unemployment.'

Sounds harsh. But then Mr Obama failed to mention during the '60 Minutes' interview that like his predecessor, he has overseen a gigantic Wall Street bailout. And he has opposed legislation to curb executive pay, opting instead for modest restrictions on financial institutions that have received funds of the Troubled Asset Relief Program (TARP).

Moreover, during a gathering of some of the leading 'fat cat bankers' at a private White House meeting with Mr Obama on Monday, the President seemed to be sweet-talking the financial executives - those who starting only a year ago have benefited from trillions of US dollars paid for by the American tax-payers - into providing loans to cash-starved small businesses and consumers.

Bank lending

After the meeting ended, Mr Obama tried to spin his meeting with the 10 financial executives as a confrontation: 'I made very clear that I have no intention of letting their lobbyists thwart reforms necessary to protect the American people,' he said. 'If they wish to fight common-sense consumer protections, that's a fight I'm more than willing to have.' But then the bankers refrained from making any specific commitments to increase lending, with the exception of Bank of America announcing it plans to make US$5 billion more available to small and medium-sized businesses.

And what was seen as a snub to Mr Obama, two Wall Street bankers, Lloyd Blankfein of Goldman Sachs and John Mack of Morgan Stanley, did not attend the meeting at the White House in person but through a teleconference. It was the bad weather that forced them to stay in New York, they insisted. But their aides told reporters they were insulted by Mr Obama's description of them as 'fat cat bankers'.

Citigroup, Wells Fargo, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley have already decided to use their profits to pay back TARP funds which will allow them to avoid government restrictions on executive pay.

At the same time, the bankers and their lobbyists in Washington have expressed strong opposition to regulatory legislation that was passed by the House of Representatives recently.

So the expectation in Washington is that the White House and the more business-friendly Senate will end up supporting a regulatory bill that will get a green light from Wall Street.

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.


Binh said...

Forcing people to buy insurance from private companies is not progressive, it's criminal. If Bush was doing this, liberals would be slamming him.

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