The New “New Deal”.

At least that is what they are trying to call the Obama plan for the economy.  Back on 9 Sept 08 I wrote when everyone was talking about the prospect of change coming to Washington,

“Sadly, history will repeat itself and change will not be coming to the political system. To answer the original question –NO CHANGE IS COMING!”  BTW, this is my way of saying, “I told you so”!

So when I hear that Obama’s plan is the New New Deal I shudder.

The present crisis is the outcome of the protracted decline of American capitalism, which is massively indebted, has seen a decades-long decimation of its manufacturing base and whose financial system has become the destructive engine of a deepening worldwide slump. There is no modern New Deal forthcoming from an Obama administration.

Moreover, the one implemented by Roosevelt more than 70 years ago failed to overcome the Depression. That was achieved only through a second world war that annihilated millions of people.

But astonishment at this turn of events, far less satisfaction at the belated acknowledgment of the state’s proper role in the market, should not lead critics of financial capitalism astray. Rather, they should argue firmly that this plan must not be a golden parachute for a small elite of people and firms paid for by the country’s already hard-pressed citizens: rather, it must become a golden opportunity to create a new model of and a new phase in the US economy itself.

The taxpayers’ money should not go to bail out a financial sector that has brought the country to the most severe crisis since 1929 – and which will have (like the great-depression era) economic and political reverberations across the world. The US has a strong banking sector, whose regulation and capital requirements have allowed it to survive the crisis of the financial sector. The fact that the two titans of Wall Street, Goldman Sachs and Morgan Stanley, have voted with their feet by joining the banking sector is another indication of a possibility of returning to a financial model centred more on banking – with more regulation, stiffer capital-reserves requirements, and fewer leveraging options.

As written in the magazine, The Nation:

What we really need is a new New Deal: a systematic approach to the financial and economic problems of the United States.

Firstly, we need relief for ordinary Americans. At the moment, four million households are behind on their mortgage payments and facing foreclosure. Some estimates suggest that an additional two million may face eviction next year.

Second, we need reform. In recent years, one federal regulatory agency after another has been handed over to the industries they were created to regulate. It should come as no surprise that during the Bush administration the US has witnessed the largest recall of contaminated beef in its history, thousands of deaths from unsafe prescription drugs, and one of our worst financial meltdowns.

Advocates of the free market must confront the fact that both the Great Depression and the current financial chaos were preceded by years of laissez-faire economic policies. Strictly enforced regulations not only protect consumers, they protect companies that behave ethically from those that don’t. The sale of tainted baby food in China demonstrates, once again, that when industries are allowed to police themselves, there’s absolutely no limit on what they’ll do for money.

Third, we need reconstruction, not only of America’s physical infrastructure, but also of its society. Today close to 50 million Americans lack health insurance. About 40 percent of the nation’s adult population is facing medical debts, or having difficulty paying medical bills. A universal health-care system would help American families, while cutting the nation’s long-term health-care costs. And a large-scale federal investment in renewable energy and public-works projects would build the foundation for a strong 21st century economy.

Contrary to the myth of the free market, direct government intervention has played a central role throughout American economic history, subsidizing the growth of the railroad, automobile, aerospace and computer industries, among others. It will take well-planned government investment to break our dependence on foreign oil and create millions of new Green jobs.

I would agree that a new New Deal is needed but I do not see anything changing as it stands today.  Obama’s choices for his economic team have proven to be acceptable to Wall Street and that means that they will pursue the continuation of Wall Street first, Main Street….maybe.