Obama's Class War: Wall Street Bailouts Killed Healthcare Reform

This week has brought retreat and retrenchment on healthcare. The headline in Politico was, "Health reform hits Senate speed bumps." As Politico explained, the bumps began on Monday, when "The Congressional Budget Office returned a $1.3 trillion pricetag on Sen. Ted Kennedy's bill—a number that far exceeds what most lawmakers are willing to pay." 

And here's how the Associated Press summarized the Capitol proceedings: 

The Senate set off on its major overhaul of the nation's health care system Wednesday, but its first steps were quickly overtaken by fresh cost concerns and partisan anger. An ambitious timetable that called for completing committee action in early summer seemed in danger of slipping away.

And Bloomberg News reports that Obama's legendary grassroots campaign cadre is having a hard time with its new mission. '"The election was easy because it was telling you to do one thing: vote for Obama,'" lamented an activist. "Working on healthcare is 'kind of frustrating."'

Indeed, for the first time, Congressional Republicans are thinking that maybe they can beat back Obamacare, after all. Concerns about the deficit and debt are rising, and startled Democrats are being forced to pay close attention to surging popular anxiety. So what happened? How did Obama take his mandate for healthcare action and fritter it away—in less than five months?

The answer, of course, is that Obama made other things a priority. He said that bailing out the banks was a higher priority, and so that's what he did—he has presided over the greatest upward wealth transfer in American history. The fiscal future of the country was thus given over to Wall Street. The perceived "march to socialism" that has antagonized so many over the past few months was not a trek on behalf of Main Street's healthcare needs, it was a trek on behalf of Wall Street's red-ink needs. And so healthcare has been left as a straggler; if any bill passes this year, it will be substantially truncated, falling far short of the goal of full coverage for the 46 million uninsured.

For his part, Obama insists that he was saving the economy. But if so, why has unemployment jumped from 7.6 percent in January to 9.4 percent in May? It sure seems as if the top priority of Treasury Secretary Tim Geithner, et al., was comforting the comfortable, as opposed to comforting the afflicted. Indeed, Obama himself has said that joblessness will continue to rise into double digits. And this is supposed to be a new New Deal?

In fact, it's obvious that the president—under the tutelage of Geithner, Lawrence Summers, and others who have made cushy careers for themselves as servants of high finance—has chosen to make propping up coastal enclaves of billionaires, and their institutions, his basic policy. (A policy that was once known as "trickle down.") And so Obama never did anything to stop the notorious bonuses going to AIG executives; that was $400 million of your money down the drain. And how much more waste of millions, billions, and maybe even trillions is waiting to be discovered as we dig through the fiscal fallout of the bailout hail?   

When confronted with a choice between healthcare for the poor and the near-poor on the one hand, and the continued overstuffing of the overclass on the other hand, Obama made a decisive choice: He chose the overclass. He put rich people first.

Such skewed preferences in him were evident last October, when Senator Obama voted for the Wall Street bailout. That was a signal, the first of many, that Obama was supportive of bank bailouts, and a generally Wall Street-centric policy. Since then, the bailouts have grown more and more costly, as the Treasury, Federal Reserve Board, and the Federal Deposit Insurance Corporation—to name just three spigots of off-budget cash to banks and rentiers—all joined in the bailout binge.

By late November 2008, the cost of the bailout was estimated to be $3.5 trillion. But Obama, by then the president-elect, had no objection; indeed, his financial team worked closely with the outgoing Bush team to keep the money coming. Those great minds all thought alike, and so by January, when Obama was inaugurated, the total cost of those bailouts had risen to $8 trillion. The next month, February, the new president added nearly another trillion in spending, signing into law a $787 billion stimulus package. And thus by May, the cost of the various bailouts had swelled to as much as $12 trillion.

That's a lot of money, and not surprisingly, it's driving up interest rates, causing the dollar to fall, and even causing other countries to make plans to convert their assets to currencies other than the greenback—or even to create a new world currency altogether. Such talk has spooked not only the markets, but also the country. And Democrats are getting the message on spending: enough is enough.

But don't take my word for it. Take the word of America's No. 1 Democrat, Barack Obama. On May 22, C-SPAN's Steve Scully put this question to the president: "You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?"

And here's the answer, dooming a big healthcare plan: "Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we've made on healthcare so far." 

True enough. America ran out of money before the Obama administration did anything about healthcare—although, of course, the Obamans did just about everything for the banks.

Yet in the meantime, the projected cost of his de-prioritized healthcare plan keeps rising; estimates now vary from  $1.6 trillion to $4 trillion over the next 10 years. That's a lot of money—but it's chump change compared to what was spent on the bailouts. Even the total at the high end of current projections, $4 trillion, works out to  $400 billion a year. And as we have seen, the bailouts of 2008-2009 ran up the fiscal score by as much as $12 trillion. In other words, the bailouts cost 30 times the annual bill for a new healthcare plan. And from the looks of things now, any healthcare plan that might survive will cost a great deal less than that.  

For his part, Obama seems cool and calm as always. He's happy enough with his economic team, keeping his poise as his healthcare agenda goes down the drain. It's all a question of priorities. As Vice President Joe Biden has said many times, "My dad had an expression, 'Show me your budget, and I'll show you what you value.'"

Well, Obama has done that. Without ever quite saying so, he has made his values clear.

The 44th president has, indeed, played class warfare. But it hasn't been a class struggle in which he sided with the poor against the rich, or even the middle class against the rich. Just the opposite. He has championed trillion-dollar subsidies for the investor class, enshrining bank bailouts as a higher priority than universal healthcare. That is, he has privileged Wall Street over perhaps the most sacred priority that Democrats hold dear: health insurance for all.

One day, rank-and-file Democrats will figure out that they have lost yet another class war—defeated by their own president.

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James P. Pinkerton, a fellow at the New America Foundation and a contributor to the Fox News Channel, was a domestic policy aide in the Reagan and Bush 41 White Houses.