In addition, Wall Street, the culprit behind the last disaster, may be at least as hard to rein in as it was four years ago. On the positive side, results of "stress tests" this week showed that 17 of the nation’s 18 largest banks will survive even if the economy plummets 5 percent and the Dow Jones industrial average falls to 7,221.7. But there is a new frothiness in the market that worries close watchers such as Neil Weinberg, the editor-in-chief at American Banker, who see new temptations abroad to underprice risk, coming at the same time that even Attorney General Eric Holder is warning that the biggest banks have grown not only too big to fail, but too big to prosecute. (In testimony before the Senate Judiciary Committee on Wednesday, Holder delivered an implicit rebuke to his former Cabinet colleague, Treasury Secretary Timothy Geithner, who permitted Wall Street to resurrect itself in what is largely its former image.)
So, yes, this is sure to be seen as Obama’s economy now. And while many of the trends are upward, in other respects what is being revealed now is the inadequacy of his first-term responses. A few years ago, some pundits, persuaded by the expert spinning of first-term economic adviser Lawrence Summers and Geithner, bought the Obama line that between the president's stimulus plan and his health care reforms, he was rectifying economic inequities that have grown since the Reagan era. The health care law, wrote David Leonhardt of The New York Times in 2010, amounted to “the federal government’s biggest attack on economic inequality since inequality began rising more than three decades ago.”
But Saez says Obama-era changes such as the health care surcharge on upper incomes, along with an increase in top tax rates back to the Clinton level, will have only minor impacts, especially relative to the changes that occurred after the New Deal. “It’s a medium-to-small-size change that, in my view, is not going to dramatically lead to a deconcentration of pretax income,” he said in a recent interview.
So, there’s little time to crow. Obama has his work cut out for him if he wants “his” economy to look like a positive legacy four years from now.
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