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Rob Johnson is President of the Institute for New Economic Thinking. He was previously Director of the Economic Policy Initiative at the Franklin and Eleanor Roosevelt Institute and is a regular contributor to the Institute's blog NewDeal 2.0. He serves on the UN Commission of Experts on Finance and International Monetary Reform.
Dr. Johnson was also a Managing Director at Soros Fund Management where he managed a global currency, bond and equity portfolio specializing in emerging markets. He was also a Managing Director at the Bankers Trust Company. Dr. Johnson has served as Chief Economist of the US Senate Banking Committee under the leadership of Chairman William Proxmire and was Senior Economist of the US Senate Budget Committee under the leadership of Chairman Pete Domenici. Dr. Johnson was an Executive Producer of Taxi to the Dark Side, an Oscar Winning documentary produced and directed by Alex Gibney.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.Now joining us to discuss President Obama's inaugural speech is Robert Johnson. Rob is the executive director of the Institute for New Economic Thinking and a senior fellow and director of the Global Finance Project on Financial Reform for the Roosevelt Institute. He joins us from New York.Thanks for joining us again, Rob.ROBERT JOHNSON, EXEC. DIRECTOR, INST. FOR NEW ECONOMIC THINKING: My pleasure.JAY: So when it comes to economic policy, do you see anything in this inaugural speech that indicates the next four years will be any different than the last four?JOHNSON: Well, it's always difficult with someone who's so skillful as Barack Obama as an orator to draw any inferences from a speech, becauseâhow would I say?âhe's shown in the past that he can say very inspiring things and not exactly implement them or even fight for them. So I don't know how to draw any inferences from this speech. There's a great deal of energy in the speech about collective action, collective responsibility, and providing security for the weakest. And this surprises me a little bit, because at the end of the last term, he was essentially conceding a lot of adjustments in Social Security, in Medicare, and in Medicaid, as Bob Woodward revealed in the documents that I guess he leaked about the BoehnerâObama interactions. But it could be said that through that problem or that challenge, and through the difficult non-cooperative period that led to the fiscal cliff and now the debt ceiling, that Obama has hardened his resolve. He doesn't have to raise moneyâthough he will for his libraryâhe doesn't have to raise money to get reelected. And he may strike a stronger posture on behalf of the people that he mentioned in his speech today.JAY: Now, he says in the speech that we have to contain health-care costs, we have to make the hard choices. It's kind of a suggestion that he's still buying the underlying logic that the deficit's the issue.JOHNSON: Well, I think, first of all, jobs and employment is the issue. Idle resources don't pay taxes, and that is a big cause of the deficit in the near term.In the longer term, the question of whether you will have insurance monopolies, pharmaceutical monopolies, and hospitalization monopolies is the key to whether we're going to have a long-termâhow would I say?âstable trajectory. And the problem is those health-care what you might call pressures to bring costs down are much harder to implement in our money-politics era than our similar what you might call cuts that could be made to the quality of services for senior citizens. So to protect the monopolies, you can make a lot of elderly people worse off and a lot of people die sooner. But that isn't exactly progress on anything other than the numerical number called the budget.JAY: So if we're going to be realpolitik and you can say realistic and these kinds of terms about what Obama could accomplish which is in the realm of, you know, a fairly centrist Democrat and notâI don't think we really saw that in the last four years. Maybe, you know, I don't think he tried so hard to push the envelope here. But now he doesn't have to get reelected. In theory, he can come out swinging. Somebody on CNN after the speech was saying, oh, this is like FDR, this is the fighting president. I mean, I don't see that in the speech. But if it really was the fighting president, what would he do?JOHNSON: I think one of the things he would have to take on is the role of money in politics. He would have to take on lobbyists. And campaign contributions by wealthy individuals in the corporate sector have hamstrung our society. We did very little in the Dodd-Frank bill that one could be proud of. We did very, very little in the health-care bill to provide an efficient system when compared with other developed countries. Our military-industrial complex seems to have free rein and is almost unscrutinized. And I thinkâhow do you say?âthere are many other avenues, many other sectors where people can intervene and we get to a place where people think of our budget as an insurance agency for the rich and powerful. We all pay in premiums, but they're the only people who are insulated from accident.JAY: President Obama took Exxon money for his inauguration. Apparently they made a fairly substantial contribution to it. Last time, he said he wasn't going to take corporate money. This doesn't really send a signal that he's trying to get money out of politics.JOHNSON: And he talked about climate issues in the inaugural address today. So the question is: is that a head fake in the speech? Or did he take somebody's money and then just say, I can do what I want now? We'll have to see. Only time will tell.JAY: So what else would you do? I mean, if he calls you up and said, okay, I've had a change of heart, I really do want a different direction for this next four years, what do you want him to do?JOHNSON: I think bear down on the health costs and bear down on the really, really difficult situation that small businesses have right now. Small business [unintel.] policy. People work in that small business, pay the premiums, or the business pays the premiums on their behalf. And then if those people get very sick, what happens? The insurance company sends an army of lawyers out to show that somehow you didn'tâeven though you got to pay the premiums, you didn't deserve the coverage or you had violated the covenants that meant that you were ineligible for the coverage. So they wiggle off the hook. Large companies with countervailing powerâa General Motors, an IBM, a Goldman Sachsâno insurance company's lawyers are going to take them on, because the size and scale of their health contracts is quite formidable.So we're in a bad situation. You've got to, if you're the president, create something where little individuals are not cast against monstrous, powerful, deep-pocketed corporations when it comes to delivering on health care. And some peopleâhow do we say?âproject that Obamacare will get to these things someday in 2014, 2015, and we may be onâhow would I say?âthe right path. But we've got to go faster and further and deeper to bring our quality of health care into line with the OECD countries. We're ranked 37th by the World Health Organization, yet we pay more than double what the other developed countries are paying. This is a dreadful situation, whether it's budget or whether it's just concern for humanity. I would have him narrow his focus, not try to do everything, and zoom right in on that particular issue.JAY: Now, what do you think about the state of the world economy? President Obama speaks, and a lot of the pundits have talked about the United States is moving out of recession. But a lot of the economists I'm talking about, when they look at the crisis in Europe and a slowdown in China, that the global economy's rather fragile. And there's actually a good likelihood of moving back into deeper recession. But that wasn't reflected in this speech at all.JOHNSON: Well, I would say the United States is a more closed economy than many others. And if our housing sector continues to rebound as the stock market has suggested, it might be somewhat more resilient, unless Congress gets in the way with all their crazy short-term deficit cuts. If the United States right now were to engage in a capital budgeted infrastructure science and education program that restored employment and spent money on things that would enhance productivity over time, it could be by far and away the most vibrant economy in the world.I expect the United States will be what you might callâit'll win the ugly contest, it'll be the lesser of evils among the Asian economies and the European economies. I think the big loser right now is Europe, 'cause they can't seem to get out from under their austerityâhow do I say?âhunger. But I think the United States is diminished by the slowdowns in those other places. But because it's a largely closed economy, it's not going to pay the price as badly as some other regions.The thing that could make me wrong is if another banking crisis erupts, 'cause all these banks all around the world are so intertwined that you would have a synchronized credit freeze-up that really doesn't relate to economic conditions in the real economy in the United States. But that credit freeze-up from the intertwined banks could send our economy down as a result of something that emanates from elsewhere, just as our Lehman Brothers crisis caused a great deal of hardship all around the world.JAY: And in terms of regulations and laws that might mitigate or prevent that type of financial crisis, what do you make of what'sâwas accomplished in the last four years?JOHNSON: Well, what's difficult is that people are very critical of the regulators and the central banks for letting things get out of control, particularly in the United States during the Greenspan era. And then we pass laws that essentially put everything in the hands of committees of those people who didn't exercise what power-influencing rights they had on behalf of the American public in the last round.When you don't enforce the laws and regulations, then you just pass legislation to create committees for further regulatory what you might call work withâhow would you say?âregulatory capacity to effect change. You've got to have those regulators step up to the plate. Now, some of them may be very embarrassed by what happened and do a bit of that, but I don't think a lot of people are very confident that large-scale regulatorsâcentral bank, finance ministry, and othersâare anything but what you might call [unintel.] likely to impose the will of the banks on the population, rather than represent the population and constrain the banks.JAY: Alright. Well, we'll come back to you in a little while and we'll see whether this second term is significantly different than the first. Thanks very much for joining us, Rob.JOHNSON: My pleasure.JAY: And thank you for joining us on The Real News Network.
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