Lesson From Barack's Folly

When a group of crooks masquerading as bankers and investors crashes out, do not bail them out like Barack Obama did.

It is bad politics and worse policy. 

This applies even more to the Artificial Intelligence charlatans than it did to the 2008 banksters.

After Barack Obama surged to the White House in 2008, his administration was hobbled by the perception that it had rescued the bankers who had crashed the global economy, held nobody accountable for the destruction that was unleashed, and left ordinary people to fend for themselves. Current events may soon rhyme with that fateful episode.

Just like before, there is an overleveraged, underregulated sector at the heart of our economy that could cause devastating consequences should it hit a liquidity crunch. Perhaps the biggest difference is that this time, the executives and billionaires have learned from 2007, and are already looking to justify golden parachutes in advance. Progressives can learn from 2007, too.

A Tale of Two Bailouts

In 2008, the Republican Party was dead in the water. Weighed down by the Iraq War and the unfolding Great Recession, the party suffered what is to date its worst defeat of this century. The view that a new period of long-term dominance was dawning for Democrats became commonly accepted. Memories of 1933 and an enduring Democratic majority were plausibly relevant, as George “Katrina + Iraq + subprime” Bush could make a long-term electoral punching bag comparable to Herbert Hoover.

Obama’s winning coalition was handed a gift-wrapped opportunity to champion working people in their clash with Wall Street. Instead, influenced by neoliberals like Larry Summers and Tim Geithner, the Obama White House chose to arbitrarily constrain the size of the stimulus package and prioritize stabilizing Wall Street as the “responsible” path forward, with accountability for the crisis dismissed as “Old Testament” justice. There was only a single prosecution for triggering the greatest economic downturn of the century.

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In short, the 2008 bailout was a political albatross around the establishment’s neck, seen as a rescue of the very rich and connected people who caused mass unemployment and foreclosures. Whoever was in power as this anger built would get singed by it.

The AI folks are incredibly unpopular now.  If the Democratic Party establishment (There is no Democratic Party establishment) forces the party to bail them out when (it is when, not if) the bubble pops, this could destroy the party on a level that makes the 2010 "Shellacking" look like a high tea.