Cogs in the Machine?: We need a wrench!

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OPA: The Goods are coming, don’t bid prices up

By Joseph Tohill

Less than two weeks to go in the US presidential election campaign, and the candidates are (surprisingly) running neck and neck. The sense of disappointment in incumbent President Barack Obama is palpable, especially after his sleepy first debate performance turned what should have been a runaway race into a real contest. Of course, the current disappointment is just the latest in a string of disappointments—from the failure to close Guantanamo Bay to the failure to reform social security. Combined, they have turned 2008’s campaign slogans such as “Change We Can Believe In!” into a bitter memory for many audaciously hopeful liberals, lefties, and social activists of all sorts.

Remember “Yes We Can!”—exuberant, confident, optimistic? Compare that with 2012’s “Forward,” which seems less like a campaign slogan than the kind of thing you might hear desperately shouted in one of those tragic films about the Great War. You know, the hoarse cry of some ill-fated officer, his eyes filled with terror, standing in the middle of ‘no man’s land,’ half his troops lying dead and butchered around him, trying frantically to rally what’s left of his company to fix bayonets and carry on with their pointless charge toward certain doom before the enemy’s trenches. (Incidentally, as we learned in the final presidential debate, bayonets are no longer the fashionable battlefield accessories they were a century ago.)

Small wonder there’s little of the excitement of 2008 in this year’s campaign. But there is the record of the Obama administration. Despite tenacious opposition, tough legislative fights, and dire warnings from opponents about the sky caving in, there have been some notable successes, such as bringing the war in Iraq to an end and ending (eventually) “Don’t ask, don’t tell.”

For a historian like myself who studies comparative consumer policy-making, it’s notable that two of the most significant legislative accomplishments of the first term advance the cause of consumer protection: “Obamacare” and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“Obamacare” (officially the Patient Protection and Affordable Care Act) seeks to protect uninsured Americans from financial ruin by dramatically reducing their numbers as well as ballooning healthcare costs, and it represents the most sweeping overhaul of American healthcare since Medicare and Medicaid were passed under Lyndon Johnson in 1965.

The Dodd-Frank Wall Street Reform and Consumer Protection Act represents the most significant financial reforms passed since the Great Depression of the 1930s. Among other things, Dodd-Frank created the Consumer Financial Protection Bureau (CFPB). The bureau was the brainchild of Elizabeth Warren, a Harvard law professor and tireless consumer advocate who had been arguing for such an agency for years. The American mortgage and debt crisis catapulted Warren and the bureau into the political spotlight.

The extraordinary opposition to the bureau and the effects of such opposition on both the effectiveness of the agency and its founder echoes the opposition to another regulatory agency established some seventy years earlier. The Office of Price Administration was created to prevent wartime inflation from sapping Americans’ purchasing power and precipitating an economic crisis similar to that which had followed the Great War. The OPA was the brainchild of New Deal economist Leon Henderson, a pugnacious proponent of economic regulation who was about as popular with corporate America by late 1942 (when he was driven out of the OPA) as Warren was by 2010, when she was deemed unappointable as head of the CFRB despite being the best qualified candidate to lead it. (Warren is now locked in a bitter contest for Ted Kennedy’s former seat in the US Senate.)

The CFPB and Elizabeth Warren, much like the OPA and Leon Henderson, faced an enervating battle to pass enabling legislation, endless political manoeuvring against the agency after its creation, slashed budgets intended to hamstring its investigative and enforcement efforts, and withering attacks on its crusading founder. Even anti-communist rhetoric reared its ugly head, as right-wing commentators denounced the CFPB as “creeping socialism”—the exact term used to denounce the OPA and price control during key battles of 1943 and 1946. Neither the OPA then nor the CFPB now have led to the socialization of the economy or any of the other apocalyptic predictions issued from what fake news anchor Jon Stewart calls “bulls#%t mountain“.

The OPA of the 1940s and the Obama financial reforms and consumer protection legislation of 2010 were considerably more than conservative opponents could stomach but considerably less than liberal supporters wanted. In many ways, they represented compromises that were perhaps the most that could be accomplished given the fractious political climate during both periods and, more importantly, the nature of the American political process.

Many Canadians like to regard the dysfunctional goings-on in Washington over issues such as the CFPB with bemusement, seeing in such seemingly broken politics a confirmation of the assumed superiority and civility of Canada’s political process. (Canadian observers of the OPA’s trials in the 1940s drew much the same lessons.) Canada came though the 2008 crisis relatively unscathed, we have been told by the Harper Government (and our banks), thanks to its superior banking regulations and the fact that we already had a Financial Consumer Agency, created in 2001. Never mind that it is more of a government advice bureau than a regulatory agency with teeth or the self-described “cop on the beat” that the CFPB is to American financial institutions. Never mind, too, that serious questions remain about the how unscathed our banks really were and how protected consumers really are.

A report by the Centre for Policy Alternatives released earlier this year, for instance, indicated that Canada’s banks were more affected by the global financial crisis then either they or the government will admit and that the banks were essentially bailed out by the government. Both the government and the banks deny this. That even the Financial Post suggests that whether the CPA or the banks/government is correct is “to some extent…a matter of how the facts are interpreted” is hardly reassuring. And then there’s the prediction of a bursting housing bubble given the record and unsustainable debt to income ratio of Canadian consumers.

It’s true that important political distinctions exist between the United States and Canada, but I’m less and less convinced that these have to do with different political cultures (arising, perhaps, as Seymour Lipset argued, out of the revolutionary/counter-revolutionary origins of the two countries) than they do with the constraints and opportunities of a parliamentary versus a congressional system.

Take for instance the cases of the CFPB and the OPA. Given the anti-statist political culture of the United States, one would expect the vociferous denunciations of both agencies’ regulatory efforts by congressional, business, and media conservatives to be matched by a similar feeling among ordinary Americans. Yet in 2010, as during WWII with the OPA, the majority of Americans supported a strong interventionist regulatory body—in CFPB’s case, the first major agency launched in Washington in nearly a decade and the first created to protect consumers since the 1970s, when the Consumer Products Safety Commission had come into being. On the eve of the official opening of the CFPB in July 2011, poll results showed that voters, regardless of political affiliation, supported the bureau by a five to one margin and nearly two thirds of Americans wanted more, not less, regulation of financial companies. Clearly American anti-statism represents no ideological consensus. Rather, it is one theme (an important one, no doubt) in American political discourse, often employed by conservatives in particular as a strategic weapon to justify inaction on a range of political, economic, and social issues. The structural aspects of the quite different political processes existing in the two countries are more fundamental and arguably more important differences between Canada and the United States than are values or political cultures.

Canada’s fusion of executive and legislative powers has allowed (and allows) federal governments to take the kind of policy leaps in areas such as healthcare that eluded American presidents from Harry Truman to Bill Clinton. It’s difficult to imagine Obama, Romney, or any other prospective president coming to power and managing to pass the kind of sweeping omnibus legislation currently being rammed through Canada’s Parliament for the second time in less than a year. As outrageous as US politics sometimes seems, it’s no more outrageous than a party elected by less than four out of ten voters being given such a decisive majority and the power to wield it relatively unchecked.

Presidential hopefuls and even incumbents (who know better) regularly proclaim what they would do as president, ignoring the inherent difficulty of fulfilling promises of sweeping change in a political system in which the separation of powers, checks-and-balances, and multiple veto points make bold strides next to impossible and compromises inevitable. That many Americans—indeed many around the world—would be disappointed by the unfulfilled promise of Obama was almost inevitable. This disappointment needs to be tempered by the knowledge that it was the same political system that kept Obama’s predecessor, George W. Bush, from spending after his re-election the political capital he so gleefully thought would give him reign to remake the American government in his conservative image by (among other unpopular things) privatizing social security. The president is surely more than “merely a small cog in the broken mechanism of power” in Washington, but Canadians concerned with our current government’s lack of respect for the usual norms of the political process could certainly wish that our system offered a few more opportunities to throw a wrench into the grinding wheels of the Big Blue Machine.

Dr. Joseph Tohill teaches history at York University.




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