New Coke?

David Dayen on the president’s populist rebranding in today’s speech:

For one of the first times ever, the President mentioned that two rounds of tax cuts passed by the Bush Administration in 2001 and 2003 created almost no jobs. He said that “Mortgage lenders … tricked families into buying homes they couldn’t afford” and that “irresponsibility and lack of basic oversight” on Wall Street “nearly destroyed our entire economy.” He recited the now-familiar economic statistics about inequality and how it corrupts, how the rich purchase politicians and have them do their bidding. He added stats about the creaking to a halt of upward mobility in this country.

I’m just not sure what the solutions expressed in the speech mean to provide. There’s a familiar focus on education, with the welcome line that “We shouldn’t be laying off good teachers right now – we should be hiring them.” There’s a focus on science and research and development, which makes sense. There’s a very good line about how building an economy on high-tech manufacturing rather than an outsized financial industry will attract the best and brightest to productive work, something I think needs to be stressed.

But then there’s this brag on how we have to live within our means and prioritize our deficit, the wrong message in a fragile economy when you can borrow at a negative interest rate. The first substantive plan in the speech is to cut the payroll tax, an anti-contractionary measure but not necessary the stuff around which a New Deal is created. Obama does support returning progressivity to the tax code, in the form of returning the high-end tax rates to the Clinton years. But that stops short of transformation.

I was most interested in the section on financial reform, where there were two specific policy proposals. First, the President vowed to veto any alterations to the Dodd-Frank law sent to him by Congress. That includes the de-funding of the agencies set up to implement the law (of course, this has already been violated; the Commodity Futures Trading Commission budget, signed by the President, was slashed 1/3 from his initial request). Then there was this:

We shouldn’t be weakening oversight and accountability. We should be strengthening them. Here’s another example. Too often, we’ve seen Wall Street firms violating major anti-fraud laws because the penalties are too weak and there’s no price for being a repeat offender. No more. I’ll be calling for legislation that makes these penalties count – so that firms don’t see punishment for breaking the law as just the price of doing business.

That’s a new one. I assume he’s talking about the SEC request to increase their penalties. However, it’s bracing to hear the President talk about penalties being too weak and absorbed by Wall Street as the cost of doing business when the hallmark of his Administration has been an unwillingness to prosecute Wall Street for systemic fraud. Action will be needed before I’m convinced anything has changed. It’s good that he recognizes the trust deficit between Wall Street and Main Street; but he needs to know that too many in this country see Washington, and his Administration, on Wall Street’s side of the line.