5 | Cutting Corporate Welfare
The universal health care that Obama won may not contain a public alternative to for-profit insurance, but the president did succeed in dismantling a major corporate gravy train. The health care bill is paid for, in part, by cutting $136 billion paid out under Medicare Advantage — a Bush-era boondoggle under which private insurers were larded with subsidies for the dubious service of inserting themselves as middlemen between patients and government-run Medicare.
At the same time, Obama also used the health care bill to end corporate welfare in an entirely different arena: student lending. For decades, megabanks like Sallie Mae have reaped billions by doing the paperwork on loans to college students — even though Uncle Sam sets the rates and assumes virtually all the risk. The president's Student Aid and Fiscal Responsibility Act, which piggybacked to victory as an add-on to health care, kicked private banks out of the federal lending game. The unalloyed victory over corporate lobbyists will cut lending costs by more than $60 billion over the next decade — $36 billion of which is being reinvested to expand federal grants for low-income and middle-class students. The law also makes unprecedented investments in historically black schools and community colleges, caps student-loan repayment at 10 percent of a borrower's income and pays for a program to forgive the debts of students who make their careers in public service.
"We've stopped this incredibly wasteful practice where there was effectively no benefit for taxpayers, and we were able to recycle that for families and students," says Rep. George Miller, who spearheaded the reform in the House. "We've been fighting for this since the Clinton administration — and Obama had the courage to do it straight up."
6 | Restoring America's Reputation
Prescient opposition to the Iraq War was the fuel that rocketed Barack Obama past Hillary Clinton in the Democratic primaries. As president, Obama has stuck to the timetable he laid out, withdrawing nearly 100,000 troops from Iraq — including the last combat brigade, which came home in August. The move meant quietly overruling his top general on the ground, Ray Odierno, who wanted to delay withdrawal.
"Obama gets credit for checking off that box," says Steven Clemons, director of American strategy at the New America Foundation. "Bringing Iraq to a resolution like this is a very big deal." Although 50,000 troops remain — ostensibly in an advisory and training capacity — they too have a date certain for withdrawal: December 31st, 2011.
While Obama has yet to put an end to the fighting in Afghanistan — a war that has now dragged on longer than Vietnam — he has managed to boost America's standing in the rest of the world. Despite the continuing loss of NATO troops, U.S. approval ratings in western Europe have soared into the 60s and 70s — far higher than during the unilateralism of the Bush era. U.S. approval is up more than 10 points in Poland and Russia, 20 points in China, and 30 points in Indonesia, France and Germany. Overall, global confidence in America's leadership has leaped from 21 percent in 2007 to 64 percent today.
The president himself has shown a deft diplomatic touch: He has thawed icy relations with Russia and negotiated historic cuts in nuclear arms, re-establishing American leadership and credibility on nuclear nonproliferation. He has also convinced Security Council veto-holders Russia and China to back new sanctions to punish Iran's nuclear ambitions — a degree of international cooperation that was unthinkable during the Bush years.
"President Obama has already repaired much of the damage wrought during the eight years of the Bush administration," former secretary of state Madeleine Albright observed in September. "He has restored America's reputation on the world stage."
7 | Protecting Consumers
Obama has taken heat from progressive critics — much of it deserved — over the weakest aspects of his effort to reform Wall Street. It remains unclear whether the new law — the most sweeping overhaul of financial regulations since the Great Depression — will do enough to rein in high-risk trading and end the era of Too Big to Fail. But the law does take bold steps to avoid a repeat of the current meltdown. The Federal Reserve and the FDIC now have the power to seize and dismantle firms like AIG and Lehman Brothers and to force the financial industry to pony up the costs of their liquidation. Banks can no longer gamble federally insured deposits on high-risk investments, and they are required to risk a portion of their own assets in the dubious investments they sell — a move designed to prevent firms like Goldman Sachs from profiting off of "shitty deals."
But the most significant facet of the legislation is the creation of the Consumer Financial Protection Bureau. For the first time, a single regulatory authority will have the power to protect consumers from bad loans and credit deals, the same way the FDA protects patients from dangerous drugs. Armed with an annual budget of $500 million — exempt from congressional cost- cutting — the agency will police everything from payday loans to jumbo mortgages.
For a taste of the kind of regulations the consumer bureau is likely to deliver, look no further than your credit-card bill. Another measure pushed by Obama — the Credit CARD Act — has already forced Visa, MasterCard and American Express to include a box on your statement spelling out how long it will take to pay off your debt making only the minimum payment. It also bans credit-card companies from jacking up your rate without warning, and places stiff restrictions on luring college kids into mountains of debt with easy credit. Those are exactly the sort of reforms the new consumer agency will have the authority to make on its own, without an act of Congress.
The consumer bureau matters not simply to individual borrowers but to the overall stability of the financial system. "Predatory lending played a very big role in the collapse of the financial system," says Joseph Stiglitz, the Nobel Prize-winning economist. The champion and acting head of the bureau, Elizabeth Warren, put it even more bluntly to Rolling Stone earlier this year: "Our financial crisis started one lousy mortgage at a time, one family who got fooled, tricked or cheated at a time," she said. "If nobody can build mortgage-backed securities on trillions of dollars of unpayable instruments, there's a lot less risk in the overall system."
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