REPUBS BANK ON I-TOLD-YOU-SO ECONOMIC BAD NEWS

by Alexander Cockburn

The morning after Obama's inauguration, a betting man would surely have found odds-on stakes that the new president's first daring cavalry charge would be an assault on the economic crisis, worsening day by day. Our Wednesday-morning gambler would have found much longer odds being offered on any daring initiative in that graveyard of presidential initiatives sign-posted "Israel-Palestine."

But there's been no exciting surprise or originality in Obama's opening engagements with the reeling economy. His team is flush with economists and bankers who helped blaze the path to ruin. He's been selling his $825 billion stimulus program on the Hill, with all the actors playing their allotted roles and many a cheering Democrat not entirely confident that the House Republicans may not have had a point when, unanimously, they voted no on the package.

America's economy may be so hollowed out, its industrial base so eroded by 20 years of job exports to China and other low wage sanctuaries, that a bailout may not turn the tide, Then the Republicans will have their told-you-so's primed and ready to go in the midterm elections.

But Obama can scarcely be blamed for putting up his $825 billion pump primer. It was a given, from the moment he got elected. The folly comes with the impending $2 to 4-trillion bailout package for the banks, signaled by Treasury Secretary Tim Geithner. If anything can make Wall Street smile bravely through the hail of public ridicule for the way it's been handing out the previous wad of bailout money in the form of bonuses, it's the prospect of getting further truckloads of greenbacks to lend out to Americans already crippled by debt.

As the economist Michael Hudson puts it, "The government's solution, placed in its hands by the financial lobbyists, is to bail out the bankers and Wall Street while leaving the Ôreal' economy even more highly indebted. Families, businesses and government are having to spend more wage income, profits and tax revenues on debt service instead of buying goods and services. So why is the solution to this debt overhead held to be yet MORE debt? Is there not something crazy here?"

Worse still, Obama's economic team is alerting reporters to their increasing enthusiasm for a so-called "aggregator" bank that would take over the banks' worst assets. Thus would the new administration play along with the Bush-Paulson script, allowing Wall Street to dump its problems in the taxpayers' laps and go on its merry way.

As Hudson points out, it would take only $1 trillion or so -- or simply to let "the market" work its magic in the context of renewed debtor-oriented bankruptcy laws -- to cure the debt problem. But that obviously is not what the government aims to solve at all. It simply wants to make creditors whole -- creditors who are, after all, the largest political campaign contributors and lobbyists these days.

So Wall Street can feel satisfaction that its investment in Obama seems to be paying off. Can the same be said of the Israel lobby, which rewarded Obama's tireless blandishments last year with enthusiastic pre-election endorsements, to the effect that here was a true friend of Israel?

In his inaugural speech, Obama proclaimed that "we are a nation of Christians and Muslims, Jews and Hindus -- and nonbelievers." Muslims were ahead of Jews in that line, which caused some eyebrows to twitch.

The next morning, in his opening round of phone calls to Middle Eastern leaders, Obama placed the first call to Mahmoud Abbas, and only the next to Olmert. Hardly had Obama settled in before he appointed a fellow Democrat and former senator, George Mitchell, as his peace broker between Israel and Palestinian. Mitchell's mother had come to America from Lebanon at age 18, and Mitchell himself, orphaned from his Irish father, was brought up in a Maronite Christian Lebanese family.

Then Obama gave his first formal TV interview to the Dubai-based cable station Al Arabiya, where he remarked at the outset that "I think it is possible for us to see a Palestinian state -- I'm not going to put a time frame on it -- that is contiguous, that allows freedom of movement for its people É " Contiguous? You can read that a number of ways, including the possibility that Obama is obliquely criticizing Israel's strategy of corralling Palestinians into mini-Bantustans on the West Bank, divided by military roads, walls and Jewish settlements.

As the venerable Israeli peace leader Uri Avnery, whose biography stretches back to Israel's earliest days, remarked, "These are not good tidings for the Israeli leaders. For the last 42 years, they have pursued a policy of expansion, occupation and settlements in close cooperation with Washington. They have relied on unlimited American support, from the massive supply of money and arms to the use of the veto in the Security Council. This support was essential to their policy. This support may now be reaching its limits."

As buttress for Avnery's claim that U.S. "support may be reaching its limits," we can instance a report on CBS's "60 Minutes" program, the most widely watched news show on U.S. television. CBS reporter Bob Simon's filmed report of the arrogance and brutality of IDF and Israeli settlers was, at least in my memory, the single most savage indictment of Israel ever broadcast on network television.

Such talk can be undercut by simple reference to the endless instances of Israel's successful sabotage of peace initiatives, decade after decade. Obama may well be smarting from the savage criticism across the world he incurred from keeping his mouth shut about Israel's bloody rampages in Gaza. The furious public letter denouncing U.S.-Israeli conduct from Prince Turki Al-Faisal, Saudi Arabia's ambassador to the United States and former intelligence chief probably also prompted Obama to "reach out," as they say, to the Arab world -- particularly since the United States needs all the customers for its Treasury bonds that it can get.

So far, the Israel lobby here has held its peace. The Jewish Forward newspaper, a useful bellwether, has editorialized positively about Obama's moves. But the minute Mitchell comes up with a concrete proposal discomfiting to Israel and to its likely new leader, Benjamin Netanyahu, then the atmosphere could become sulphurous with blinding speed. That will be the testing time for Obama and a true test of leadership and hard-nosed cunning. A prudent bettor would still have to wager that Obama simply won't want to spend that kind of political capital. But a prudent better wouldn't have predicted the moves he's made so far.