Why couldn't the administration have let some of the big banks, insurers, and auto companies fail - I'm not persuaded Armegeddon would have resulted - and redirected the stimulus towards a massive program of investment and job creation in infrastructure and emerging industries? It's not so much the "invisible hand" of the market as the very visible resistance of the market to government ownership and spending which deterred the administration from going in this direction.
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CB: Hey, if it were me I'd nationalize them; get control for all that money. However, I'm not sure just letting them fail would have brought about the result of "fixing" the unemployment rate and ending the recession, which is what this author is saying the admin must do to be re-elected or win governorships. Even Doug and Krugman opposed letting them just fail.
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Of course, the relationship of forces between reformers and Capital is an "objective condition" which needs to be taken into account in developing policy, but I think the incoming administration was well placed after the election to use the Presidency and Congress to alter that relationship somewhat and to push through some of the reforms it promised during the campaign. Unlike the New Deal, however, it was too timid or too clever for it's own good to exploit the opportunity, and there was no mass movement to propel it forward. Now the political right and the capitalists have seized the initiative, and the administration is caught in an electoral trap of it's own making.
^^^^^ CB: As I say, if I ran the world... As to why Obama considered that he had to cave to the ruling sector of the ruling class, and couldn't take advantage of the seeming mass support for being more takeoverish, I don't know. Maybe O is just gungho for capitalism, like his detractors here say. I suspect it's more like he's under, what can I call it , control by threat of "we'll get you if you do something like that" from people who can and will definitely get you if they say it. Also, in all of this , Congress is more powerful than the Pres. The Pres doesn't control the Congress, especially a new one. Kennedy couldn't get hardly anything through Congress. It took LBJ who had been Senate majority leader. Look how the right Dems are the key to preventing a good health care law.
It's seems premature to conclude that the admin is in an electoral trap though.