In other words, it isn't Congress's fault. It isn't the Senate Banking Committee's fault. It certainly isn't Dodd's fault. The reason more than a year has passed since the biggest bailout in the history of the world and nothing has been done to prevent a repeat performance -- even as the biggest banks are doling out more than $30 billion of bonuses, even as Goldman Sachs is awarding its big traders $16 billion in bonuses (more than the $13 billion Goldman collected from taxpayers via the bailout of AIG), even as AIG itself is handing out bonuses -- the reason is ... what, exactly, Senator? Because the Street has sent an army of lobbyists to Capitol Hill?

Call me old fashioned, but I thought Congress was in charge of passing legislation, not Wall Street.

Wall Street firms and their executives have been uniquely generous to both political parties, emerging recently as one of the largest benefactors of the Democratic Party. Between November 2008 and November 2009, Wall Street firms and executives handed out $42 million to lawmakers, mostly to members of the House and Senate banking committees and House and Senate leaders. During the 2008 elections, Wall Street showered Democratic candidates with well over $88 million and Republicans with over $67 million, putting the Street right up there with the insurance industry as among the nation's largest equal-opportunity donors.

Some Democrats are quietly grumbling that all the tough talk emanating from the White House in recent weeks -- the President calling the Street's denizens "fat cats" and threatening them with limits on their size and the risks they can take, even waiving a watered-down version of Glass-Steagall in their faces -- is making it harder to collect money from the Street this mid-term election year. And the Street is quietly threatening that it may well give Republicans more, if the saber-rattling doesn't stop.

Congress isn't doing a thing about Wall Street because it's in the pocket of Wall Street. Dodd's outburst at the Street is like the alcoholic who screams at a bartender "how dare you give me another drink when all I've done is pleaded with you for one!"

Dodd is right about one thing. The American people are frustrated, and the failure of Congress to pass real financial reform is insulting. But in trying to place responsibility for this appalling failure on Wall Street, Dodd insults us even more.

It seems as if more and more decisions that should be made democratically are being shunted off somewhere to a few people who make them in back rooms. Which programs should be cut, which entitlements pared back, and what taxes raised in order to reduce the long-term budget deficit? Hmmm. Let's convene a commission and have them decide.

Democracy requires at least three things: (1) Important decisions are made in the open. (2) The public and its representatives have an opportunity to debate them, so the decisions can be revised in light of what the public discovers and wants. And (3) those who make the big decisions are accountable to voters.

But these principles are in retreat, and I say this not just because of the proposed deficit commission.

The notorious Troubled Assets Relief Program (TARP) began with a virtual blank check from Congress. Treasury officials then secretly decided which companies were to receive hundreds of billions of dollars. Why these particular entities were chosen and not others remains a mystery. For months, the Treasury didn't even disclose the identities of the major banks that giant insurer AIG repaid with its bailout money - 100 cents on each dollar AIG owed them.

The Federal Reserve, meanwhile, has gone far beyond its traditional role of setting short-term interest rates. It has bought up massive amounts of debt - mortgage debt, Treasury bills, and debt instruments emanating several public agencies, many of them supporting a wide range of private entities. No one outside the Fed knows the ultimate beneficiaries of all this government backing, the criteria used by the Fed for making these commitments, or even how much debt the Fed is buying.

Even if the economic emergency justified such secrecy - and it's hard to see exactly why it would - the emergency is over, and yet closed-door decision making continues. Will Treasury use what's left of TARP to help stimulate more jobs and, if so, how? Will the Fed stop buying mortgage-backed securities? No one knows.

The same pattern is evident on other issues. Congress can't decide whether or how to limit the pay of financial executives. So where does the issue end up? The Securities and Exchange Commission and the Fed both say they're going to look at whether pay levels are appropriate. The House and Senate can't agree on what to do about climate change. Who decides? The Environmental Protection Agency concludes it has authority to regulate carbon emissions under the Clean Air Act.

The debate over health-care reform looked like democratic deliberation until you realize the key negotiations that framed the deal occurred behind closed doors, between the White House and Big Pharma and Big Insurance. The Administration promised these industries some thirty million new paying customers. In return, they agreed not to oppose the plan. Big Pharma even placed a firm limit on how much it would cut its costs over the next ten years - $80 billion, and not a penny more. How do I know this? Not because this crucial deal was made in public, but because it was leaked to the press.

Personally, I want the government to limit the pay of financial executives, regulate greenhouse gases, and reform health care. And no one wanted a financial meltdown. But I'm appalled by the process that's been used to reach these objectives.

A big piece of the problem is this: Washington is now so overrun by lobbyists representing moneyed interests that it's become almost impossible to make policy in the open. If the Treasury and Fed tried to decide publicly which industries and firms should get hundreds of billions, they'd be inundated. Wall Street lobbyists are blocking real financial reform. The energy industry has filled the House's cap-and-trade bill with special subsidies and exemptions. Big Pharma and Big Insurance would have killed off the health-care reform if they hadn't been bought off. When it comes to the long-term deficit, Congress is incapable of acting because so many special interests have their hands out.

But the answer isn't to give up on democracy. Back-room policy making can succumb to private interests just as easily as lobby-infested legislatures (much of the public suspects the Treasury of being too cozy with Wall Street as it is).

The real answer is to recommit ourselves to cleaning up democracy. Yes, I know: The Supreme Court's recent grotesque Citizens United vs. Federal Election Commission, which decided corporations are people entitled to First Amendment protection, complicates this. But the goal is still possible to achieve with more public money for congressional and presidential candidates who refuse private funding, more constraints on lobbyists, tighter rules for who must register as a lobbyist, fuller disclosure, and tougher rules on the revolving door between public service and private gain. Yale's Bruce Ackerman recently came up with another good idea: A $50 tax credit per person, which they can send to the candidate of their choosing.

Yet nobody seems to be talking about these sorts of reforms. They don't appear on Obama's agenda. True, they don't generate lots of public excitement or appreciation, and they're murderously difficult to enact. But without them our democracy doesn't stand a chance.

(I wrote a version of this for the current issue of "The American Prospect.")

But here's the problem. Both of these measures, and many of the other tax cuts he's proposing, give ammunition to supply-siders who think the way out of this awful economy is simply to cut taxes on businesses. If a new jobs tax credit is a good idea, why not a cut corporate in income taxes? If it's useful to reduce capital gains taxes for small businesses, why isn't it useful to reduce them for all businesses?

So what's the President's new proposal for boosting overall demand? Hmmm. Turns out, he's not really proposing anything new on that score. (Some who watched his State of the Union the other night thought they heard him call for a second stimulus. Actually, he didn't, and as far as I can tell he doesn't plan to.) His political advisors are telling him to emphasize deficit reduction instead. And that's what he did Wednesday night when he talked about a "freeze" on discretionary spending, and a "commission" to look for ways to cut the deficit.

I can understand why Obama's political advisors are pushing him in this direction. Many Americans borrowed too much during the boom years before the Great Depression, and now they're paying the price. So they naturally analogize their own plight to that of the federal government and the economy as a whole. The government is too deep in debt, they reason. Logically, that means the only way out of the nation's economic doldrums is for the government to mend its ways. The government has to reduce its budget deficit just like American families have to reduce theirs.

This analogy is faulty, of course. If John Maynard Keyenes taught us anything, it's that a federal budget is not at all like a family budget. In fact, it's precisely because families have to pull in their belts that the federal government has to let its belt out. When consumers and businesses aren't buying much of anything, the government has to fill the gap. That's the only way to get jobs and get the economy moving again. Once the economy is percolating, the government can pull back. By then, tax revenues will soar, and the long-term deficit will shrink. (And yes, entitlement reform is probably necessary in the long term. But here again, it's vitally important to separate the long term from the now.)

But if the public learns the wrong set of lessons -- that tax cuts for businesses are good, and deficit reduction starting now is good -- there's no hope for getting wise policies out of Congress. The debate is framed all wrong.

The President -- any president -- is the nation's educator in chief. Everything he proposes contains an implicit lesson. The economic lesson President Obama ought to be teaching is that targeted tax cuts, mostly for small business, are good to the extent they give businesses a nudge toward creating more jobs. But businesses won't begin to create lots of jobs until they have lots of customers. And that won't happen until lots more Americans have work. The only way to get them work when businesses aren't hiring is for government to prime the pump.

One final lesson I wish he'd teach: The best and fastest way for government to prime the pump is to help states and locales, which are now doing the opposite. They're laying off teachers, police officers, social workers, health-care workers, and many more who provide vital public services. And they're increasing taxes and fees. They have no choice. State constititions require them to balance their budgets. But the result is to negate much of what the federal government has tried to do with its stimulus to date.

We need a second stimulus directed at states and locales. I wish our educator-in-chief would say that loud and clear, explain why, and then do it.

The bigger news is Obama is planning a three-year budget freeze on a big chunk of discretionary spending. Wall Street is delighted. But it means Main Street is in worse trouble than ever.

In December 1994, Bill Clinton proposed a so-called "middle class bill of rights" including more tax credits for families with children, expanded retirement accounts, and tax-deductible college tuition. Clinton had lost his battle for health care reform. Even worse, by that time the Dems had lost the House and Senate. Washington was riding a huge anti-incumbent wave. Right-wing populists were the ascendancy, with Newt Gingrich and Fox News leading the charge. Bill Clinton thought it desperately important to assure Americans he was on their side.

Two months later, Clinton summoned Dick Morris to the White House to figure out how Clinton could move to the right and better position himself for reelection. The answer: Balance the budget.

But in 1994, Clinton's inconsistencies didn't much matter. The U.S. economy was coming out of a recession. It was of no consequence that Clinton's jobs proposals were small or that he moved to the right and whacked the budget, because within a year the great American jobs machine was blasting away and the middle class felt a lot better. Dick Morris was not responsible for Clinton's reelection. Nor was Clinton's move to the right. What reelected Bill Clinton in 1996 was a vigorous jobs recovery that was on the way to happening anyway.

Today, though, there's no sign on the horizon of a vigorous recovery. Jobs may be coming back a bit in the next months but the country has lost so many (not to mention all those who have entered the workforce over the last two years and still can't land a job) that it will be many years before the middle class can relax. Furthermore, this recession isn't like other recessions in recent memory. It has more to do with problems deep in the structure of the American economy than with the ups and downs of the business cycle.

Like Clinton's, Obama's package of middle class benefits is small potatoes. They're worthwhile but they pale relative to the size and scale of the challenge America's middle class is now facing. Obama can no longer afford to come up with lists of nice things to do. At the least, he's got to do two very big and important things: (1) Enact a second stimulus. It should mainly focus on bailing out state and local governments that are now cutting services and raising taxes, and squeezing the middle class. This would be the best way to reinvigorate the economy quickly. (2) Help distressed homeowners by allowing them to include their mortgage debt in personal bankruptcy -- which will give them far more bargaining leverage with morgage lenders. (Wall Street hates this.)

Yet instead of moving in this direction, Obama is moving in the opposite one. His three-year freeze on a large portion of discretionary spending will make it impossible for him to do much of anything for the middle class that's important. Chalk up another win for Wall Street, another loss for Main.

It's a mistake to see the Mad-As-Hell party as just a right-wing phenomenon - the so-called Tea Partiers now storming the gates of the Republican Party. There are plenty of mad-as-hellers on the left as well - furious at Wall Street, health insurers, pharmaceutical manufacturers, and establishment Democrats.

First it was TARP, the giant bank bailout that seems to have made Wall Street flush again -- so flush the Street is now distributing giant bonuses as if the crash it brought on never happened.

Then came the stimulus package, replete with earmarked goodies for every corporation big enough to hire a team of Washington lobbyists.

And then it was health care, which to some people looked like a sweetheart deal between government and Big Pharma and big health insurers.

To the Mad-As-Hell party, the biggest event last week wasn't Scott Brown's upset victory in Massachusetts. It was the Supreme Court's decision in Citizen's United vs. the Federal Election Commission, allowing corporations to spend however much they want on political campaigns. True mad-as-hellers see this as inviting even more collusion between big business, Wall Street, and big government - and against the rest of us.

With the mid-term elections months away, both Republicans and Democrats are scrambling to embrace the Mad-As-Hell Party as their own. Republicans are hoping the mad-as-hellers forget the gushing corporate welfare of the Bush administration and the last Republican congress. And Democrats have become born-again economic populists, blaming the nation's problems on the same "fat cat" bankers and corporate lobbyists they've been cozying up to for years.

If the Mad-as-hell Party helps get money out of politics it will do a world of good. I might even join up. But if it just fulminates against the establishment, forget it. Wrecking balls are easy to wield. Rescuing our democracy is hard work.

In fact, close your eyes and you could be back in the wilds of 2007. Bankers are still making wild bets, still devising new derivatives, still piling on debt. The big banks have access to money almost as cheaply as in 2007, courtesy of the Fed, so bank profits are up and bonuses as generous as at the height of the boom.

All could be forgiven if the House and Senate committees with responsibility for coming up with new regulations were about to come down hard on the Street and if the Obama administration were pushing them to. But nothing of the sort is happening. Yes, the White House has indicated interest in charging banks for the cost of the bailout, but this is not real reform; it's just making up for some of the direct costs of cleaning up the mess.

Last week, Senator Chris Dodd, chairman of the Senate banking committee, announced he would not seek re-election next November, recasting himself as a lame duck who will do whatever the banks want. Mr Dodd's decision "makes it more likely that regulatory reform will be enacted", says Edward Yingling, chief executive of the American Bankers Association, because it "frees him from political dynamics that would have made it more difficult for him to compromise". Translated: Dodd's committee will report out a bill - Democrats would be embarrassed not to - but it will be weak because voters can no longer penalise Mr Dodd for rolling over for the Street.

The bill that has already emerged from the House is hardly encouraging. Dubbed the "Wall Street Reform and Consumer Protection Act", it effectively guarantees future Wall Street bail-outs. The bill authorises Fed banks to provide up to $4,000bn in emergency funding the next time the Street crashes. That is more than twice what the Fed pumped into financial markets last year. The bill also enables the government, in a banking crisis, to back financial firms' debts - a wonderful insurance policy if you are a bondholder. To be sure, the bill authorises the Fed and Treasury to spend these funds only when "there is at least a 99 per cent likelihood that all funds and interest will be paid back," but predictions about pending economic disasters can be conveniently flexible, especially when it comes to bailing out the Street.

If this were not enough, the House bill creates regulatory loopholes big enough for bankers to drive their Ferraris through. Consider derivatives. Last year, as taxpayers threw money at the Street, congressional leaders promised to put derivative trading on public exchanges. The prices of derivatives could be disclosed and margin requirements imposed, making it more likely that traders would make good on their bets. Yet the House bill exempts nearly half the $600,000bn of outstanding derivatives trades.

The bill also allows - but, notably, does not require - regulators to "prohibit any incentive-based payment arrangement". This makes fat bonuses the norm unless a regulator has reason to prevent them. And as we witnessed last year, bank regulators tend not to disturb the status quo. The House bill does not even make an attempt to unravel the conflict of interest that led credit ratings agencies to turn a blind eye to the risks the Street was taking on.

To its credit, the House bill does create a Consumer Financial Protection Agency to protect borrowers from predatory lending. Banking regulators have authority to protect consumers but failed to do so, so consolidating these powers in a new agency makes some sense. But Senate Republicans are dead-set against it, and Mr Dodd's new willingness to compromise may well doom it in that chamber.

What is truly remarkable is what Congress and the administration have shown no interest in doing. Large numbers of Americans have lost their homes to bank foreclosures or are in danger of doing so. Yet American bankruptcy law does not allow homeowners to declare bankruptcy and have their mortgages reorganised. If it did, homeowners would have more bargaining power to renegotiate with banks. But neither Congress nor the administration has pushed to change the bankruptcy laws. Wall Street opposes such change and was instrumental in narrowing the scope of personal bankruptcy in the first place.

Nor have lawmakers shown any enthusiasm for resurrecting the wall that used to exist between commercial and investment banking. The Glass-Steagall Act, passed in the wake of the Great Crash of 1929, separated the two after it became obvious that commercial deposits needed to be insured by government and kept distinct from the betting parlour of investment banking. But Wall Street forced Congress to take down the wall in 1999, enabling financial supermarkets such as Citigroup to use its deposits to make all sorts of bets. Even Obama adviser and former Fed chief Paul Volcker has argued that the two functions should be separated again.

Nor is anyone talking seriously about using antitrust laws to break up the biggest banks - the traditional tonic for any capitalist entity that is "too big to fail". Five giant Wall Street banks now dominate US finance. If it was in the public's interest to break up giant oil companies and railroads a century ago, and the mammoth telephone company AT&T, it is not unreasonable to break up the almost infinitely extensive tangles of Citigroup, Bank of America, JPMorgan Chase, Goldman Sachs and Morgan Stanley. No one has offered a clear reason why giant banks are important to the US economy. Logic and experience suggests the reverse.

What happened to all the tough talk from Congress and the White House early last year? Why is the financial reform agenda so small, and so late?

Part of the answer is that the American public has moved on. A major tenet of US politics is that if politicians wait long enough, public attention wanders. With the financial crisis appearing to be over, the public is more concerned about jobs. Another 85,000 jobs were lost in December, bringing total losses since the recession began in December 2007 to over 7m. One out of six Americans is unemployed or underemployed.

Yet if the president and Congress wanted to, they could help Americans understand the link between widespread job losses and the irresponsibility on Wall Street that plunged America into the Great Recession. They could make tough financial reform part of the answer to sustain-able jobs growth over the long term.

True, financial regulation does not make a powerful bumper sticker. Few Americans know what the denizens of Wall Street do all day. Even fewer know or care about collateralised debt obligations or credit default swaps. To the extent Americans have been paying attention to the details of any public policy, it has been the healthcare reform bill. But that only begs the question of why financial reform has not been higher on the agenda of the president and Democratic leaders.

A larger explanation, I am afraid, is the grip Wall Street has over the American political process. The Street is where the money is and money buys campaign commercials on television. Wall Street firms and executives have been uniquely generous to both parties, emerging as one of the largest benefactors of the Democrats. Between November 2008 and November 2009, Wall Street doled out $42m to lawmakers, mostly to members of the House and Senate banking committees and House and Senate leaders. In the first three quarters of 2009, the industry spent $344m on lobbying - making the Street one of the major powerhouses in the nation's capital.

Money is powerful. Talk is cheap. Mr Obama recently called the top bankers "fat cats", and the bankers insisted they were shocked - shocked! - to learn how intransigent their lobbyists had been in opposing financial reform. The bankers even claimed a "disconnect" between their intentions and their lobbyists' actions. This was all for the cameras, of course.

But the widening gulf between Wall Street and Main Street - a big bail-out for the former, unemployment checks for the latter; high profits and giant bonuses for the former, job and wage losses for the latter; buoyant expectations of the former, deep anxiety and cynicism by the latter; ever fancier estates for denizens of the former, mortgage foreclosures for the rest - is dangerous. Americans went ballistic early last summer when AIG executives got big bonuses after taxpayers had bailed them out. They will not be happy when Wall Street hands out billions in bonuses very soon. Angry populism lurks just beneath the surface of two-party politics in America. Just listen to Sarah Palin or her counterparts on American talk radio and yell television. Over the long term, the political stakes in reforming Wall Street are as high as the economic.

So by taxing so-called Cadillac plans, the Senate bill would actually end up taxing the Chevy plans of a large portion of the middle class. And as time goes by, a still larger portion, since the Senate plan is geared to the overall rate of inflation rather than to the (much higher) rate of increases in health-care costs.

Defenders of the Senate plan say not to worry. Employers who bear the tax and therefore have an incentive to cut back on health care for their employees will make it up to employees in higher wages. But anyone taking even a passing glance at today's labor market knows this is wishful thinking. Employers have no incentive to raise wages when almost everyone is worried about keeping their jobs. (Besides, a dollar's worth of tax-free health benefit is worth more than a taxable dollar of wages.)

In any event, I thought a major purpose of health-care reform was to get more care to more people, not to cut it back. Even employees who get extra dollars of wages to make up for the cutbacks won't necessarily plow those wages back into health care.

Some say the Senate's excise tax is the only way to control long-term health care costs. Baloney. If a portion of the middle class loses their health care, they won't get the preventive care that's so crucial to containing long-term costs. If Congress wanted to do more cost containment it would allow Medicare and Medicaid to use their huge bargaining power to get lower costs from pharmaceutical makers and medical suppliers. And it would have a public option to compete with private insurers.

Of course, we're playing with probabilities here. No one knows exactly what will happen when the Senate excise tax hits -- how many employers will cut back coverage without raising wages to compensate, how many middle class people will be hit hard by this, how many who do get higher wages will use them to buy health care, including preventive care.

But why even take these chances when the House bill simply and cleanly goes after the top 1 percent? It's not as if couples earning over a million can't afford to pay the tax. When I last looked, the top 1 percent was taking home a record 23 percent of total income. If anything, the Great Recession is widening the gap. It's bonus time on Wall Street again. But the middle class is taking a beating.

This is the last big fight on health care reform. It's being fought right now. Make your voice heard.

The Dems have enough votes to enact health care -- the hurdle Bill Clinton failed to jump, contributing to the Republican takeover in 1994 -- but when it's enacted, expect the spin machines on both sides to be at full throttle. And because health care legislation won't be implemented for another three or four years (depending whether the House or Senate versions prevail), Americans won't be able to test the veracity of these wildly divergent claims. So don't count on health reform to help Dems next November -- nor harm them, either.

Issue Number One -- the overriding concern that will determine more than anything how many seats the Dems lose next fall -- is jobs. If unemployment is 10 percent or more next November, the Dems are in danger of losing the House and will almost certainly be short of the 60 votes they need in the Senate.

But why would employment be 10 percent or above next November? Surely, you say, there are enough signs of recovery that we can count on a lower rate. Don't be so sure. Here are likely scenarios, with my probabilities:

Double-dip recession (10 percent likelihood). The commercial real estate market craters, carrying with it hundreds of regional banks and exposing how much junk is still on the books of major Wall Street banks. This triggers a long-awaited "correction" in the Dow and pushes the nation into another recession. Job losses rise. By November, the unemployment rate is back over 10 percent.

Stalled recovery (20 percent). Fearing inflation and overly confident of the strength of the recovery, the Fed stops buying up debt instruments and starts raising rates. These acts choke off the recovery. Unemployment remains at 10 percent.

Jobless recovery (40 percent). The stimulus remains in full force, the Fed keeps interest rates low, firms replace inventories and expand production. But with the average workweek hovering around 33 hours, employers don't add new jobs; they just have current workers put in more hours. Result: No drop in unemployment.

Solid recovery (20 percent). Demand surges, employers decide to expand capacity. But they don't add American jobs. Now that foreign workers have access to much of the same equipment and can be linked up to the U.S. so cheaply through the Internet, employers outsource abroad. Result: No drop in unemployment.

Strong recovery (10 percent). The recovery is strong enough for employers to start hiring American workers. Many jobless Americans who have been too discouraged to look for work to begin looking again. But because the BLS household survey (on which the official level of unemployment is based) depends on how many Americans are looking for work, the paradoxical result is for unemployment to remain in double digits.

In other words, I think the chances of unemployment being 10 percent next November are overwhelmingly high. But although voters are acutely sensitive to the rate of unemployment, they're also influenced by the direction employment is heading. If it looks like jobs are coming back, they may forgive a high absolute level of unemployment -- even one as high as 10 percent. But if it looks like jobs aren't coming back, that we may be stuck with a high level of joblessness for years, voters will take out even more of their anxieties on Democrats next November.

The irony, of course, is that Republicans want to cut spending and reduce the deficit. If they had their way, we'd have double-digit unemployment as far as the eye can see.