Democrats have a month, reconciliation is the only way
On CNN this evening, James Carville had nice things to say about the way Lamar Alexander and Tom Coburn opened today's health care summit between Democrats and Republicans. He also said that he thought Barack Obama was the "smartest guy in the room." It was painful to watch the six hour discussion, Carville said, because he was an ADD sort of guy, but it seemed a good setting for Obama to show what he had.
Never mind. Win the discussion or lose it, Obama knows time is running out on health care and the Democrats, They must act before the Congressional recess for Easter, which begins four weeks from Friday. If they don't, Democratic senators and representatives will return from their districts cowed by voter anger and anxious to do something, anything about the economy. But the thing is, without passing a health care bill, nothing Democrats do after April will sway an electorate ready to abandon them in sufficient numbers to cost virtually every single swing seat they hold now. And Harry Reid will go down, too.
So here's the deal: There is going to be a bill passed by reconciliation. Now is the time for every one who gives a damn about what's in the bill to lobby to make it as good as it can be--the 51 votes are there. And if the bill passes before April, it will do very little downstream harm. The republic will not collapse before November and the economy, with a little more government action, will stagger forward; not in a way that fixes much, but well enough to reduce some of anti-government anger that so frightens the Dems. And with health care off the agenda temporarily, expect Congressional Democrats to do a little better with economic and environmental issues.
Showing posts with label recession. Show all posts
Showing posts with label recession. Show all posts
Thursday, February 25, 2010
Wednesday, August 26, 2009
Kennedy, Obama ...
... and a little more about me
Blogging has been, in bursts and dormancy, a bit of a metaphor for my life. At the best of times, it feels like a gift, an inspiration, a duty, an engagement. But it has also slipped away, eeled out of my grasp, a task quite beyond me. Lately, it has been more the second than the first. I wonder at how unable I have been to make myself do it.
About three weeks ago (two weeks, maybe), I had a plan to write about Ted Kennedy and how his illness had changed political and policy outcomes. I'd spoken to a lobbyist I know who had been quite clear that if Kennedy had not been dying--had been present and functioning in the Senate--we would already have passed a health care bill, and passed a watered-down version of the Employee Free Choice Act, too. She was emphatic.
I was somewhat surprised to hear her say it, and even more surprised to note that I had seen stuff written about Kennedy and his legacy, but not a peep about how dramatically his absence had affected Congress and the country. The director of a progressive think tank echoed some of what the lobbyist had to say. "I don't know about health care, but I've seen him get things done in the Senate that others couldn't manage." Despite Kennedy's reputation as a liberal, he has generally been more effective working with conservative Republicans than his more moderate colleagues have been, the source observed.
But of all the people who should rue Sen. Kennedy's illness (and, as of today, his death), Barack Obama and David Axelrod must have felt the pain of his absence most, or nearly so. Here's Barack, trotting about, trying to get the country back on his side and in full support of his version of health care reform when, barring a single cancer, he might still be enjoying his earlier-in-the-term popularity and posing with Kennedy at the signing of a health care bill.
Such thoughts incline me, briefly, to a more charitable attitude toward what's happening politically. Obama is in the midst of a difficult communication battle, his spin on health care reform has not been persuasive to a big part of the public, and his political agenda has been stymied, if not also revealed as patchwork and shallow. We have always known, or should have, that Obama is no progressive, but the momentum should have remained with the Democrats longer than it has, and we should have been enjoying the continuing belief that change we could believe in remained ahead.
Anyway, a couple of weeks ago, I thought I should be the first on my block to blog about Kennedy. I could have even thrown in some references to Tom Daschle, who was supposed to be Obama's point person on reform, but who ended up unable to serve formally (and immediately) in that leadership role because of unpaid taxes. Kennedy's death is sad, of course, but his inability to play a role unique to him, and Daschle's unavailability, may have moved us into an alternative political universe in which the fruits of Obama's election victory turn out to be dramatically less progressive than anticipated.
But I didn't write about it--because I've hardly been writing, at all, these last few weeks--and now Sen. Kennedy is dead. The point ought not to be that I am more frustrated by my unproductivity than I am by the loss of an opportunity that almost certainly died with Kennedy, but clearly, I have been on my own mind quite alot recently. Still, I'm actually blogging here, today (the day after my 62nd birthday), and I ought to try and maintain my focus.
So, here's the deal: Kennedy and Daschle aside, the collapse of the economy and the huge loss of asset wealth had already made the political landscape gloomier and less fertile. Kennedy's loss alone should not have doomed health care, but it's easy to imagine that he would have made a huge difference had he been healthy. But it's over now and Obama is in for some hugely difficult politics over the next year to eighteen months. Moderates, except as peace keepers in an incredibly polarized political debate, aren't going to make much difference politically, even if the media and a good portion of the public wish them all the best.
Obama is a moderate, himself, but he's not going to gain any points trying to referee. He needs an agenda to guide him, but the one he had is in a shambles. Neither he nor Congressional Democrats are going to get much support from progressives, either.
They don't have a peace agenda for Afghanistan. They have no clear sympathy for the plight of Palestinians and no effective ways to deal with a pro-Israel lobby that continues to frame the debate about the Middle East. They are badly mishandling Latin America, siding with the engineers of coup in Central America and making friends with the same, old right-wingers.
And if the economy has not turned dramatically positive by spring, the summer of 2010 will be the hottest summer in the inner cities since the 1960s. The moment for change we can believe in seems to be passing us by. Worse, it may already have happened.
Blogging has been, in bursts and dormancy, a bit of a metaphor for my life. At the best of times, it feels like a gift, an inspiration, a duty, an engagement. But it has also slipped away, eeled out of my grasp, a task quite beyond me. Lately, it has been more the second than the first. I wonder at how unable I have been to make myself do it.
About three weeks ago (two weeks, maybe), I had a plan to write about Ted Kennedy and how his illness had changed political and policy outcomes. I'd spoken to a lobbyist I know who had been quite clear that if Kennedy had not been dying--had been present and functioning in the Senate--we would already have passed a health care bill, and passed a watered-down version of the Employee Free Choice Act, too. She was emphatic.
I was somewhat surprised to hear her say it, and even more surprised to note that I had seen stuff written about Kennedy and his legacy, but not a peep about how dramatically his absence had affected Congress and the country. The director of a progressive think tank echoed some of what the lobbyist had to say. "I don't know about health care, but I've seen him get things done in the Senate that others couldn't manage." Despite Kennedy's reputation as a liberal, he has generally been more effective working with conservative Republicans than his more moderate colleagues have been, the source observed.
But of all the people who should rue Sen. Kennedy's illness (and, as of today, his death), Barack Obama and David Axelrod must have felt the pain of his absence most, or nearly so. Here's Barack, trotting about, trying to get the country back on his side and in full support of his version of health care reform when, barring a single cancer, he might still be enjoying his earlier-in-the-term popularity and posing with Kennedy at the signing of a health care bill.
Such thoughts incline me, briefly, to a more charitable attitude toward what's happening politically. Obama is in the midst of a difficult communication battle, his spin on health care reform has not been persuasive to a big part of the public, and his political agenda has been stymied, if not also revealed as patchwork and shallow. We have always known, or should have, that Obama is no progressive, but the momentum should have remained with the Democrats longer than it has, and we should have been enjoying the continuing belief that change we could believe in remained ahead.
Anyway, a couple of weeks ago, I thought I should be the first on my block to blog about Kennedy. I could have even thrown in some references to Tom Daschle, who was supposed to be Obama's point person on reform, but who ended up unable to serve formally (and immediately) in that leadership role because of unpaid taxes. Kennedy's death is sad, of course, but his inability to play a role unique to him, and Daschle's unavailability, may have moved us into an alternative political universe in which the fruits of Obama's election victory turn out to be dramatically less progressive than anticipated.
But I didn't write about it--because I've hardly been writing, at all, these last few weeks--and now Sen. Kennedy is dead. The point ought not to be that I am more frustrated by my unproductivity than I am by the loss of an opportunity that almost certainly died with Kennedy, but clearly, I have been on my own mind quite alot recently. Still, I'm actually blogging here, today (the day after my 62nd birthday), and I ought to try and maintain my focus.
So, here's the deal: Kennedy and Daschle aside, the collapse of the economy and the huge loss of asset wealth had already made the political landscape gloomier and less fertile. Kennedy's loss alone should not have doomed health care, but it's easy to imagine that he would have made a huge difference had he been healthy. But it's over now and Obama is in for some hugely difficult politics over the next year to eighteen months. Moderates, except as peace keepers in an incredibly polarized political debate, aren't going to make much difference politically, even if the media and a good portion of the public wish them all the best.
Obama is a moderate, himself, but he's not going to gain any points trying to referee. He needs an agenda to guide him, but the one he had is in a shambles. Neither he nor Congressional Democrats are going to get much support from progressives, either.
They don't have a peace agenda for Afghanistan. They have no clear sympathy for the plight of Palestinians and no effective ways to deal with a pro-Israel lobby that continues to frame the debate about the Middle East. They are badly mishandling Latin America, siding with the engineers of coup in Central America and making friends with the same, old right-wingers.
And if the economy has not turned dramatically positive by spring, the summer of 2010 will be the hottest summer in the inner cities since the 1960s. The moment for change we can believe in seems to be passing us by. Worse, it may already have happened.
Tuesday, June 9, 2009
Stella Taylor Died Last Week
The Woman Wouldn't Quit
Stella Taylor died last week, after a too-short lifetime of struggle. She was 56. To me, Stella is and was both the image and the summary of the six years I spent on the Ann Arbor City Council.
I suppose that when I met Stella, I thought of her as a victim. I never told her that and I don’t believe she wanted me to think so. I thought of her as a poor person who was afflicted two or three times over by racism and sexism. But she was never helpless in the face of the challenges life threw at her.
I met her during my first year on council when she called me about the inadequacies of the city recreation center in her neighborhood. By the time she called, she had already invested considerable energy trying to persuade the director of the center that the facility wasn’t doing a very good job serving neighborhood children.
The director of the rec center, Stella told me, “Had gotten on her last nerve.” He wasn’t serving children, she said. He was serving himself.
Stella insisted that I visit her and see for myself how little the city did for her neighborhood. The center was the only significant city government presence in the area and it was, she insisted, understaffed, passive and uncommitted.
Frankly, in six years of trying, I don’t think Stella and all her allies, mostly other neighborhood mothers and grandmothers and me, made much progress. I’m pretty sure she would have agreed with that assessment. But she would also have insisted, and did so, that we keep trying. Quitting, she believed, was the only real sign of failure
There was no quit in Stella. Her mother died when Stella was a young teenager, shot to death by someone who should have loved both Stella and her mother better. Dee Booker, one of the women whom I met through Stella, remembers Stella regularly visiting an aunt in the neighborhood, before her mother’s death. “She was so pretty,” Dee says. “She was always so neat and wore ribbons in her hair.”
But not long after her mother’s murder, Stella ended up homeless, on the streets of Detroit. She developed a drug habit and did whatever she had to do to get by.
Though I don’t know how she did it, Stella got herself straight by the time her first child, Putty, was born. Over the next 10 or so years, three kids followed, sons Corey and William and daughter Kamaria.
After Stella called me that first time, we took a walk around the neighborhood. It was the middle of the day. We stopped by the rec center. It was closed, locked up while the director, according to Stella, was off running personal errands on city time.
Stella was no tattletale. Everything she told me about the center and the director were things I later heard her tell directly to him, at meetings she demanded. At first, I was inclined to believe the director when he told me that the city didn’t have the resources to do what Stella wanted. I also believed that he was a professional who was doing his best.
Eventually, I came to think otherwise, to think that he was a gatekeeper who believed his responsibility was to “manage” the community and to discourage demands or, even, requests, for service. It was Stella who had a vision of how things should be. And it was Stella, who with her soft voice, made the most noise in the neighborhood.
I left Ann Arbor in 1990, a year after the end of my third term on Council, and I didn’t stay in close touch with Stella much after that. But we talked from time to time. One of her sons, William, in the same grade at Pioneer High with my son Nate, was also killed in a shooting. Corey, a great high school basketball player, struggled in junior college and didn’t finish. Kamaria ran into problems, too. But Stella never gave up, and has passed that quality on to her children who have learned from her that they, too, must persevere and insist on better for their own children.
The country is in a crisis of its own now. The economy has tanked, decent jobs are scarce, health care hard to come by, and housing grows increasingly unaffordable. If anything, times are objectively worse now for Stella’s children than they were for Stella. To compound the difficulties, the media seems fascinated with the problems of the once comfortable. The never comfortable have fallen off the radar.
I have some ideas of my own for what would help. Certainly universal health care would make a difference. School reform and vast new investment in public education (paid for by dramatic cuts in the military budget) would be a giant step toward real equity across the country. Enlightened regulation of the private sector, which has always functioned in the interests of a privileged few, could help fulfill some of the promises America has made to working people, but has never kept.
But what we need most of all, is more Stella Taylors. People who speak up and don’t quit. If we don’t have enough of them, then we need to raise more of them. We are poorer, by far for the loss of our one Stella Taylor, but we are rich with her memory and her example. As Mother Jones said, "Mourn the dead and fight like hell for the living."
Stella Taylor died last week, after a too-short lifetime of struggle. She was 56. To me, Stella is and was both the image and the summary of the six years I spent on the Ann Arbor City Council.
I suppose that when I met Stella, I thought of her as a victim. I never told her that and I don’t believe she wanted me to think so. I thought of her as a poor person who was afflicted two or three times over by racism and sexism. But she was never helpless in the face of the challenges life threw at her.
I met her during my first year on council when she called me about the inadequacies of the city recreation center in her neighborhood. By the time she called, she had already invested considerable energy trying to persuade the director of the center that the facility wasn’t doing a very good job serving neighborhood children.
The director of the rec center, Stella told me, “Had gotten on her last nerve.” He wasn’t serving children, she said. He was serving himself.
Stella insisted that I visit her and see for myself how little the city did for her neighborhood. The center was the only significant city government presence in the area and it was, she insisted, understaffed, passive and uncommitted.
Frankly, in six years of trying, I don’t think Stella and all her allies, mostly other neighborhood mothers and grandmothers and me, made much progress. I’m pretty sure she would have agreed with that assessment. But she would also have insisted, and did so, that we keep trying. Quitting, she believed, was the only real sign of failure
There was no quit in Stella. Her mother died when Stella was a young teenager, shot to death by someone who should have loved both Stella and her mother better. Dee Booker, one of the women whom I met through Stella, remembers Stella regularly visiting an aunt in the neighborhood, before her mother’s death. “She was so pretty,” Dee says. “She was always so neat and wore ribbons in her hair.”
But not long after her mother’s murder, Stella ended up homeless, on the streets of Detroit. She developed a drug habit and did whatever she had to do to get by.
Though I don’t know how she did it, Stella got herself straight by the time her first child, Putty, was born. Over the next 10 or so years, three kids followed, sons Corey and William and daughter Kamaria.
After Stella called me that first time, we took a walk around the neighborhood. It was the middle of the day. We stopped by the rec center. It was closed, locked up while the director, according to Stella, was off running personal errands on city time.
Stella was no tattletale. Everything she told me about the center and the director were things I later heard her tell directly to him, at meetings she demanded. At first, I was inclined to believe the director when he told me that the city didn’t have the resources to do what Stella wanted. I also believed that he was a professional who was doing his best.
Eventually, I came to think otherwise, to think that he was a gatekeeper who believed his responsibility was to “manage” the community and to discourage demands or, even, requests, for service. It was Stella who had a vision of how things should be. And it was Stella, who with her soft voice, made the most noise in the neighborhood.
I left Ann Arbor in 1990, a year after the end of my third term on Council, and I didn’t stay in close touch with Stella much after that. But we talked from time to time. One of her sons, William, in the same grade at Pioneer High with my son Nate, was also killed in a shooting. Corey, a great high school basketball player, struggled in junior college and didn’t finish. Kamaria ran into problems, too. But Stella never gave up, and has passed that quality on to her children who have learned from her that they, too, must persevere and insist on better for their own children.
The country is in a crisis of its own now. The economy has tanked, decent jobs are scarce, health care hard to come by, and housing grows increasingly unaffordable. If anything, times are objectively worse now for Stella’s children than they were for Stella. To compound the difficulties, the media seems fascinated with the problems of the once comfortable. The never comfortable have fallen off the radar.
I have some ideas of my own for what would help. Certainly universal health care would make a difference. School reform and vast new investment in public education (paid for by dramatic cuts in the military budget) would be a giant step toward real equity across the country. Enlightened regulation of the private sector, which has always functioned in the interests of a privileged few, could help fulfill some of the promises America has made to working people, but has never kept.
But what we need most of all, is more Stella Taylors. People who speak up and don’t quit. If we don’t have enough of them, then we need to raise more of them. We are poorer, by far for the loss of our one Stella Taylor, but we are rich with her memory and her example. As Mother Jones said, "Mourn the dead and fight like hell for the living."
Tuesday, March 3, 2009
History Roars Back, What Are We Going To Do About It?
Writing in the Washington Post today ("History Roars Back," March 3) , Richard Cohen makes the claim that there are certain moments in history when big events affect us all and do so for many years to come. He isn't talking 9/11 here. He's talking Great Depression. He's talking Naziism. Cohen says that the economic collapse we are living through now "is not just an economic crisis. It's a historical mugging...This will hit the young particularly hard."
World news, Cohen says, hasn't mattered much to young people--meaning, I think 20- and 30-somethings--because what passed for news seemed irrelevant to them. "It did not matter to them what was happening in Washington or London or even Baghdad."
Cohen may be right that the news hasn't mattered much to young people, but it may not really have been a function of youth. More a function of the ways in which the mass society of the '50s and '60s became atomized, breaking into sub-cultures of millions or, even, tens of millions, each with their own specific definition of what is news and the separate and distinct cable outlets, internet sources, news channels and niche publications serving them that news.
But what Cohen is clearly saying is that we are being hit by a phenomenon, economic chaos and depression, that is nearly the same everywhere. The news is that the news is global once more.
The Vietnam War, Cohen claims, was news of the same type. Probably not, but it nevertheless got the attention of young people, who might have otherwise continued their drift out of engagement with the world as it was portrayed at the time by ABC, NBC, CBS and a few major daily papers.
"Rage was the result [of the Vietnam War and its suffocating draft]. The campuses exploded.
"The rage that is coming back will change the politics of our time. Barack Obama will either figure out how to channel it, as Franklin D. Roosevelt did, or he will be flattened by it, as Lyndon Johnson was."
In less than 700 words, Cohen makes the case that now is a pretty desperate time. People this time, perhaps by the billions, are going to be victims. For some individuals, the experience will be personally calamitous. Unaware that history was returning, we in the United States have been living the "American delusion" of endless and relentlessly expanding prosperity.
In the 1930s, "history had come roaring out of Germany and flattened everything," Cohen writes. He concludes with this:
"The beast is loose again."
But history is not the end of everything. Cohen's compact and grimly eloquent piece excludes actual people from any role other than victim or passive observer. He notes that FDR successfully channeled the rage that history provoked and Barack Obama may be able to do something similar. Perhaps without intending to, Cohen leaves the rest of us with little to do but await history's arrival in our neighborhood.
But the real question for the rest of us is this: If history is coming, what are we going to do about it?
World news, Cohen says, hasn't mattered much to young people--meaning, I think 20- and 30-somethings--because what passed for news seemed irrelevant to them. "It did not matter to them what was happening in Washington or London or even Baghdad."
Cohen may be right that the news hasn't mattered much to young people, but it may not really have been a function of youth. More a function of the ways in which the mass society of the '50s and '60s became atomized, breaking into sub-cultures of millions or, even, tens of millions, each with their own specific definition of what is news and the separate and distinct cable outlets, internet sources, news channels and niche publications serving them that news.
But what Cohen is clearly saying is that we are being hit by a phenomenon, economic chaos and depression, that is nearly the same everywhere. The news is that the news is global once more.
The Vietnam War, Cohen claims, was news of the same type. Probably not, but it nevertheless got the attention of young people, who might have otherwise continued their drift out of engagement with the world as it was portrayed at the time by ABC, NBC, CBS and a few major daily papers.
"Rage was the result [of the Vietnam War and its suffocating draft]. The campuses exploded.
"The rage that is coming back will change the politics of our time. Barack Obama will either figure out how to channel it, as Franklin D. Roosevelt did, or he will be flattened by it, as Lyndon Johnson was."
In less than 700 words, Cohen makes the case that now is a pretty desperate time. People this time, perhaps by the billions, are going to be victims. For some individuals, the experience will be personally calamitous. Unaware that history was returning, we in the United States have been living the "American delusion" of endless and relentlessly expanding prosperity.
In the 1930s, "history had come roaring out of Germany and flattened everything," Cohen writes. He concludes with this:
"The beast is loose again."
But history is not the end of everything. Cohen's compact and grimly eloquent piece excludes actual people from any role other than victim or passive observer. He notes that FDR successfully channeled the rage that history provoked and Barack Obama may be able to do something similar. Perhaps without intending to, Cohen leaves the rest of us with little to do but await history's arrival in our neighborhood.
But the real question for the rest of us is this: If history is coming, what are we going to do about it?
Thursday, February 26, 2009
Bubble Riders Got Richer
Poverty and Policy Problems for the Rest of US
My friend Alex Kotlowitz is nearly done with a magazine piece outlining the many ways the city of Cleveland has been devastated by the collapse of the housing market. Cleveland’s problems are on the devastating side of bad; a rust-belt city built around good union manufacturing jobs, suffering from hundreds of millions of dollars worth of lost wealth, eroding tax base and unmet needs.
The other day, Alex and I vigorously debated the proposition that sub-prime housing problems caused the collapse of the larger housing market. Though it wasn't really Alex's position, I have a hard time with even the suggestion that sub-prime mortgage holders somehow caused anything. But we were engaged in a discussion that could have continued indefinitely.
After all, Cleveland homeowner households had a much higher percentage of sub-prime mortgages than did most urban markets. At ground level in Cleveland the flood of mortgage defaults, abandoned housing, personal bankruptcies and business closings must look like a cataract unleashed when the tailings damn of sub-prime mortgages washed out. Alex ended the discussion, graciously suggesting that it might be fair to say that the housing bubble burst and the sub-prime mortgage market collapsed in some places almost simultaneously.
I pushed hard against the notion that defaults on sub-prime mortgages were a first cause of our current financial problems for a couple of reasons. One, I really do believe I’m correct here. And two, it freaks me out that some conservatives (and large numbers of ordinary folks traumatized by their own growing financial problems) think that the nasty habits of sub-prime mortgage holders are to blame for everything.
If such a perspective were to prevail, it could lead to all sorts of scary policy outcomes. Like bailout programs kinder to bankers than homeowners. Like scapegoating low-income folks because they wanted to be homeowners, too, and because they were innocent grist for the commercial and investment banking mills grinding out securitized mortgages at great profit. Like policies that abandon rather than bail out and invest in hard-hit urban communities.
Anticipating the possibility of bad policy outcomes is time well spent, but not if it molds an argument about facts, however elusive those facts might be. That night I hit the books, scanning Dean Baker’s new book, Plunder and Blunder, The Rise and Fall of the Bubble Economy, and coming to the conclusion that I had better clarify a few things, particularly as I have no wish to be regarded as a dogmatic idiot.
A decent understanding of Baker’s work (you can see lots of it at www.cepr.net/) might be to say that the collapse of the housing bubble and the subsequent loss of more than $1 trillion in wealth were caused by the inevitable collision of the forces that fueled the bubble in the first place with the forces that would pop it. Those forces included:
• Sustained and artificially low interest rates, primarily the work of the Fed under Greenspan;
• An artificially high dollar, primarily the result of export economies like China investing their cash in US Treasury Bonds in order to maintain American purchasing power and appetite for imported goods;
• Deregulation and bad regulation that allowed major financial actors driven by greed to develop, sell, swap, trade and insure a myriad of dubious services and securities;
• And job loss, especially high-paying manufacturing jobs, in the United States, caused by competition from cheaper imported goods and resulting in significant losses in household income concentrated in urban economies most dependent on manufacturing.
Though these essentially contradictory economic forces could co-exist for a period of time, they could not do so indefinitely. As the deflating of the bubble proceeded, the effects showed first in housing markets with a high percentage of sub-prime mortgages and adjustable rate mortgages (sub-prime or otherwise).
In not a few instances, households with sub-prime mortgages and ARMs had actually been steered into them in spite of the fact that they were qualified for cheaper and more stable conventional mortgages. Some qualified homebuyers simply received mortgages with disastrous terms lurking in escalating interest rates and onerous payoff conditions.
In other instances, borrowers sought and obtained ARMs that deferred principle and, even, interest payments, and created only temporarily affordable monthly mortgage payments. In the rush to securitize and sell mortgages, and collect the fees associated with midwifeing the securitized mortgage packages, lenders barely scrutinized borrowers.
In some cases, refinancing deadlines arrived for households with ARMs at the same time that job losses began increasing and home values in their communities began stagnating. With little or no equity in their homes, these households found new low-interest mortgages increasingly unavailable.
An honest reading of Plunder and Blunder wouldn’t likely lead anyone to the notion that a single first cause for our economic depression is identifiable. But Baker’s last chapter, “Learning from the Bubbles,” is full of quotable indictments of some of the villains, and they aren’t sub-prime mortgage holders.
“The financial industry’s conduct in the housing bubble was even worse,” Baker writes (pg. 141). “housing prices had sharply diverged from a 100-year trend…vacancy rates were at record highs…inflation-adjusted rents were not rising through most of the period of the housing bubble…some owners of rental units [converted] them to ownership units…Decreasing demand and increased supply lowers the price; what part of that reality did the highly compensated analysts fail to understand?”
Elsewhere, Baker neatly excoriates former Fed Board Chair Alan Greenspan. He also takes a swipe at the media, which he amply substantiates elsewhere.
“The leading villain in this story is Alan Greenspan. Greenspan mastered the art of currying the favor of the rich and powerful and held top economic positions under five presidents of both political parties. He also managed to gain a near cult-like following among the media. As a result, most of the public is largely unaware of how disastrous the Fed’s policies under his tenure were for the economy and the country (pg. 140).”
The cascade of terrible economic news that has characterized most of the last two years was almost inevitable. Except, of course, for the mega- and quasi-collapses of so many banking, insurance and brokerage giants that promoted the bubble in the first place.
The much ignored original sin here is the amount of wealth that was privatized in the form of dividends, salaries and bonuses during the bonanza years, leaving the now shaky financial giants without the resources to cover their losses. Almost to a man, or woman, the nouveau rich and richer of the last 15 years will get to keep what they took.
The rest of us will be left with the responsibility for developing, advocating and supporting fair, just and restorative polices, based on a clear understanding of what happened, and focused on communities where people live and work and engage the future.
My friend Alex Kotlowitz is nearly done with a magazine piece outlining the many ways the city of Cleveland has been devastated by the collapse of the housing market. Cleveland’s problems are on the devastating side of bad; a rust-belt city built around good union manufacturing jobs, suffering from hundreds of millions of dollars worth of lost wealth, eroding tax base and unmet needs.
The other day, Alex and I vigorously debated the proposition that sub-prime housing problems caused the collapse of the larger housing market. Though it wasn't really Alex's position, I have a hard time with even the suggestion that sub-prime mortgage holders somehow caused anything. But we were engaged in a discussion that could have continued indefinitely.
After all, Cleveland homeowner households had a much higher percentage of sub-prime mortgages than did most urban markets. At ground level in Cleveland the flood of mortgage defaults, abandoned housing, personal bankruptcies and business closings must look like a cataract unleashed when the tailings damn of sub-prime mortgages washed out. Alex ended the discussion, graciously suggesting that it might be fair to say that the housing bubble burst and the sub-prime mortgage market collapsed in some places almost simultaneously.
I pushed hard against the notion that defaults on sub-prime mortgages were a first cause of our current financial problems for a couple of reasons. One, I really do believe I’m correct here. And two, it freaks me out that some conservatives (and large numbers of ordinary folks traumatized by their own growing financial problems) think that the nasty habits of sub-prime mortgage holders are to blame for everything.
If such a perspective were to prevail, it could lead to all sorts of scary policy outcomes. Like bailout programs kinder to bankers than homeowners. Like scapegoating low-income folks because they wanted to be homeowners, too, and because they were innocent grist for the commercial and investment banking mills grinding out securitized mortgages at great profit. Like policies that abandon rather than bail out and invest in hard-hit urban communities.
Anticipating the possibility of bad policy outcomes is time well spent, but not if it molds an argument about facts, however elusive those facts might be. That night I hit the books, scanning Dean Baker’s new book, Plunder and Blunder, The Rise and Fall of the Bubble Economy, and coming to the conclusion that I had better clarify a few things, particularly as I have no wish to be regarded as a dogmatic idiot.
A decent understanding of Baker’s work (you can see lots of it at www.cepr.net/) might be to say that the collapse of the housing bubble and the subsequent loss of more than $1 trillion in wealth were caused by the inevitable collision of the forces that fueled the bubble in the first place with the forces that would pop it. Those forces included:
• Sustained and artificially low interest rates, primarily the work of the Fed under Greenspan;
• An artificially high dollar, primarily the result of export economies like China investing their cash in US Treasury Bonds in order to maintain American purchasing power and appetite for imported goods;
• Deregulation and bad regulation that allowed major financial actors driven by greed to develop, sell, swap, trade and insure a myriad of dubious services and securities;
• And job loss, especially high-paying manufacturing jobs, in the United States, caused by competition from cheaper imported goods and resulting in significant losses in household income concentrated in urban economies most dependent on manufacturing.
Though these essentially contradictory economic forces could co-exist for a period of time, they could not do so indefinitely. As the deflating of the bubble proceeded, the effects showed first in housing markets with a high percentage of sub-prime mortgages and adjustable rate mortgages (sub-prime or otherwise).
In not a few instances, households with sub-prime mortgages and ARMs had actually been steered into them in spite of the fact that they were qualified for cheaper and more stable conventional mortgages. Some qualified homebuyers simply received mortgages with disastrous terms lurking in escalating interest rates and onerous payoff conditions.
In other instances, borrowers sought and obtained ARMs that deferred principle and, even, interest payments, and created only temporarily affordable monthly mortgage payments. In the rush to securitize and sell mortgages, and collect the fees associated with midwifeing the securitized mortgage packages, lenders barely scrutinized borrowers.
In some cases, refinancing deadlines arrived for households with ARMs at the same time that job losses began increasing and home values in their communities began stagnating. With little or no equity in their homes, these households found new low-interest mortgages increasingly unavailable.
An honest reading of Plunder and Blunder wouldn’t likely lead anyone to the notion that a single first cause for our economic depression is identifiable. But Baker’s last chapter, “Learning from the Bubbles,” is full of quotable indictments of some of the villains, and they aren’t sub-prime mortgage holders.
“The financial industry’s conduct in the housing bubble was even worse,” Baker writes (pg. 141). “housing prices had sharply diverged from a 100-year trend…vacancy rates were at record highs…inflation-adjusted rents were not rising through most of the period of the housing bubble…some owners of rental units [converted] them to ownership units…Decreasing demand and increased supply lowers the price; what part of that reality did the highly compensated analysts fail to understand?”
Elsewhere, Baker neatly excoriates former Fed Board Chair Alan Greenspan. He also takes a swipe at the media, which he amply substantiates elsewhere.
“The leading villain in this story is Alan Greenspan. Greenspan mastered the art of currying the favor of the rich and powerful and held top economic positions under five presidents of both political parties. He also managed to gain a near cult-like following among the media. As a result, most of the public is largely unaware of how disastrous the Fed’s policies under his tenure were for the economy and the country (pg. 140).”
The cascade of terrible economic news that has characterized most of the last two years was almost inevitable. Except, of course, for the mega- and quasi-collapses of so many banking, insurance and brokerage giants that promoted the bubble in the first place.
The much ignored original sin here is the amount of wealth that was privatized in the form of dividends, salaries and bonuses during the bonanza years, leaving the now shaky financial giants without the resources to cover their losses. Almost to a man, or woman, the nouveau rich and richer of the last 15 years will get to keep what they took.
The rest of us will be left with the responsibility for developing, advocating and supporting fair, just and restorative polices, based on a clear understanding of what happened, and focused on communities where people live and work and engage the future.
Friday, February 15, 2008
An Economy and Budget That Works - Part One
An Economy and Federal Budget
That Works for Working Families
What the Next Administration Should Do
Part One
(I’m going to produce my own prescription for economic change in the United States. This section, about health care and military spending, is part one. Later pieces will be about climate change and green jobs, unions, Social Security and more.)
Recessions are commonly experienced in two ways. Economists measure them; working people and their families endure them. The recession that we are in now, precipitated by the bursting of the housing bubble, will get worse. How much worse will be a subject of debate among economists, now and over the next few years.
But workers will not be attempting to measure the recession; they will be trying to live through it. Workers will lose jobs. Unemployed workers will face lengthening periods of unemployment and loss of individual and family health care coverage. Workers with jobs will still get paychecks, but paychecks with diminished purchasing power. And health care costs will keep rising.
Congress and President Bush have passed and signed a stimulus package, but it won’t be enough. It won’t restructure the federal budget, it won’t support the creation of millions of good, green jobs over the long-term, and it won’t lead to universal, affordable health care in the United States. Getting there will require a new president promoting new economic and social policies.
Health Care
A recent study by the Center for Economic and Policy Research (CEPR) shows that ending the role of big drug companies in conducting clinical trials is one way to begin cutting health care costs. The monopoly that big Pharma currently maintains over the data generated from those trials ultimately costs consumers and taxpayers billions. That data, says co-author Dean Baker, rightfully belongs in the public domain and would allow the FDA to make better regulatory decisions and help prevent the wasteful duplications of drug testing and marketing that turns decisions about treatment into competition between drug advertisers.
The study, “The Benefits and Savings from Publicly-Funded Clinical Trials of Prescription Drugs,” released in January, shows that public funding of trials, combined with a mandated reduction of 40 percent in the prices paid for drugs by Medicare (bringing prices in line with those paid by the VA), would save $50 billion over a ten-year period. If state and local governments also had corresponding reductions in the prices paid for prescription drugs, their ten-year savings would be over $120 billion. If these price reductions were applied to the private sector as well, they would total more than $900 billion over the same period.
Such savings would be a big step toward reigning in the escalating costs of health care. It would also end the drug company monopoly over data from trials, making all information available to the FDA, the public and other researchers.
Spending for War and Weapons
Last year, CEPR commissioned Global Insight to do an analysis of the long-term effects of increased military spending on the wars in Iraq and Afghanistan. That study, “The Economic Impact of the Iraq War and Higher Military Spending,” published in May, showed that an early stimulus provided by that spending would begin to turn negative after five years and worsen in succeeding years.
In other words, the result of spending approximately $135 billion for war in 2003 provided a small immediate stimulus, but will begin to result in job losses in specific sectors of the economy (almost 45,000 lost in manufacturing) by 2008. Continuing war spending worsens the effect—the study projects that by 2013 more than 450,000 jobs will be lost across most sectors of the economy.
Any president trying to make policy that will strengthen the economy and create good jobs will have to deal with the damaging long-term effect of spending for war and supporting a bloated military budget.
Among the worst offenses of the current military budget is the sustained multi-year spending for weapons systems that are inappropriate for the current mission of the military, inefficient and/or faulty. These multi-billion dollar programs are the direct consequence of the revolving door between the Pentagon and defense contractors.
New defense priorities that reduce the overall military budget—the United States currently spends more on the military than the combined spending of the rest of the world—would free hundreds of billions of dollars over the next decade for housing, education, public transportation and other infrastructure spending. As things now stand, the U.S. military budget is probably the most effective mechanism ever developed for the transfer of wealth from taxpayers and working families to the executives and shareholders of multi-national corporations. Call that mechanism "tax workers, buy weapons (TWBW)."
That Works for Working Families
What the Next Administration Should Do
Part One
(I’m going to produce my own prescription for economic change in the United States. This section, about health care and military spending, is part one. Later pieces will be about climate change and green jobs, unions, Social Security and more.)
Recessions are commonly experienced in two ways. Economists measure them; working people and their families endure them. The recession that we are in now, precipitated by the bursting of the housing bubble, will get worse. How much worse will be a subject of debate among economists, now and over the next few years.
But workers will not be attempting to measure the recession; they will be trying to live through it. Workers will lose jobs. Unemployed workers will face lengthening periods of unemployment and loss of individual and family health care coverage. Workers with jobs will still get paychecks, but paychecks with diminished purchasing power. And health care costs will keep rising.
Congress and President Bush have passed and signed a stimulus package, but it won’t be enough. It won’t restructure the federal budget, it won’t support the creation of millions of good, green jobs over the long-term, and it won’t lead to universal, affordable health care in the United States. Getting there will require a new president promoting new economic and social policies.
Health Care
A recent study by the Center for Economic and Policy Research (CEPR) shows that ending the role of big drug companies in conducting clinical trials is one way to begin cutting health care costs. The monopoly that big Pharma currently maintains over the data generated from those trials ultimately costs consumers and taxpayers billions. That data, says co-author Dean Baker, rightfully belongs in the public domain and would allow the FDA to make better regulatory decisions and help prevent the wasteful duplications of drug testing and marketing that turns decisions about treatment into competition between drug advertisers.
The study, “The Benefits and Savings from Publicly-Funded Clinical Trials of Prescription Drugs,” released in January, shows that public funding of trials, combined with a mandated reduction of 40 percent in the prices paid for drugs by Medicare (bringing prices in line with those paid by the VA), would save $50 billion over a ten-year period. If state and local governments also had corresponding reductions in the prices paid for prescription drugs, their ten-year savings would be over $120 billion. If these price reductions were applied to the private sector as well, they would total more than $900 billion over the same period.
Such savings would be a big step toward reigning in the escalating costs of health care. It would also end the drug company monopoly over data from trials, making all information available to the FDA, the public and other researchers.
Spending for War and Weapons
Last year, CEPR commissioned Global Insight to do an analysis of the long-term effects of increased military spending on the wars in Iraq and Afghanistan. That study, “The Economic Impact of the Iraq War and Higher Military Spending,” published in May, showed that an early stimulus provided by that spending would begin to turn negative after five years and worsen in succeeding years.
In other words, the result of spending approximately $135 billion for war in 2003 provided a small immediate stimulus, but will begin to result in job losses in specific sectors of the economy (almost 45,000 lost in manufacturing) by 2008. Continuing war spending worsens the effect—the study projects that by 2013 more than 450,000 jobs will be lost across most sectors of the economy.
Any president trying to make policy that will strengthen the economy and create good jobs will have to deal with the damaging long-term effect of spending for war and supporting a bloated military budget.
Among the worst offenses of the current military budget is the sustained multi-year spending for weapons systems that are inappropriate for the current mission of the military, inefficient and/or faulty. These multi-billion dollar programs are the direct consequence of the revolving door between the Pentagon and defense contractors.
New defense priorities that reduce the overall military budget—the United States currently spends more on the military than the combined spending of the rest of the world—would free hundreds of billions of dollars over the next decade for housing, education, public transportation and other infrastructure spending. As things now stand, the U.S. military budget is probably the most effective mechanism ever developed for the transfer of wealth from taxpayers and working families to the executives and shareholders of multi-national corporations. Call that mechanism "tax workers, buy weapons (TWBW)."
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