Globalization

Despite the bumps in the road over the last few weeks, there can be no doubt that President Obama and the new Congress have acted decisively, quickly and with great force in passing the Recovery and Reinvestment Act so quickly.  After years of politics and dithering, the nation should be relieved they have leaders in place willing to take on the hard challenges of our day. 

Speaking for the NDN team we are very pleased with where the new bill has ended up.  Many of its core ideas - investments in health IT, clean and traditional infrastructure including greening federal buildings, 21st century schools and uiversal broadband access, support for unemployment insurance and backstopping the states, weatherization - are ideas NDN championed publically and privately before the President-elect outlined his original stimulus plan in early December.   Consider this passage from an essay, A Stimulus for the Long Run, Rob Shapiro and I released in Mid-November originally on the Huffington Post: 

When Congress goes back to work next week, its first job should be another stimulus package for the sinking economy. President-elect Obama also has said he wants another stimulus of his own design after he is sworn in. We know that more stimulus is necessary, because the ongoing financial and housing market crises will very likely produce an unusually long and deep recession. We also need additional stimulus as insurance against the possibility of another economic shock that would worsen the downturn, such as a run on the dollar that drives up interest rates, or worsening housing foreclosures that trigger more failures in financial institutions and further drive down consumer and business confidence.

The path of least resistance to deliver that stimulus is another round of tax rebates for American families, which in theory families would spend to jumpstart demand and, ultimately, the business investments and jobs to meet that demand. However, the catch is that approach is very unlikely to work this time. Most of the rebates from the spring 2008 stimulus were saved rather than spent; and given the recent, sharp decline in confidence, even a greater share of another round would be saved and so provide little stimulus. Moreover, President Obama and Congress can put those billions of dollars to uses that will stimulate long-term growth and income gains much more effectively.

Instead of tax rebates, congressional leaders and President-to-be Obama should look to targeted tax changes and targeted spending increases, with the lion's share going in a new direction: investments in the basic elements of growth for a 21st century economy. The stimulus should and will include traditional measures such as aid to the states facing serious revenue shortfalls and an extension of unemployment insurance. But for its major thrust, President-elect Obama should use the stimulus to drive policy reforms that will affect the shape and strength of the economy for the next decade, rather than simply affecting the timing of the next recovery. The stimulus should be first steps toward delivering on the change that President-elect Obama has pledged to bring to America.

This change should be directed toward creating a 21st century, low-carbon, innovation-driven economy, as the development, spread and efficient use of economic innovations will continue to be the most important factors driving all our future progress in growth, productivity, and incomes. For example, productivity gains are increasingly tied to an employee's capacity to operate effectively in workplaces dense with information and telecommunications technologies. Within a decade, workers who cannot perform in such work environments will be marginalized economically. Therefore, the stimulus should help businesses and workers prepare for the ideas-based economy, through grants to community colleges to keep their computer labs open and staffed in the evenings and on weekends for any adult to walk in and receive free computer training, a plan Obama endorsed as Senator. The stimulus also could include an innovative program to provide inexpensive laptops to every sixth-grader in America and spread broadband installation to schools, local libraries, and human services offices that currently lack it.

There is already a broad consensus on the need to include infrastructure investment in the stimulus, but instead of addressing only roads and bridges, America can also take this opportunity to invest in a new generation of clean infrastructure. The federal government can lead the way, through greening its buildings and vehicle fleets and putting 1,000 megawatts of solar power on its roofs. It also can provide funding to help modernize the electrical grid and build a new generation of light rail systems for urban areas, as well as greater support for research and deployment in renewable energy and energy efficiency technologies, and tax credits and other incentives for greening America's homes and private buildings.

Aside from energy, the other rapidly rising business cost squeezing wages and jobs is health care. To help hold down these costs for the long haul, the stimulus can provide support for hospitals, clinics and physicians to purchase and install the hardware and software for standardized electronic medical records systems. This will serve as a first down payment for 21st century health care reform, and will ultimately reduce costs and promote best-practices at the nation's hospitals.

These are all investments we know we have to make if we intend to make the U.S. economy more efficient, innovative and sustainable. They also are all investments that will ultimate pay for themselves several times over. Congress and President-elect Obama can use this opportunity not only to create more jobs, but to do so in ways that will help drive the development of a real, 21st century workforce and genuine 21st century economic infrastructure. And taking this course by passing a stimulus for change could be an early and important opportunity for him to practice both his new politics and a new form of economic leadership.

Or this passage from Michael Moynihan's excellent October essay, Accelerating the Development of a 21st Century Economy: Investing in Clean Infrastructure: 

Below are six proposals NDN offers to accelerate the building of clean infrastructure now. Each of these will help get money onto the street quickly to stimulate demand, help American families solve problems related to high energy costs and build the clean infrastructure America needs to compete effectively in the 21st century. Congress should pass legislation to:

 Fund the National Infrastructure Bank to leverage federal resources to fund
worthy, approved clean infrastructure projects (which would not only increase
funds available to infrastructure, but also represent a vast improvement over the
earmark system).

 Modernize the electrical grid through use of smart computer technology and
more transmission capacity, both to manage demand and move America's
tremendous wealth of wind and solar power to where it is needed.

 Provide tax credits for Americans to winterize their homes as the cold weather
approaches.

 Provide tax credits for the purchase of Energy Star appliances to reduce
demand for electricity.

 Provide aid to states and cities to expand mass transportation service and
perform maintenance on overburdened systems.

 Provide a tax credit to people who buy a new, fuel efficient car and take an old gas guzzling jalopy off the road, which has the added bonus of aiding the
weakened automobile industry.

There are other ways for Congress to promote clean infrastructure going forward -- through funding rail, promoting green national building standards and updating our electricity regulation regime to promote distributed generation of renewable power, among other approaches. But these six proposals can help us move toward clean infrastructure now as we get the economy moving again.  

So in other words NDN is very invested in this new legislation, and will be working hard with our Congressional leaders and all of you to ensure that as the plan moves from bill to implementation it is done in a way consistent with the opportunties presented to us and the nation.  More on this historic piece of legislation in the days ahead. 

And again Congratulations to your new President and Congress for stepping up, standing tall and doing the right thing for a nation in need.

Update - Jake Berliner did a comprehensive summary of our recent economic essays on Friday.  You can find it here. 

From his column today:

And I don't know about you, but I've got a sick feeling in the pit of my stomach - a feeling that America just isn't rising to the greatest economic challenge in 70 years. The best may not lack all conviction, but they seem alarmingly willing to settle for half-measures. And the worst are, as ever, full of passionate intensity, oblivious to the grotesque failure of their doctrine in practice.

There's still time to turn this around. But Mr. Obama has to be stronger looking forward. Otherwise, the verdict on this crisis might be that no, we can't.

In an article today, Spend or Save? Trick Question, The New York Times' David Leonhardt looks into a question I posed a week ago, and which NBC's Chuck Todd asked the President  Monday night - whether it is best for American consumers now to spend, or save.  He begins:

It's your fault. Part of it is, anyway. You, the American consumer, spent too much money. You bought too much house, took on too much debt and generally lived beyond your means. Your free-spending ways helped cause the worst financial crisis since the Great Depression.

And now you're going to have to do your part to end the crisis. How? By spending. Enough already with the saving that many of you have suddenly begun doing. This very moment, Congress and President Obama are preparing to send you a tax rebate, to inspire you to stimulate the economy. So go out and stimulate. Spend as if the future of your country depended on it.

John Maynard Keynes, the great 20th-century economist, would have appreciated the apparent absurdity in these mixed messages. He coined a phrase, "the paradox of thrift," to point out that what was rational for an individual during hard times - saving money - could be ruinous for an entire economy. Eventually, many of the savers may end up out of work because everyone else is saving, too.

It's enough to make you wonder what exactly you're supposed to do. At his news conference on Monday night, Mr. Obama was asked directly whether people should spend or save their rebate checks. He ducked the question.

Fortunately, though, it has an answer. There are a few ways to help both your own finances and the country's.

Read on.  How Americans answer this question will go a long way to determining the length and depth of the current global recession.  Leonhardt concludes that the best course is for America to invest in projects that provide both short term stimulus and prepare America for future growth and prosperity.   This is the same conclusion Rob and I reached in our November memo, A Stimulus For the Long Run, and has been at the core of our advocacy these past few months.

We are very proud that many of the items we advocated in this memo - health IT, greening federal buildings and vehicle fleets, extending unemployment insurance and backstopping the states, investing in broadband and 21st century schools, modernizing the electrical grid - are still in the mix for the final Economic Recovery legislation and are at the very core of our emerging economic strategy.  

For months, NDN has written a great deal about what we believe should be in an economic recovery plan. We’ve argued for investment in provisions that will both spur the economy now and create the basis for future prosperity.  We’ve argued for investments in clean and traditional infrastructure, broadband access, electronic health records, and computers in schools. While we have some concerns about what will end up in the final bill, all in all we think the recovery plan that is emerging is a good one and should be passed as soon as possible. We applaud the work of this young Administration and Congress for moving so swiftly and so assuredly to take the kind of action required at this challenging time for the nation.  

However, there are two provisions being discussed that we believe should not be in the final bill: mandatory E-verify usage by employers receiving stimulus funds and "Buy American" requirements for materials involved in stimulus funded projects. We believe that, in coming days, these provisions should be removed from the economic recovery legislation. While they are well intentioned provisions, we, like many others, do not believe that they will function as a stimulus for the economy and will do more harm than good.

As President Obama pointed out yesterday in Elkhart, Indiana, there are many effective ways to make America more competitive in the global economy, but we believe that "Buy American" provisions, which, depending on the version of the bill, would force steel, iron, and other materials used in stimulus projects to be American-made, are not among them. We have serious concerns that Buy American provisions, while well-intentioned, place us right on the edge of our international legal commitments and open the door to dangerous retribution from other nations also in the midst of grave economic challenges at home. America not only imports from abroad, but our workers and our companies sell a great deal abroad.   Enacting provisions that would slow American exports and potentially diminish the overall volume of trade at a time of an accelerating global slowdown could tip the world into a global depression. As many have pointed out, America tried this strategy in the early 20th century, and it was instrumental in bringing about the Great Depression.  

Similarly, however laudable the goal of using the nascent E-verify system by all companies receiving stimulus funds to ensure that these funds go to legal workers, the reality is that the system is not yet ready for broad, mandatory deployment. Indeed, mandating its use could have adverse consequences for the economic recovery, as it would almost certainly slow the use of funds, be incredibly costly to employers, and, because of the consequences of false "no matches" (which are easily triggered and all too common), would delay the recovery plan’s goal of putting Americans back to work.  For those policymakers interested in the United States having national, effective electronic immigration verification system, they should work with the President to include it in a broader effort to fix our broken immigration system later this year.  

As members of Congress debate the economic recovery plan in conference committee over the next few days, we trust that they will keep an eye out for provisions that are clearly not in the economic interests of the United States. The inclusion of Buy American and E-verify provisions fall well short of this measure and should be removed from the legislation.

Like many other commentators, I thought the President was terrific last night.  Commanding, thoughtful, grounded, pragmatic.  He made a powerful case not only for the Recovery Plan, but for his Presidency.   Let's hope we see more of these formats in the future.  They are good for the nation, and good for the President.  

But there was one exchange that I kept coming back to this morning - his answer to Chuck Todd's question about consumer debt.  Chuck's question was similar to one I asked recently in this post, Spend? Save? What's The Right Course for Everyday Americans?   I post the question and answer below for your consideration, as I think getting this one right may be a predicate for us designing a Recovery Plan that will do what we need it to do over time: 

Q Thank you, Mr. President. In your opening remarks, you talked about that if your plan works the way you want it to work, it's going to increase consumer spending. But isn't consumer spending or overspending how we got into this mess? And if people get money back into their pockets, do you not want them saving it or paying down debt first before they start spending money into the economy?

THE PRESIDENT: Well, first of all, I don't think it's accurate to say that consumer spending got us into this mess. What got us into this mess initially were banks taking exorbitant, wild risks with other people's monies based on shaky assets. And because of the enormous leverage where they had $1 worth of assets and they were betting $30 on that $1, what we had was a crisis in the financial system. That led to a contraction of credit, which in turn meant businesses couldn't make payroll or make inventories, which meant that everybody became uncertain about the future of the economy, so people started making decisions accordingly -- reducing investment, initiated layoffs -- which in turn made things worse.

Now, you are making a legitimate point, Chuck, about the fact that our savings rate has declined and this economy has been driven by consumer spending for a very long time -- and that's not going to be sustainable. You know, if all we're doing is spending and we're not making things, then over time other countries are going to get tired of lending us money and eventually the party is going to be over. Well, in fact, the party now is over.

And so the sequence of how we're approaching this is as follows: Our immediate job is to stop the downward spiral, and that means putting money into consumers' pockets, it means loosening up credit, it means putting forward investments that not only employ people immediately but also lay the groundwork for long-term economic growth. And that, by the way, is important even if you're a fiscal conservative, because the biggest problem we're going to have with our federal budget is if we continue a situation in which there are no tax revenues because economic growth is plummeting at the same time as we've got more demands for unemployment insurance, we've got more demands for people who've lost their health care, more demand for food stamps. That will put enormous strains on the federal budget as well as the state budget.

So the most important thing we can do for our budget crisis right now is to make sure that the economy doesn't continue to tank. And that's why passing the economic recovery plan is the right thing to do, even though I recognize that it's expensive. Look, I would love not to have to spend money right now. This notion that somehow I came in here just ginned up to spend $800 billion, that wasn't -- that wasn't how I envisioned my presidency beginning. But we have to adapt to existing circumstances.

Now, what we are going to also have to do is to make sure that as soon as the economy stabilizes, investment begins again; we're no longer contracting but we're growing; that our mid-term and long-term budget is dealt with. And I think the same is true for individual consumers. Right now they're just trying to figure out, how do I make sure that if I lose my job, I'm still going to be able to make my mortgage payments. Or they're worried about how am I going to pay next month's bills. So they're not engaging in a lot of long-term financial planning.

Once the economy stabilizes and people are less fearful, then I do think that we're going to have to start thinking about how do we operate more prudently, because there's no such thing as a free lunch. So if you want to get -- if you want to buy a house, then putting zero down and buying a house that is probably not affordable for you in case something goes wrong, that's something that has to be reconsidered.

So we're going to have to change our bad habits. But right now, the key is making sure that we pull ourselves out of the economic slump that we're in.

For more on my thoughts on the politics of the Recovery Plan see this recent post, What The Senate Bill Cut  and this one, The Utter Bankruptcy of Today's Republican Party.

Over at Daily Kos Meteor Blades has a list of what the Senate cut from the House bill.  

The cuts include many investments near and dear to NDN's heart, things we have fought hard for in recent months.  

As I wrote yesterday "reconciling" these two bills is not going to be easy, and will set a precedent for how the two chambers and the White House reconcile future legislation.  

Important to watch is what commitment emerges this week to keep people in their homes.  The Senate version of the bill has more money for fixing the AMT - which affects people in the upper end of the middle class - than is being floated for dealing with what may be the single most important act we can take to attack the financial crisis - stablizing the housing market.  Michael Moynihan has been making the case this week for a new USA Mortgage, a 4 percent 30 year mortgage for all Americans.   It is an idea that deserves serious consideration. 

Whatever happens this week, the leaders of our government cannot, for one moment, give the impression that the banks and those with means are getting the lion share of attention and bailout, leaving once again those struggling to get by to get what's left over.   This is the core of the politics the American people rejected last fall, and the core of the mandate the new President has been given. If President Obama is true to his arguments of this past week, and he believes the GOP has been peddling tired, failed and worn ideas, then he has an obligation not to allow too many of them in the final recovery bill and financial rescue plan that emerge this week.  Given where things seem to be heading this may be harder than the new President would have wanted.

Noon Update - Carla Marinucci of the SF Chronicle has an extensive analysis today of the moment's politics which features commentary from NDN.  It is well worth reading. 

Monday 8am Update - Paul Krugman offers a powerful critique of the Senate bill this morning, while one of its architects, Senator Specter, offers this defense.

Monday 1pm Update - Tom Edsall has a piece up on Huff Post right now which shows why the AMT "fix" is such a bad idea.   

In the Washington Post today President Obama makes his case:

By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression. Millions of jobs that Americans relied on just a year ago are gone; millions more of the nest eggs families worked so hard to build have vanished. People everywhere are worried about what tomorrow will bring.

What Americans expect from Washington is action that matches the urgency they feel in their daily lives -- action that's swift, bold and wise enough for us to climb out of this crisis.

Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.

That's why I feel such a sense of urgency about the recovery plan before Congress. With it, we will create or save more than 3 million jobs over the next two years, provide immediate tax relief to 95 percent of American workers, ignite spending by businesses and consumers alike, and take steps to strengthen our country for years to come.

This plan is more than a prescription for short-term spending -- it's a strategy for America's long-term growth and opportunity in areas such as renewable energy, health care and education. And it's a strategy that will be implemented with unprecedented transparency and accountability, so Americans know where their tax dollars are going and how they are being spent.

In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.

I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We've seen the tragic consequences when our bridges crumble and our levees fail.

Every day, our economy gets sicker -- and the time for a remedy that puts Americans back to work, jump-starts our economy and invests in lasting growth is now.

Now is the time to protect health insurance for the more than 8 million Americans at risk of losing their coverage and to computerize the health-care records of every American within five years, saving billions of dollars and countless lives in the process.

Now is the time to save billions by making 2 million homes and 75 percent of federal buildings more energy-efficient, and to double our capacity to generate alternative sources of energy within three years.

Now is the time to give our children every advantage they need to compete by upgrading 10,000 schools with state-of-the-art classrooms, libraries and labs; by training our teachers in math and science; and by bringing the dream of a college education within reach for millions of Americans.

And now is the time to create the jobs that remake America for the 21st century by rebuilding aging roads, bridges and levees; designing a smart electrical grid; and connecting every corner of the country to the information superhighway.

These are the actions Americans expect us to take without delay. They're patient enough to know that our economic recovery will be measured in years, not months. But they have no patience for the same old partisan gridlock that stands in the way of action while our economy continues to slide.

So we have a choice to make. We can once again let Washington's bad habits stand in the way of progress. Or we can pull together and say that in America, our destiny isn't written for us but by us. We can place good ideas ahead of old ideological battles, and a sense of purpose above the same narrow partisanship. We can act boldly to turn crisis into opportunity and, together, write the next great chapter in our history and meet the test of our time.

In a recent post, The Utter Bankruptcy of Today's Republican Party, I argued

As I have written so many times before on this blog, the modern Republican Party ceased being a serious Party when Bush took office. Their leadership and government left America weaker today than it has been since before World War II. They failed to tackle critical challenges on their watch, and ignored warning signs of dangers to come. They have dug a very deep hole for the nation, and today they turned their backs, hard, on a popular President trying to begin cleaning up the mess they made, and do the right thing for a nation in need.

I listened to Republicans over the last couple of days, trying hard to understand the rationale for their opposition. I heard references to a CBO report that had already been proven not to exist. I heard about pork but they offered few specifics. I heard the refrain again and again that tax cuts are the best way to create jobs - an assertion that was disproven by the economic experience of the Bush era. We had historic tax cuts under Bush; job creation was anemic, and incomes for average people actually fell. The tax-cut strategy didn't work. For eight years the Bush Presidency confused cutting taxes with offering a broad economic strategy that would help prepare the nation for the great challenges of this emerging century - and we are all paying the price today. Massive structural budget deficits, ready to grow worse with the retirement of the baby boom. Aging infrastructure. Years of flat wages and declining incomes. Record home foreclosures and personal bankruptcies. 2nd tier rates of broadband penetration. Rising rates of poverty and those without health insurance. A terribly broken immigration system. A global round of economic liberalization unfinished. A badly bungled TARP. But of course one big thing did get done during this period - those massive set of tax cuts for the very wealthiest Americans.

In his CEO pay announcement today (a set of remarks that I feel somehow will be studied for a long long time) Obama took off after the failed economic theories of the age of Bush in ways we have not heard often since the election: 

Now, in the past few days I've heard criticisms of this plan that echo the very same failed theories that helped lead us into this crisis - the notion that tax cuts alone will solve all our problems; that we can ignore fundamental challenges like energy independence and the high cost of health care and still expect our economy and our country to thrive.

I reject that theory, and so did the American people when they went to the polls in November and voted resoundingly for change. So I urge members of Congress to act without delay. No plan is perfect, and we should work to make it stronger. But let's not make the perfect the enemy of the essential. Let's show people all over our country who are looking for leadership in this difficult time that we are equal to the task.

Our good President is showing that while he will work to engage and bring Repubicans on board, he will also be making every effort to defeat their anachronistic and discredited arguments that did so much harm to the nation he now leads.  And it is critical that he keep this tact up in the days ahead for to understand where we need to go we need to know where we have been.  And where we have been has been a conservative-led disaster, of awol leadership, important roads not taken, problems badly bungled.  As the right looks to reassert themselves in this debate it is critical, essential, that our President remind the country what their time in power and their vision brought.  For part of his job will  be to accomodate Republicans themselves while strenously resisting accomodation of their failed approach to governing. 

Of course pulling that off will be no easy task - but no one said this was to be an easy job.

Niall Ferguson in the Huffington Post today: 

The harsh reality that is being repressed is this: the Western world is
suffering a crisis of excessive indebtedness. Many governments are too
highly leveraged, as are many corporations. More importantly,
households are groaning under unprecedented debt burdens. Average
household sector debt has reached 141 per cent of disposable income in
the United States and 177 per cent in the United Kingdom. Worst of all
are the banks. Some of the best-known names in American and European
finance have balance sheets forty, sixty or even a hundred times the
size of their capital. Average U.S. investment bank leverage was above
25 to 1 at the end of 2008. Eurozone bank leverage was more than 30 to
1. British bank balance sheets are equal to a staggering 440 per cent
of gross domestic product. 

I discussed whether families facing so much debt should spend or save in this post from last night.

Michael Steele had a lot to overcome. One of his opponents, the sitting GOP Chair from South Carolina, had just resigned from an all white country club and admitted that he became a Republican in reaction to his personal experience with desegregation. Another opponent, Chip Saltsman, sent out a wildly racist CD to RNC Members which included the now infamous Magic Negro and Star Spanglish Banner songs. Saltsman was so battered by his out-of-touch comments that he withdrew from the race before the balloting began. But Katon Dawson, the SC Chair, went all the way to the final ballot before losing to Steele.

What a stark choice this was for the Republicans: an avowed disciple of the Southern Strategy era of racial politics vs. an African-American candidate from that awfully liberal, pretty far north state of Maryland. That Steele won, defeating Saltsman and Dawson, is a hopeful sign that the GOP has begun to confront its shameful exploitation of race as a national political strategy over the past 44 years. But the road back to power for the Party Mr. Steele has chosen to lead is a hard one. As I recently wrote:

Their recent success as a national Party was built on an approach towards race that spoke to a different racial reality in America, an American one where could get away with magic negro songs, and much much worse of course. But that America - a white/black, majority/minority America - is now an historic relic, and is in the process of being replaced by an America that has 3 times as many minorities as it did just 44 years ago, and is on track to be majority minority by 2042 (for more on this historic demographic transformation see here). But for many in the GOP, including ones who might become their Chairman, they know no other politics than this Southern Strategy era politics, a politics that has been rejected once and for all by the American people of today's America.

It is important that the leaders of the GOP have begun to confront its shameful racial past. But their problem has no simple or easy fix. It will require a complete refashioning of their politics around a very different set of 21st century demographics and a much more tolerant understanding of race in America - and a complete and utter repudiation of much of their domestic agenda for the past half century. Which is major reason why I think their road back is such a long one - many of their leaders came to power by becoming expert in this kind of politics; it is the core play in their playbook; it is the foundation of their domestic agenda; and they know little else. Their old Southern Strategy dogs aren't going to learn new tricks - for the GOP they will have to slowly, over time, replace their anachronistic leaders with ones schooled in the modern governing challenges, modern media and technology and modern demography of our day. The process of watching this generational replacement take place will be one of the most interesting political stories of the next 10-20 years, and of course has become all the more necessary in the age of Obama.

Recall that one of Mr. Steele's predecessors as RNC Chairman, Senator Mel Martinez of Florida, resigned in 2007 after less than a year on the job because of the lingering intolerance of the Party of Saltsman, Tancredo, Limbaugh and Dawson. So these tensions in the GOP - and the nation - will continue to play out for some time as old attitudes and people give way to new racial attitudes and a new America.

Just yesterday, Mr. Steele showed how hard this adjustment would be for the GOP. As Huffington Post's Sam Stein reported, Steele was asked on Fox News whether the GOP's position on immigration had alienated the Latino vote for a generation. His answer? No, of course. Hispanics really agree with our position calling for continued exploitation and demonization of Hispanics, but we just didn't message it very well. Score one for the nativists.

So, all in all, Mr. Steele's election is a hopeful sign for the GOP and the nation. His Party not only chose a new path in electing him their new Chair, they rejected candidates who would have sent a very bad signal about the values of the GOP in this new age of Obama. But as we saw with the irresponsible House stimulus vote last week, old ways die hard, and the choice of Steele alone does not a new Party make.