Repudiating the Bush Era

Michael Mandel (h/t to Mark Thoma) writes:

Over the past ten years, the S&P 500 is down 50% adjusted for inflation (February 17, 1999 to February 17, 2009). By my calculation, the stock market was down roughly 50%, adjusted for inflation, in the worst ten years of the Great Depression (September 1929 to September 1939).

When you add in the fact that real wages were stagnant over the past ten years and debt soared, I think we will look back at the last ten years as a decade of despair. As an optimist, I'm going to bet on the next ten years as being better. Any takers?

It may take a while to fully deconstruct just how bad the Bush years were, but this is probably an accurate prognosis - pretty bad. Notably, NDN has been making the case about stagnating wages as part of the Bush economic record for years now. Two lost decades in a row would be nothing short of a disaster. Let's hope Mandel's hope isn't misplaced.

New York City - Last fall, I wrote about an obscure accounting rule contributing to the financial crisis.  Trillions of dollars in taxpayer outlays and guarantees later, it is time to revist the subject. 

Since the financial crisis began last year, many commentators have pointed to an obscure accounting rule as playing a major role in the the crisis. Called mark to market accounting, the rule requires public firms to reprice their assets every quarter, and in the event of a decline, take a huge paper loss. 

Supporters--principally accountants and advocates of shareholder rights--defend the rule on the free market principle of transparency.  Opponents who include many in Congress, say forced writedowns on illiquid assets to fire sale prices for the last year is illogical and has led not only to the losses booked by large financial insitutions in the last year, but also to the need for billions in taxpayer bailouts. 

Mark to market is not controversial for easily priced assets such as those traded on exchanges.  However, in 2007, the FASB which writes these rules issued a modification known as FAS 157, which instructed firms to begin repricing so-called Level 3 assets--those which by definition are extremely hard to value.  That change took effect last year and has helped drive many of the paper losses that have roiled the economy.

For banks, venture capital funds, hedge funds and others that hold illiquid investments like stakes in Internet companies and untraded derivatives, mark to "make believe", as it is known is not easy. How, after all, do you value an investment in an Internet company that has yet to turn a profit (think YouTube before its sale to Google), or a mortgage backed derivative when buyers disappear.  The answer, more often than not, is an arbitrary guess.

A valid criticism of all mark to market for untraded assets is that it's pro-cyclical, promoting exuberance in good times and fear in bad ones.  Enron officials loved mark to market in the year 2000, as I wrote last year, because it let them report paper profits as they marked up their portfolio, inflating their stock price.  During the real estate bubble a few years ago, mark to market also fueled the upward trend.

Falling markets, however, exaggerate losses on the downside.  In the last year, the rule has forced holders of illiquid assets--those firms whose names have been in the news--to take huge losses on paper that the government has had to staunch with real funds from the TARP supplied by taxpayers.  Today, fear of mark to markdowns lies behind uncertainty that continues to block the flow of credit through the economy.

While the SEC oversees accounting standards, it has traditionally outsourced them to the Financial Accounting Standards Board or FASB.  Bush SEC Chairman Cox was especially loathe to tackle the issue.  The Obama team may be more open to action on this issue that has reportedly been a hot topic of debate in the White House. 

The reason is that escaping mark to market may be a requirement of the Geithner plan to entice private investors to buy up troubled assets.  Markdown risk is a disincentive to private investors even going into the deal proposed by Secretary Geithner, let alone paying a reasonable price for assets. 

The government could offer investors in distressed assets a special deal.  However, that would raise the question of fairness.  One approach would be to extend a guaranty to distressed assets for those who buy them from current owners.  However, this raises the question, why should taxpayers foot the bill for a trillion dollar guaranty that could have been reduced or eliminated with a press release from the SEC modifying a rule that only took effect last year.  (Practically speaking, tweaking the rule would involve a clarification from the SEC to explicitly prevent revaluations of illiquid securities. 

It also raises the broader question, given the trillions of losses the taxpayer has borne and is now facing--and the collapse of faith in markets around the world that may alter our relationship with markets for a generation--whether defending an obscure rule that didn't even exist until 2007, is worth the spectacular cost.  Shareholder rights advocates may be missing the forest for a tree.

Changing treatment of illiquid assets might also give the Administration breathing room to implement its plan.  The rule in question introduced only in 2007 at the height of market fundamentalism is hardly an American tradition.  It is time to deal with this issue.

The U.S. Senate’s “Dr. No,” Republican Judd Gregg of New Hampshire, best captured the need for political leadership in this time of crisis in accepting his nomination by President Barack Obama to be U.S. Secretary of Commerce: "Now is not the time for partisanship. Now is not the time to stand in our ideological corners and shout at each other. Now is the time to govern and govern well."

Unfortunately, many in Congress, including much of the leadership of both parties, still don't understand that the United States has entered a new civic political era, demanding new rules of behavior in response to our dire economic circumstances. Even as President Obama expresses the "fierce urgency of now," pointing out that if government does not act soon and vigorously it "will turn a crisis into a catastrophe," Congress still seems unable to put aside the ideological arguments and constant efforts to win partisan advantage that characterized American politics in the era the country has just left.

Congressional Republicans seem to believe that the economy can only be revitalized by tax cuts while Democrats say that only vast federal spending, some of it on the pet projects of Members, will produce economic recovery. As demonstrated by the recent House vote on final passage of the economic recovery bill, in which virtually all Democrats voted against all Republicans, working across party lines remains an elusive dream. Republican Members of Congress seem intent on following the strategy from their ideological battles with President Bill Clinton a decade ago in which the goal was to enforce party discipline in the hope that the President and his party would fail and Republicans could blame the Democrats in the next election. But with the stakes as high as they are now, the GOP should instead be listening to the author of that earlier strategy, Newt Gingrich, who has publicly made it clear that the country cannot afford for Obama’s economic recovery plan to fail.

Meanwhile, Democrats need to learn some new rules of behavior as well. While NDN's Globalization Initiative Chair Dr. Rob Shapiro has correctly noted that the recovery package now before the Senate contains only the "normal quotient of special interest subsidies on both the spending and tax sides -- think of it as a 'congressional tax,'" -- these clearly aren’t normal times. It may be true that, as Rob says, "they really can’t help themselves." But like others recovering from an addiction, Democrats will have to at least try to change their approach to building legislative consensus in this new era, one step at a time. 

The American public clearly sees the distinction between Congress' approach and that of President Obama. A Pollster.com compendium of national surveys indicates that 70 percent of Americans have a favorable opinion of President Obama and 63 percent approve of his performance. By contrast, only 17 percent approve of the job Congress is doing, while 78 percent disapprove. More to the point, in a recent Rasmussen Reports survey, a plurality (42 percent) perceives Obama to be governing in a bipartisan manner. By contrast, only half that number believes the same of both congressional Democrats and Republicans (22 percent each).

Of course, there is a way out. Unlike the social issues that dominated American politics during much of the last four decades, the economic and fiscal issues that are the current focus can be bridged with a non-ideological, post-partisan, and pragmatic approach recognizing that each side may have something to offer. If properly targeted, the tax cuts advocated by Republicans should be useful. If aimed at the right mix of projects, the Democratic spending proposals should help the economy in the short run and provide the conditions for growth in the long run. Keeping people in their homes, as both parties seem to advocate, will help families, neighborhoods, and society.

In short, as Rob Shapiro points out the recovery package can be "a useful first step, and one for which NDN has long argued."

Unlike their legislative representatives, the public has moved on from the cultural wars of the last decade. In a late January Pew survey, more than eight in 10 named the economy (85 percent and jobs (82 percent) as top policy priorities for the federal government, significantly above the numbers saying this about any other issue. In a January Wall Street Journal/NBC News poll, only seven percent cited “social issues” as an area on which government should focus compared to 21 percent who cited such cultural issues a decade ago. Paul Helmke, The Republican former mayor of Fort Wayne, Indiana, summed up the historical nature of the shift, telling Naftali Bendavid of the Wall Street Journal, that in a time of war and financial crisis, "people tend to focus on pragmatic issues rather than what the framers meant in 1789."

Throughout our history, major transformations or civic realignments have occurred at a time of intense national crisis that threatens the viability or even existence of the Republic. One such crisis occurred in the mid-19th century when the nation, led by Abraham Lincoln, overcame secession and a civil war to preserve the Union and end the moral blight of slavery. Another took place in the 1930s as America, spurred by Franklin D. Roosevelt, created the governmental institutions that allowed it to overcome the greatest economic downturn in its history and later to overcome the threats of fascism and communism.

The makeovers stemming from these crises change almost everything about U.S. government and politics -- voting alignments, public policy, and the rules by which politicians are expected to act and are judged by the American people (as we recently wrote in our essay, New Rules for a New Era). In the idealist periods before these civic realignments political figures more often than not act as moralists bent on the uncompromising advancement of ideological positions across virtually every policy concern--economic, international, and cultural -- and, more often than not, the public applauds and rewards this behavior. But, after civic realignments, faced with overwhelming and severely threatening crisis, the behavioral expectations and evaluative standards of politicians are altered. The public wants politicians to work across party and institutional lines on a non-ideological basis to produce pragmatic policies that deal with the crisis facing the nation. It's time for the House and Senate to follow the lead of President Obama and the American people and adopt new rules for a new era.

NDN has been writing and talking about the state of the conservative movement and the deterioration of the Republican Party for many years. With the House's passage of the stimulus bill without a single GOP vote this week, and today's RNC Chair election that will decide the GOP's future path, we would like to highlight some of our writings on the state of the modern conservative movement and the end of the conservative ascendancy.

• The Utter Bankruptcy of Today’s Republican Party, Simon Rosenberg, 1/29/09
  The Republican Party is neither honest nor competent, and is running out of chances to play a constructive role in our government.

• The GOP and Magic Negroes, Simon Rosenberg, 12/30/08
  The song “Barack the Magic Negro,” promoted by RNC chair candidate Chip Saltsman, is indicative of the troubles the Republican party finds itself in today.

• The Long Road Back, Simon Rosenberg, 11/18/08
  Barring major mistakes by the Democrats in the coming few years, Republicans are likely looking at a very long road back to power. 

• On Obama, Race, and the End of the Southern Strategy, Simon Rosenberg, 1/4/08
  By looking to younger voters, minority voters, and Western voters, the Democratic Party can move beyond the southern strategy that, for so long, has been the only way Democrats knew how to win.

• Repudiating the Bush Era, Simon Rosenberg, 2/18/07
  Politics over the past several years has been driven by a widespread rejection of the disastrous Bush era.

• "The 50-year Strategy: A New Progressive Era," in Mother Jones, Simon Rosenberg, 11/1/07
  With a fresh argument and a strong, diverse coalition, the stage has been set for a lasting progressive majority. 

• The End of the Conservative Ascendancy, Simon Rosenberg, 11/12/06
  The forty-year era of conservative ascendancy is ending.

• A Day of Reckoning for the Conservative Movement, Simon Rosenberg, 11/7/06
  The 2006 elections marked the end of conservative ascendancy. These essays look at how this shift can be explained by historical trends, hard electoral data, and recent decisions made by leaders of both parties (more here and here).

Also, please check out this recent video about how "What Race Means in America Is Changing":

Within one week of taking office, President Obama has dispelled any doubts on whether he’s serious about tackling climate change. His stimulus plan will direct greater tax and spending subsidies to climate-friendly technologies and fuels over the next 18 months than the Bush administration did over the last eight years, and the federal government will offer itself as a model by bringing federal facilities up to the “Gold Leeds” energy-efficiency standard. Moreover, his EPA will let states that as yet are politically more climate-sensitive than Washington, including California and a dozen others, set more stringent CO2 emissions standards than the federal versions. And other climate-friendly laws and regulations are on their way, including higher federal fuel-efficiency standards for automobiles and trucks.

Sound as these steps generally are, they leave undone the hard work that climate scientists agree must be done – namely, to put in place a policy to embed the cost of carbon in the price of everything our businesses and households use, especially that electrical power which mostly still depends on the most carbon-intensive fuel we have, coal. And there’s a good reason why President Obama isn’t starting with this step, even though it’s the most important one: Making people pay more for carbon-intensive energy and the products and services produced with it means that, well, people have to pay more – and people don’t like that, especially in very hard economic times. And the inconvenient truth is, those are only the beginning of the costs to contain climate change, since retrofitting our factories, offices, homes and our power systems for less carbon-intensive and energy-intensive technologies and materials will cost everyone, well, a lot more than the stimulus package. To his credit, President Obama corrected one of his rivals for the nomination who tried to claim that we could beat climate change at little cost. And there is some other good news here: The costs to redo our lives around more climate-friendly fuels and technologies can be spread over two generations – and paying those costs will save much of planet for our grandchildren.

The current hard economic times hopefully will focus more of the climate change debate on how to contain those costs, both the direct costs to people and businesses and the indirect ones through the larger effects of these policies on the economy. And if we don’t figure that out, any systemic reform that doesn’t contain those costs may not survive long enough to make a difference. Here is where a real divide opens between the two main options for embedding the price of carbon, a cap-and-trade system and carbon-based taxes. On the direct costs, a tax-based system has the advantage: You can tax energy based on its carbon content, and then turn around and return the revenues to everybody through payroll tax cuts or simple disbursement to every household. Cap and trade could do something of the same thing by auctioning off its permits to generate greenhouse gases and then using those proceeds for tax cuts. But so far, every cap-and-trade plan either gives away its permits (businesses wouldn’t have it any other way) or uses the auction revenues to pay for other climate-friendly initiatives. In either case, cap-and-trade leaves everyone’s incomes lower, a pretty nasty outcome for most of us.

Another inconvenient truth here is that carbon-based taxes also have the advantage on indirect costs. The great asset of cap and trade is that it applies an actual cap to CO2 emissions. But whenever demand for the energy that produces those emissions is greater than had been expected when the cap was set – for example, because the summer is hotter than expected, the winter is colder, or the economy grows faster than anticipated – demand will hit the cap, and prices will spike for both the permits and the energy that underlies them. Adding a new layer of national price volatility in energy prices, on top of what we already have to bear from international forces, would be another nasty outcome.

Carbon-based taxes have their own problems. They don’t involve a set, annual cap on greenhouse gases, so keeping us on a safe emissions path would probably entail adjusting the level of the tax on a pretty regular basis. And the prospect of enacting a large, new tax and then choosing what offsetting taxes to cut could itself easily turn into a nasty piece of political business. It’s no wonder that President Obama isn’t eager to referee this fight. Of course, the public’s faith that of all of our national leaders, he alone is best equipped to drive and guide our responses to daunting challenges is also the main reason he’s the president today.

With debate over the recent vote in Congress on the State Children's Health Insurance Program (SCHIP) largely turning into a debate on immigration, we present much of NDN's key work on comprehensive immigration reform, the changing demographic realities of 21st century America and Hispanic electoral trends.

• The Star Spanglish Banner, Melissa Merz, January 29, 2009
• Weekly Immigration Update, and Outlook for 2009, Zuraya Tapia, January 2009
• Immigration Remains Top Priority for Hispanics, Evidence of Bipartisan Support, Zuraya Tapia, January 26, 2009
• What Race Means in America Is Changing, Simon Rosenberg, January 19, 2009
• Congress, SCHIP, and Immigration Reform, Simon Rosenberg, January 13, 2009
• The GOP and Magic Negros, Simon Rosenberg, December 30, 2008
• A New Coalition and a New Map, NDN Event, December 12, 2008
• The Economy and Immigration, DHS Targets "Engine of Our Economy", The Economy and Immigration Reform, 2008-2009
• What World Does the Republican Party Live In?,  Zuraya Tapia, December 12, 2008
• An Updated Analysis of the Hispanic Vote, 2008, Andres Ramirez, November 15, 2008
• New NDN Polls Find Overwhelming Public Support for Comprehensive Immigration Reform in Key Battleground States, September 10, 2008
• Words Have Consequences, Zuraya Tapia, August 7, 2008 and November 20, 2008
• Hispanics Rising II, May 30, 2008
• The 50-Year Strategy, Simon Rosenberg and Peter Leyden, Mother Jones, Winter 2007
• 1%, 62% and the Failure of Tancredoism,Simon Rosenberg, December 20, 2007
• Can Democrats Seize the Opportunity The Immigration Debate Offers Them, Simon Rosenberg, December 11, 2007
• Immigration, Once Again, Despite Huge GOP Investments, Does Not Perform for the GOP, Simon Rosenberg, November 7, 2007

Washington, D.C. - Today, Simon and Andres will address approximately 100 Latino organizers, community leaders, and individuals interested in increasing the civic participation of Latinos from approximately 20 different states. 

It is most fitting that Simon and Andres begin the day's program, reflecting on Latino vote in 2008.  NDN's most significant accomplishment has been our advocacy for what we have called the "new politics."  For years NDN has made the case that a new politics was emerging in America, driven by three major changes: 1) the emergence of a new governing agenda and priorities, 2) the emergence of a whole new media and technology construct that was fundamentally changing the way we communicate and advocate, and 3) the emergence of a new American people, one very different from the demographic makeup of the U.S. in previous decades.  As part of this third pillar of the new politics, NDN has made the case to progressives and those on the center-left that for us to succeed as a 21st century movement, we must involve Hispanics and encourage Latino participation in politics. 

This day-long event is intended to serve as one major step to ensure that Hispanics continue to build on the momentum built by their participation in the 2008 elections, and engage civically.  Panelists are experts in the areas of political organizing, media strategy, and advocacy.  Attendees are coming to this pre-Inauguration event from AZ, CA, CO, D.C., FL, GA, ID, IL, IN, MA, MD, NV, NJ, NY, OH, OR, PA, PR, TX, VA.

LATINO POLITICAL TRAINING DAY
Más que nuestro voto: The New Latino Movement

Saturday, January 17, 2009
8:30 a.m.-5:30 p.m.
National Council of La Raza Headquarters
Raul Yzaguirre Building, Washington, D.C.
1126 16th Street, NW, Washington, D.C.

Honorary Co-Hosts

Rep. Xavier Becerra & Rep. Linda Sanchez

Schedule & Speakers
8:30-9:30 a.m.  Registration. Continental breakfast. Activity on challenges facing the Latino community.

9:30 a.m. Official Opening & Welcome Remarks

9:35-10:35 a.m.  Reflection on 2008 Election

Simon Rosenberg, President of NDN
Andres Ramirez, Vice President for Hispanic Programs at NDN
Temo Figueroa, Obama campaign Latino Vote Director

10:35-11:35 a.m. Political Fundraising

Gabriela Lemus, Director of the Labor Council for Latin American Advancement
Regina Montoya, Poder PAC member, previous congressional candidate in 200, and previous chief executive of the New America Alliance

11:35 a.m.-12:35 p.m. Media Outreach

Estuardo Rodríguez, Raben Group
Fabiola Rodríguez-Ciampoli, Rep. Xavier Becerra Communications Director and former Hispanic Communications Director for Hillary Clinton's Presidential Campaign

12:35- 1:50 p.m. Lunch and Conversation with Latino Leaders

Moderator: Adolfo Gonzales, Ed.D., National City Police Chief
Mireya Falcon, Mayor, Achichilco, Hidalgo, Mexico
Delia Garcia, Kansas State Representative
Victor Ramirez, Maryland State Assembly
Emma Violand-Sanchez, Arlington County School Board

2:00-3:00 p.m. Advocacy/Lobbying

Sam Jammal, MALDEF
Larry Gonzalez, Raben Group
Alma Marquez, Green Dot Public Schools

3:00-4:00 p.m. Community Organizing
Introduction: Dario Collado, Harvard University Latino Leadership Initiative
Marshall Ganz, Harvard Professor and designer of "Camp Obama" organizing strategies for Barack Obama's presidential campaign.
Jeremy Byrd, former Ohio General Election Director, Barack Obama's Campaign for Change
Carlos Odio, Deputy Latino Vote Director, Obama for America

4:15-5:00 p.m. Regional Break out sessions

Participants will break into groups based on their geographic region to reflect on lessons learned during the course of the training, key issues to address, and next steps.

5:15 p.m. Closing Remarks

Melody Gonzales, New Latino Movement Committee Chair

Stephanie Valencia, Office of Public Liaison and Intergovernmental Affairs, Presidential Transition Team and Deputy Latino Vote Director, Obama for America

Friends, it has been a busy week for NDN's Hispanic Programs.  Today, NDN released a statement congratulating Sen. Rockefeller for introducing an amendment to the Children's Health Insurance Program that eliminates a five year wait for legal immigrant children to receive care.

You can check out Simon's thoughts on this debate on our blog. 

Additionally, in case you missed it, NDN issued a statement on Monday regarding President Calderon's visit, and we have begun a new feature on our blog - the Weekly Update on Immigration, which provides analysis of the week's most relevant news in the area of immigration in the U.S. and Mexico. 

Lastly, NDN will be participating in several events during the week of inauguration.   Andres and Simon will be sharing their insight into the demographic transformation of the United States and the role of the Latino electorate at the "Latino Political Training Day,"  being held for organizers and activist from over 20 different states in order to keep the momentum of Latino civic participation from the elections going.  Simon will also speak on Latinos and the Economy during the morning session of the Latino State of the Union event hosted by NCLR.  We hope you can join us at these important events. 

SATURDAY, JANUARY 17, 2009

MONDAY, JANUARY 19, 2009

In a special pre-Inaugural video, Simon reflects on the confluence of forces that led to the election of Barack Obama and the dawning of a new political era:

For more of NDN's thinking on these historic changes now taking place before our eyes, please see:

The Long Road Back - 11/18/08

Obama to Reinvent the Presidency - 11/7/08

More Evidence of a Sustained Progressive Revival - 8/15/08

Hispanics Rising, 2 - 5/30/08

$55 million and the emergence of "a virtuous cycle of participation" - 3/6/08

On Obama, Race, and the End of the Southern Strategy - 1/4/08

"The 50-Year Strategy" - Mother Jones, 10/30/07

"The Democratic Opportunity" - Politico, 4/11/07

The End of the Conservative Ascendancy - 11/12/06

A Day of Reckoning for the Conservative Movement - 11/7/06

Foreward to Crashing the Gate - 3/7/06

Thoughts on the Internet, Politics and Participation - 12/03