The leaders of the Republican Party, reeling from their painful string of defeats, seem stuck in two of the classic stages of grief, denial and anger. This week, Rush Limbaugh replaced Bobby Jindal as the leading and most colorful example. Limbaugh may seem like too easy a target, since talk radio always tends toward hyperbole. Nonetheless, the essence of the message from the presumptively addled Mr. Limbaugh is that Americans would be better off if the President’s economy program failed. Even if their homes slip into foreclosure and their kids have to drop out of college, American families would at least escape the degradations of “socialism” or, as another popular conservative pundit put it, “left fascism” (that’s from the hard-right blogger and historian, Ron Radosh).
The rhetorical excesses of talk radio and the Web would hardly be noteworthy, if the same strain of non-thinking didn’t also dominate the Republican Party’s current economic positions. Let’s set the stage: of the three natural sources of demand in a market economy, consumers have stopped spending, businesses have stopped investing, and exports have fallen off the proverbial cliff. That leaves government stimulus as the only possible source of new demand to at least slow the accelerating downward momentum of the economy and most of the people in it. Perhaps the best explanation, then, for why every Republican in the House and all but three GOP senators voted “no!” on the President’s stimulus is, well, denial and anger.
To be sure, economic ideology almost certainly plays a role here, too, on top of their denial (about the consequences) and anger (about no longer calling the shots). This came through vividly at a conference I attended earlier this week for the National Chamber Foundation. My panel was asked to talk about whether the Administration’s plans foreshadowed a permanent change in the relationship between the public and private sectors. Set aside the fact that the leaders of the central private institutions in this drama, big finance, have begged Washington to amend that relationship long enough to preserve their jobs and the assets of their bond holders.
At the panel, a well-turned-out executive from a major private equity company (and former Bush Treasury official) laid out what once could have been the reasonable conservative position -- stimulus weighted to tax cuts, a banking rescue that avoids taking over anybody (or dictating anybody’s compensation), and tax-based measures to reduce foreclosures. As a matter of economics, he got his targets right, even if his approaches are weaker than those favored by the Administration. But at least his response suggested that he wants the economy to recover, regardless of who gets the credit.
Not so from the other member of the panel, Brian Westbury, who on top of being an economist with a Midwestern financial advisory is also the economics editor of the American Spectator and a frequent writer for the Wall Street Journal. He provided an economic-cum-ideological gloss for the denial and anger expressed by the flamboyantly-frustrated Mr. Limbaugh. Westbury’s prescription was no stimulus, no banking rescue and no program for foreclosures. The only constructive government action he could imagine was to jettison current “mark-to-market” rules. Those rules say that the balance sheets of banks and public companies have to reflect the actual market value of their assets and liabilities. So, for example, when a mortgage-backed security goes bust, you have to write down its value while preserving the liability of the money borrowed to purchase it and still owed.
In this view, none of what seems so important to the rest of us -- collapsing demand, investment and trade, huge job losses, rising bankruptcies -- matters for government policy. The only thing Washington should do here is to change how the financial losses from these events are reported. This isn’t economics; it’s a prescription that follows from a hard-edged ideological view that government can do nothing of value for an economy, regardless of conditions.
Unhappily, this cramped understanding isn’t limited to the pages of the American Spectator and the Wall Street Journal op-ed page. Bobby Jindal put the Republican Party on record for much the same view in his awkward response to the President’s address to Congress. He even cited the colossal inadequacies of the Bush Administration’s response to Katrina as proof that the private sector is always the best answer to any problem or catastrophe -- even if it’s under water at the time.
I honestly can’t believe that they’re really so dull-witted. A better explanation for Jindal and Limbaugh, along with commentators like Westbury and Radosh, is that they’re still grappling with the grief of losing the support of the American people -- and the power that came with it. They’re stuck in denial and anger. And that’s a very bad position from which to consider the best policies for a nation and world economy in crisis.
Across the upper five percent of America, there's some sense that this Great Recession, as NDN's Dr. Robert Shapiro labeled it in December, just isn't really that bad. Sure, stocks are taking a hit and the financial sector is hurting, but we've been there before. In the New York Times, David Leonhardt lays out how bad this Great Recession really is, and who it has hurt the most, to this point.
What does the worst recession in a generation look like?
It is both deep and broad. Every state in the country, with the exception of a band stretching from the Dakotas down to Texas, is now shedding jobs at a rapid pace. And even that band has recently begun to suffer, because of the sharp fall in both oil and crop prices.
Unlike the last two recessions — earlier this decade and in the early 1990s — this one is causing much more job loss among the less educated than among college graduates. Those earlier recessions introduced the country to the concept of mass white-collar layoffs. The brunt of the layoffs in this recession is falling on construction workers, hotel workers, retail workers and others without a four-year degree.
The Great Recession of 2008 (and beyond) is hurting men more than women. It is hurting homeowners and investors more than renters or retirees who rely on Social Security checks. It is hurting Latinos more than any other ethnic group.
Leonhardt tells us that could all soon change:
You often hear that recessions exact the biggest price on the most vulnerable workers. And that’s true about this recession, at least for the moment. But it isn't the whole story. Just look at Wall Street, where a generation-long bubble seems to lose a bit more air every day.
In the long run, this Great Recession may end up afflicting the comfortable more than the afflicted.
He points out that the collapse of the financial sector will hurt the wealthy and ultimately lead to a smaller Wall Street. (The same dynamic will ultimately help young families, allowing them to buy into the financial and housing markets at the bottom.) Government policy will reduce inequality. And, most importantly for expanding the economic pie, the nation's unemployed will turn to education, if they can. Community colleges are already feeling budget crunches across the country, especially in the areas where they’re most needed.
There seems to be, amongst conservatives in Congress and the Rick Santellis of the world, a sense that the Great Recession just isn't that bad. They shout "Moral Hazard" as we try and stabilize the housing market, and they cry about deficits that didn't matter to them when the last Administration launch an optional war and ideological tax cuts. But Leonhardt tells us that they're about to start feeling it.
And, even if they aren't big fans of some of the President's plans, let's hope they can work with him to do the one thing we know will grow the economy for everyone in the long term – build a 21st century education system to create the workforce for the next great expansion.
On February 19, NDN convened a public forum that made the case for why Congress should pass Comprehensive Immigration Reform this year. Joining NDN 's Simon Rosenberg were Rick Johnson ofLake Research, Pete Brodnitz of Benenson Strategy Group, Janet Murguia of the National Council of La Raza (NCLR), and Frank Sharry of America's Voice.
It was a powerful event. For those of you who were unable to watch the video live, or review the compelling package of data and presentations that were part of the event, I encourage you to visit:
"Immigration08: National Survey and Swing District Polling on Immigration,"
Lake Research Partners,11/13/08
Polling sponsored by America's Voice and Immigraiton08 found - yet again - that a large majority of voters broadly support Comprehensive Immigration Reform. The data here demonstrates how voters understand that common sense solutions that help the economy and fix the broken immigration system are a win-win.
"Attitudes Towards Immigration Reform in Swing Districts,"
Benenson Strategy Group, Updated: 1/27/09
This polling performed in congressional swing districts found that support of a comprehensive approach to immigration reform both increases a candidate's ballot support and improves the public perception of him or her on key qualities and attributes. It's telling that candidates associated with support for comprehensive reform were perceived more favorably than candidates supporting enforcement-only.
"NDN Statewide Polls on Immigration,"
NDN and Bendixen & Associates, 9/10/2008
Similar to the polling done in swing districts, this poll conducted in four battleground states - CO, NM, NV, and FL- found overwhelming support for comprehensive immigration reform. The data here also shows that while the anti-immigrant minority may be loud, it remains a very small minority, with most voters blaming the U.S. government for the broken immigration system - not the undocumented immigrants.
Taken together, these presentations and reports are essential reading for anyone working on this issue.
We cannot forget that we also have a moral imperative to pass national immigration reform. Click here to read more about the perfect storm that is being fostered by the consistent immigration debate at local and state levels, leading to dramatic increases in the number of hate crimes and hate groups.
President Obama's Weekly YouTube address today focuses on the budget outline he released earlier this week. In breaking down the various elements of his budget, Obama explains how the specifics correspond to commitment to change he made on the campaign trail.
The most memorable line comes after he discusses the changes from the Washington status quo that his budget represents:
I know these steps won’t sit well with the special interests and lobbyists who are invested in the old way of doing business, and I know they’re gearing up for a fight as we speak. My message to them is this:
So am I.
Take a look at the whole address:
This very much feels like the President is governing with the large mandate he won on election day, and rightly so. It's amazing to think how much there is to do, after so much of this - energy, infrastructure, healthcare - has gone undone for the last 8 years or longer.
Today, MSNBC featured a story on the growth in hate groups and increas in hate crimes. Since the year 2000, the number of hate groups has increased by 54%, adding up to 926 such groups across the country. The Southern Poverty Law Center (SPLC) contends that this growth is due almost entirely to the exploitation of the immigration issue by these groups. Statistics show that these groups are mainly targeting Latinos. The piece states that the combination of an economic crisis, a rapidly changing demography (it is estimated that by 2042 most of the U.S. population will be of a "minority", and this will happen by 2023 among 18-year olds), and the first black President have served to stir the storm of hate crimes and hate groups - a storm that "only knowledge and understanding" can eliminate. Let's hope this small percentage of our population starts becoming more informed, and more accepting of the demographic reality of 21st century America. See the video, with coments by John Amaya from MALDEF and the SPLC, dedicated to tracking such groups.
With news today that last year's fourth quarter was even worse than expected, take a look at some of NDN's lastest and important thinking on the economy, from thoughts on the President's budget and housing, and financial stability plans to visions for creating a 21st century economy:
The Economic Logic in President Obama's Speech to Congress by Dr. Robert Shapiro, 2/27/2009 - Shapiro breaks down President Obama's address to Congress, pointing out that the underlying logic of the President's agenda springs from the fierce new challenges Americans face under globalization to their jobs and incomes.
Financial Stability: Plan Z by Michael Moynihan 2/23/2009 - Moynihan lays out a plan of last resort for financial stability, noting that it might not be pretty, but it could be necessary.
Spend? Save? The debate continues by Simon Rosenberg, 2/11/2009 - Building on a previous post, Rosenberg follows the growing debate about whether American families should be focusing on saving.
The Utter Bankruptcy of Today's Republican Party by Simon Rosenberg, 1/28/09 - Rosenberg argues that Republican opposition to the economic recovery package represents the ideological bankruptcy of the party.
A Stimulus for the Long Run by Simon Rosenberg and Dr. Robert Shapiro, 11/14/2008 – This important essay lays out the now widely agreed-upon argument that the upcoming economic stimulus package must include investments in the basic elements of growth for the next decade, including elements that create a low-carbon, energy-efficient economy.
Back to Basics: The Treasury Plan Won't Work by Dr. Robert Shapiro, 9/24/2008 - As the financial crisis unfolded and the Bush Administration offered its response, Shapiro argued that, while major action was needed, the Treasury's plan would be ineffective.
Keep People in Their Homes by Simon Rosenberg and Dr. Robert Shapiro, 9/23/2008 – At the beginning of the financial collapse, NDN offered this narrative-shaping essay and campaign on the economic need to stabilize the housing market.
President Barack Obama's superb address Tuesday night had an underlying, unifying logic which some may have missed, but which hopefully those reading this will recognize.
First, on the financial and economic crisis, he embraced the three basic steps we have urged since last September: on top of a stimulus aimed at long-term investments and helping the states – that’s now done – there will be new requirements that banks getting help from taxpayers use that assistance to expand their lending, and new steps to keep people in their homes and bring down foreclosure rates. It’s just economic common sense – but that’s precisely what most of official Washington casually casts aside in favor of scoring short-term, political points. (Take a look at Gov. Bobby Jindal’s empty and sneering response to the President’s speech. His repeated citing of Katrina as a model for government action, by itself, should be a career-ending act).
The President also laid out a domestic agenda for the rest of his first term, and it looks like the most sweeping since FDR and LBJ. I suppose that personal blogs, by definition, are no place for humility, so here it is straight. The three cornerstone Obama initiatives -- slow down our fast-rising health care costs, expand energy conservation and our use of alternative fuels, and give everybody new chances to upgrade their working skills -- are the exact prescription laid out more than a year ago in my book, Futurecast: How Superpowers, Populations and Globalization Will Change the Way You Live and Work. It’s also been a regular theme of this blog and a series of papers issued by NDN.
Here, too, it’s just economic common sense, for a world being transformed by globalization. The underlying logic of the President’s program springs from the fierce new challenges Americans face under globalization to their jobs and incomes. Globalization has made competition much stronger, and that competition leaves American businesses and their workers in a bind. Their costs have been rising very fast, especially for health care and energy, but intense global competition makes it harder for companies to raise their prices to cover these rising costs. The result is that the wages of most American stopped rising since about 2002, even as they became more productive. And most can’t find higher wages by getting new jobs, because before the current crisis began, the same forces had made this period the weakest for job creation since World War II.
The President understands that coming out of the current crisis isn’t enough, if we just return to another period of growth without wage gains or healthy job creation. He also understands another theme of Futurecast and NDN's work, namely that about half of Americans also need new skills if they aspire to jobs with a real future. That’s the basis for the third plank of the domestic agenda he laid out last night -- genuine, new access for young people to go to college or receive other, post-secondary training, and new opportunities for everyone else to upgrade their skills.
President Obama’s first speech to Congress already ranks as the most serious and thoughtful presidential address on the economy in decades. Perhaps it took an historic crisis to break through the political cant and mental laziness that has gripped our economic agenda for so long. But the President is using this moment to put forward not only meaningful answers for the crisis, but serious, long-term remedies for much deeper economic problems which other politicians routinely ignore. That’s presidential leadership of the sort we haven’t seen since, well, FDR.
I. "Making the Case for Passage of Comprehensive Immigration Reform This Year" - And our message is going global. NDN, America's Voice, NCLR, and experts from Lake Research Partners and Benenson Strategy Group teamed up last week to articulate the arguments as to why President Barack Obama and Congress need to pass immigration reform legislation (CIR)this year. Reporters from around the world were able to participate in our event via live webcast, and a prominent Mexican periodical, El Financiero, coveredour event. Click hereto check out the speakers' presentations. The full video will be on our blog this Wednesday.
II. The Deportation Era - There was ample news coverage over the week of the report published by the Migration Policy Center, demonstrating that after seeing its budget soar to $218 million last year, the federal program responsible for tracking down and finding "criminal aliens" yielded 72,000 arrests, 73% of which had no criminal record. The New York Times published an Editorialthis weekend on this pervasive inefficiency (and racial overtones) in enforcement:
Of all the noncitizen Latinos sentenced last year, the vast majority - 81 percent - were convicted for unlawfully entering or remaining in the country, neither of which is a criminal offense. The country is filling the federal courts and prisons with nonviolent offenders. It is diverting immense law-enforcement resources from pursuing serious criminals - violent thugs, financial scammers - to an immense, self-defeating campaign to hunt down ... workers.
III. Speaking of Enforcement Gone Bad - This Times Editorial also mentions the issue of severely overburdened immigration judges. As it stands, judges simply are not equipped to properly deal with this "immigration crackdown" and inaction with respect to the rest of the broken immigration system, as reportedby Jennifer Ludden.
As it stands, racial profiling is apparently encouraged as a part of "enforcement." One law proposed in Montana would apparently encourage average citizens to file claims against employers they "believed" were employing undocumenteds. Here in the D.C. area - in Baltimore - a group of ICE officers who were behind their "mandated" quotas of arrests thought it would be ok to just scout a 7-11 for Hispanics and call it a day:
New Tools and Bad Enforcement - In case you hadn't seen this, Texas sheriffs have erected a series of surveillance cameras along the Rio Grande and connected them to the Internet so that your average Joe can be a "virtual Deputy." John Burnett reports on NPR:
Thousands of people are now virtual Border Patrol agents - and they're on the lookout for drug smugglers and illegal immigrants.....Robert Fahrenkamp, a truck driver in South Texas, is one of them. After a long haul behind the wheel of a Peterbilt tractor-trailer, he comes home, sets his 6-foot-6-inch, 250-pound frame in front of his computer, pops a Red Bull, turns on some Black Sabbath or Steppenwolf, logs in to www.blueservo.net - and starts protecting his country. "This gives me a little edge feeling," Fahrenkamp says, "like I'm doing something for law enforcement as well as for our own country."
With hate crimes already rising against Hispanics at record levels, this "program" really does not help bring communities together to solve crime, or anything else. It is to be expected that this site will invite extremists to participate in virtual man-hunts. The people logging in are no "border agents," they undergo no background or criminal check, no psychological profile exams, no training. And to top it off, the website provides no detailed or intelligent information. A typical description of "what to watch for," includes: "During the day watch for subjects on foot carrying large bags. During the night time hours watch for activity involving lights." This is no description of drug traffickers, it could be a Mexican just coming home from visiting family, or crossing illegally, but let's not hide his program behind the guise of "fighting border crime". Let's call a spade a spade - this is a case of Texas sheriffs wanting help in keeping the "illegals" out, not criminals. If the intent were to keep criminal activity away, then we should begin by re-visiting Texas gun laws, the laws that allow guns to flood into Mexico and play a role in all that "border crime."
The New Political Economy of Immigration - In this interesting piece written by Tom Barry of the Americas Program, Center for International Policy (CIP), he analyzes the political and economic reasons behind the change in the narrative on immigrants and immigration since September 11. First, by being depicted as more "dangerous," second, by discussing immigration in a vacuum, rather than addressing it as the complex socio-economic issue that it is, there are market forces that have become invigorated due to the immigrant "crackdown," and he argues they have "given rise to an unregulated complex of jails, detention centers, and prisons that create profit from the immigrant crackdown."
IV. Gallup Briefing focuses on Mexico - Click hereto review Gallup's latest analysis of escalating violence in Mexico related to the drug trade and public opinion.
V. The Real Economics of Immigration Reform - Workers are workers, are workers. In case you missed it, check outthis piece by Cristina Jimenez, which breaks down the "bottom line" on how the economics of immigration should reframe the debate on the policy in this area.
VI. Obama Continues to Reach out to Hispanics - During thisinterview with El Piolin, the radio show with the most audience nationally, Obama explained his economic policy to Spanish-speaking listeners, and reiterated his commitment on other fronts, such as immigrationreform.
VII. Watch out for the Wolf in Sheep's Clothing - If you look at the Center for Immigration Studies (CIS) "Morning News," it looks pretty harmless, just a series of clips from major newspapers. Is it intended to throw off those people who don't happen to know that it is a member of the hate network founded by John Tanton?
VIII. Census Offers a Look at the Make-up of the Nation's Immigrants - ThisNew York Times piece by Sam Roberts provides a broad overview of the Census findings released last week.
IX. It's All About Juan - If you've ever wondered why immigration advocates work so tirelessly on this difficult issue, just look at Juan. No, not a "Juan Perez" a real Juan - Juan is a Georgetown University student who deserves CIR. Read his story, featured in the Washington Post.
New York City - In the two weeks since floating by Treasury of a financial stability plan, markets have fallen almost every day, culminating in new lows on Friday that have wiped virtually all the gains of the last expansion. Hardest hit have been bank stocks which on Friday plumbed new depths. Over the weekend, the New York Timesendorsed bank nationalization and Citi evidently approached the government about more aid. Besides the banks, the big losers are the American middle class who placed their nest eggs in the stock market. The financial stability plan has unsettled markets because uncertainty exists over whether it will work. In the spirit of thinking creatively about difficult problems, here is plan Z.
First, a brief recap. Plan A was the Super SIV, a fund to be created by the banks themselves that fell apart over sharing the cost. Plan B was for the Fed to extend its lending in unconventional ways. Plan C was to seize problem institutions such as Freddie and Fannie. Plan D was selling faltering banks to strong ones as in the forced sale of Bear to Chase. Plan E was let the market decide as in allowing Lehman to fall. Plan F was to rescue AIG or one off rescues. Plan G was to extend Fed credit to banks. Plan H was the TARP to buy up all the troubled assets, which fell apart over pricing the assets. Plan I, which was carried out, was to inject capital into the banks to shore up their solvency. Plan J was to announce that the TARP would not be used to buy up assets. Plan K was to imply that the government would be ready to bail out any troubled institution. With many wrinkles in between we get to the two current plans, the Treasury plan and bank nationalization.
The Treasury plan calls for creating a public private partnership to buy up the toxic waste. The private participation is needed because Congress is not inclined to appropriate the one or two trillions needed to buy the troubled assets and recapitalize the banks. The question is whether the private investors will step up to the plate. Nationalization, the other proposal, would give the government a freer hand in sorting assets into good and bad. It would not necessarily cost less assuming the government honors the debts of the banks, however. And it comes with negatives, the shock of nationalization, cost to common shareowners and the prospect of state ownership of risk taking institutions. So what to do.
Here is Plan Z.
There is one player left in the world with a lot of buying power. The Federal Reserve. As Congress sweated the details last year of the $700 billion TARP, the Fed was guaranteeing and lending larger sums against unconventional collateral including commercial paper and mortgage-backed paper through the TAF, TSLF, MMIFF, TPLF and similar programs. This underscores the fact that the Fed is comparatively unconstrained by politics.
The Fed, like other banks, has a balance sheet. In normal times its assets consist of very high quality stuff, including gold, deposits at the IMF, and cash. In the last year, it has doubled its balance sheet by adding unconventional things. Wouldn't it be worth adding another trillion to solve this crisis once and for all?
Let the Fed issue fully guaranteed credits to the banks in exchange for their troubled assets. For clarity, the trouble assets should go into a separate tank, shares of which the Fed would hold. This instantly makes the banks sound as a pound (forgive the metaphor). The Fed ends up with a lot of troubled assets that may be worth from 10 cents to 90 cents on the dollar. Time will tell. But the point is, this simple stroke would allow the banks to resume lending with confidence. And it would transfer risk to the one party in our financial system best able to handle it.
The downside is that the Fed is the one party that you don't want to take risk under ordinary circumstances. Make no mistake, while being in effect an accounting entry at the Fed, this would be one huge entry, increasing its balance sheet by about 50%. So the next question is how to minimize the risk to the Fed.
Once sequestered within the Fed, the trillion or more of bad assets could be gradually sold off to investors, (not to banks) and any shortfall between the face value and the market (which should eventually recover) be paid for by appropriations as insured by a government guaranty. However, rather than requiring the taxpayer to put up 1 trillion at once, plan Z would retire the shortfall over time, perhaps over ten years of annual appropriations.
This plan, by the way, is not that different from the one used by China a decade ago to escape a raft of bank failures.
Since these toxic assets happen to be exotic mortgages, the final way to reduce the ultimate losses would be to refinance them with a 4% government guaranteed mortgage or, at a minimum, standard fixed rate Fannie Mae mortgages now going for about 5-6%. This would have the benefit of ending the uncertainty over exotic mortgage resets and freeing up demand in the economy.
It's not the first thing one would try. But by addressing the problem in one fell swoop it may beat all others.
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