Bush / GOP

An Economic Program for the Fall Campaign and the Next Four Years

With the presidential election turning on the economy, the debate has focused on what’s right or wrong with the current recovery, and who’s responsible.  They agree that growth is too slow and deficits are too high; and unsurprisingly, President Obama blames the GOP for both while Mr. Romney blames the President.  The President’s arguments are stronger, especially given Romney’s risible claim that he can balance the budget and cut taxes another $5 trillion at the same time.  The larger point is that the high deficits and tepid expansion are legacies of the financial meltdown, and resolving them would only allow economic policy to finally move past 2008-2009.  The next stage of the economic debate, then, should focus on the two critical issues that have bedeviled middle-class Americans for more than a decade — namely, historically-slow jobs growth, and stagnating incomes.  

A presidential campaign can accommodate only a handful of big ideas.  Here, then, are three new policy initiatives to help reignite job creation and income gains:  1) reduce the cost of creating new jobs by reforming payroll taxes; 2) restore the foundation for middle-class wealth by stabilizing the housing market; and 3) enable everyone to become more productive by providing universal, low-cost access to college education and worker training. 

Tax reforms offer the best way to reduce the cost of creating new employment and keeping those already employed in their jobs.  The focus of such reforms is not the tax on corporate profits.  Yes, the corporate tax is an inefficient mess, but reforming it will do little for those looking for work.  The right target for job creation is the payroll tax, because it directly increases the labor costs of every employer.  The idea here is to stimulate job creation and employee retention by cutting the employer side of the payroll in half, and on a permanent basis.  And we can replace the revenues lost to Social Security with a carbon-based pollution tax. 

The second idea could help address slow job creation and the slow expansion, as well as widening inequality.  Employers have been creating relatively few new jobs not only because of the cost of doing so.  Employers also are not  confident about when Americans will begin to spend again like they used to, creating the demand for the goods and services which additional workers could produce.  The simplest way to boost demand is more budget stimulus – and good luck with that.  A more efficient way, however, is to remove any factors holding back normal consumer spending.  It’s not unemployment, with the jobless rate already down from 9.8 percent to 8.2 percent.  Rather, what continues to hold back tens of millions of consumers is the hard fact that the housing bust has left them substantially poorer.

So far, the bust has cost most homeowners one-third of the value of their homes.  This is a big deal economically, because home equity is the main form of wealth or saving held by most of the middle class.  Consider the following: The bottom 80 percent of Americans, measured by income, own just 7 percent of the value of the country’s financial assets – but they also hold 40 percent of the value of all residential real estate.  The sharp drop in housing values, therefore, wiped out most or all of the home equity built up by tens of millions of Americans.  Before most people begin spending again at the rate required to boost business investment and hiring, housing prices have to stabilize and begin to move up. 

 Washington spent more than $1 trillion to stabilize the financial markets, which generate most of the wealth of the top 1 percent to 20 percent of Americans.  For much less, we can stabilize the housing markets which generate the wealth of everybody else.  The most direct way to do this is to keep people in their homes by bringing down the current abnormally-high foreclosure rates.  Fannie Mae, which taxpayers now own, could extend low-cost, two-year loans to millions of homeowners facing foreclosure.  The funds could be used only for mortgages held by Fannie Mae.  And to control the moral hazard lurking in such relief, 20 percent of any capital gain earned from eventually selling those homes would go back to taxpayers.  

The third initiative would ensure that everyone can build the skills needed to earn a rising income by providing low-cost access to college education and worker training.  First, we could replace student loans with an expanded and upgraded form of national service:  Two years of service in the military or the Peace Corps, or three to four years service in Americorps, would earn any young person in-state tuition at a public college or university for four years.  Young people considering college would be asked to give something of themselves back in service to the country, and would no longer have to face huge debts that can take decades to work off.  In addition, every working American should have access to additional training in the information technologies integral to virtually all industries and jobs.  The plan here is one that Mr. Obama supported when he was in the Senate – provide grants to community colleges to keep their computer labs open and staffed in the evenings and on weekends, so any adult can walk in a receive free instruction. 

This agenda is forward-looking rather than present-oriented, so it does not address the deficit.  In truth, everyone knows perfectly well what to do about it.  Simpson Bowles, Domenici-Rivlin, the Senate Gang of Six all rely on the same formula: Raise new revenues, reform Medicare and Medicaid, cap discretionary spending, and reduce defense spending.  This approach, which President Obama supports, broke the deficit logjams in the 1980s under Ronald Reagan and the 1990s under Bill Clinton.  The only thing standing in its way today is the intransigence of extreme conservatives who would rather see the U.S. default on its sovereign debt than consider raising taxes.  We can only hope that the public will continue to rally around this balanced approach and convince House Speaker John Boehner and Senate GOP leader Mitch McConnell. Once that is done, we can turn to the real business of restoring jobs and income gains.

The Truth about Job Creation under Obama and Bush

Everyone knows that unemployment is high today and unlikely to fall by much soon. Yet, a longer view of the official jobs data would startle most people, including virtually everyone in the media. Nearly three years into Barack Obama’s presidency, his record on private job creation has actually been much stronger than George W. Bush’s at the same point in his first term. Whatever the public perception, the real record provides strong evidence for both the relative success of Obama’s economic program and how hard it now is for American businesses to create large numbers of new jobs — as they did once so effortlessly, and without political prodding.

Let’s go to the numbers reported by the Bureau of Labor Statistics (BLS). In the first 33 months of George W. Bush’s presidency, from February 2001 to October 2003, the number of Americans with private jobs fell by 3,054,000 or 2.74 percent. Perhaps Americans were too distracted by Osama bin Laden to pay attention, or everyone was lulled by the dependably strong job creation of the 1980s and 1990s.  Whatever the reason back then, Americans are certainly paying attention to jobs now. Yet, few seem to have noticed that Barack Obama’s jobs record has unquestionably been much better. In the first 33 months of his presidency, from February 2009 to October 2011, private sector employment fell by 723,000 jobs or 0.66 percent. That means that over the first 33 months of the two presidents’ terms, jobs were lost at more than four times the rate under Bush as under Obama. 

To be fair, new presidents shouldn’t be held responsible for job losses or job gains in the first five or six months of their administrations.  Bush’s signature tax cuts, for example, weren’t enacted until June 2001; and while Congress passed Obama’s signature stimulus program earlier in his term, it didn’t take effect for several more months. But the story is the same when we start counting up jobs without the first five months of each president’s term. The BLS reports that from July 2001 to October 2003 under Bush’s program, U.S. businesses shed 2,167,000 jobs, or about 2 percent of the workforce. Over the comparable period under Obama’s policies, from July 2009 to October 2011, American businesses added 1,890,000 jobs, expanding the workforce by 1.75 percent. In fact, private employment in Bush’s first term didn’t begin to turn around in a sustained way until March 2004, 38 months into his term. By contrast, private employment under Obama started to score gains by April and May of 2010, 14 to 15 months into his term.

The same dynamics have played out with manufacturing workers. While they have taken a beating under both presidents, they suffered much harder blows under Bush than Obama. Setting aside, once again, the first five months of each president’s term, the data show that under Bush, 2,141,000 Americans employed in producing goods lost their jobs by October 2003, a 9 percent decline. Under Obama, job losses in goods production totaled 183,000 over the comparable period, a 1.0 percent decline.

Public perceptions, especially of Obama’s record, may be skewed by the collapse of the jobs market in the months before he took office. In the final, dismal year of Bush’s second term, from February 2008 through January 2009, American businesses laid off an astonishing 5,220,000 workers, 4.5 percent of the entire private-sector workforce. Obama and the Fed managed to staunch the hemorrhaging. But the huge job losses in the year before he took office have become a political hurdle which Obama must overcome before he can take credit for putting Americans back to work.

Apart from the obvious disconnect between conventional wisdom and what actually has happened with jobs, the data also speak to certain features of the labor market and the policies we use to affect it. For example, both presidents began their terms with large fiscal stimulus programs, backed up by more stimulus from the Federal Reserve. So, the record now shows clearly that when the economy is depressed, spending stimulus has a more powerful effect on jobs than personal tax cuts.

Beyond that, why couldn’t either president restore the much stronger job creation rates of the 1990s and 1980s? Obama’s economic team can point to the long-term effects of the 2008 housing collapse and financial crisis, especially the impact of four years of falling home values on middle-class consumption. But another factor also has been at work here, one which contributed mightily to the slow job creation under both presidents, and will similarly affect the next president.

The tectonic change from strong job creation of the 1980s and 1990s to the current times is, in a word, globalization. From 1990 to 2008, the share of worldwide GDP traded across national borders jumped from 18 percent to more than 30 percent, the highest level ever recorded. Intense, new competition from all of that additional trade has made it harder for American businesses to raise their prices, as competition usually does. That’s why inflation has remained tame for more than decade, here and nearly everywhere else in the world. The problem that American employers have faced — and still do — is that certain costs have risen sharply over the same years, especially health care and energy costs. Businesses that cannot pass along higher costs in higher prices have to cut back elsewhere, and they started with jobs and wages.

One irony here is that the Obama health care reform should relieve some of the pressure on jobs, by slowing medical cost increases. The administration’s energy program, still stalled in Congress, also might slow fuel cost increases, at least over time. So, if he does win reelection in the face of high unemployment, there is a reasonable prospect of stronger job creation in his second term than in his first one — or in either of George W. Bush’s terms.

Why It Doesn’t Matter Much that Obama’s Jobs Record is Better than Bush’s

 

The great partisan squabble of 2011 over the economy begins this week with the new Congress.  Even if some of the rhetoric seems fresh, the core issues likely to become the stuff of real political fights – the terms of entitlement spending, the shape of the tax code, and the value of public investment -- are all familiar from battles during the previous two administrations.  There is one important difference, however, which will startle both sides.  When we probe the economics and politics, it appears that the real issue for most Americans isn’t jobs and unemployment, but incomes and wealth. 

The first clue lies in public data which have been almost universally ignored:  George W. Bush’s record on jobs was much worse than Barack Obama’s.  Both men took office during recessions which had taken shape under their predecessors, but with quite different effects.  So far, we have 21 months of jobs data under Obama, from February 2009 to November 2010:  Over that period, as the administration took numerous steps to support the economy, American businesses shed a net of 1,975,000 jobs.  George W. Bush’s approach was much simpler, relying almost entirely on large tax cuts.  Yet, even though the 2001 downturn was barely a blip compared to what Obama would face eight years later, Bush saw 2,852,000 private-sector jobs disappear in his first 21 months.  The job losses in Bush’s first two years, then, were nearly 1 million larger than during Obama’s first two years.  Set aside the first six months of each president’s term, before their policies could take effect, and the comparison grows even starker.  In those subsequent 15-month periods, American business under Bush shed 1,772,000 jobs, compared to job gains of 715,000 under Obama’s program. That doesn’t include the most recent developments, including a report today from ADP Employer Services estimating that private employment jumped by 297,000 in December.  By any economic measure, then, the Obama approach has been much more successful with regard to jobs than the Bush program which congressional Republicans now want to repeat.  

But the Bush program was much more successful politically, judging by the 2002 and 2010 midterm elections.  To be sure, the Bush White House managed to change the subject from its dismal jobs record to terrorism and Saddam Hussein, which helped a lot.  But the huge Democratic losses last November, despite Obama’s much better record on jobs, tell us that the main issue for most voters – at least those with jobs -- probably wasn’t unemployment at all, but rather their overall economic condition.  In this regard, Bush was as lucky as a Rockefeller:  He inherited an economy which under Clinton had produced large income and wealth gains for most Americans, giving them a critical cushion to muddle through the 2001 recession without having to cut back much.  Obama, on the other hand, had the misfortune of inheriting a much weaker economy from Bush, one which had left most Americans treading water even before the financial crisis and Great Recession of 2007-2009 eroded their assets.   

Let’s retrace the real conditions.  Throughout the Bush expansion, most Americans experienced no income gains, although their wealth appeared to increase.  Here, the stock market isn’t very important.  The Federal Reserve reports that the top 20 percent of Americans control 93 percent of the value of all financial assets, including pension and retirement accounts.  With 80 percent of the country holding only 7 percent of the nation’s financial assets, the falling stock markets of 2000-2001 and 2007-2009 had little direct effect on most people economic condition.  But one asset is widely held by Americans: Nearly 70 percent of the country owns their own homes.  Bush’s legacy to Obama, then, included not only a half decade of stagnating incomes, but also wealth losses for most people amounting to between 25 and 30 percent of the value of their homes.  Layer a deep recession on top of all that, and voters grow very cranky.

The truth is, most people are prepared to live with large job losses that affect others, so long as their own economic conditions remain decent.  But wipe out a good slice of their assets, so that most of them have to cut back, and whoever is in office will pay a big political price.

Where does Washington go from here?  The GOP wants to replay the Bush program, which is no more likely today to lead to sustained income progress and wealth gains than it was in the last decade.  This time around, they also want to layer on deep cuts in public spending, an approach likely to cut the legs off of the fragile expansion which just now is beginning to take hold.

The administration’s alternative looks a lot like Bill Clinton’s program, which did help promote broad income gains.  In his State of the Union address and budget proposal, President Obama will likely call for targeted, new public investments in infrastructure, R&D and education, additional steps to expand foreign markets starting with the free trade agreement with Korea, and measures to bring down the deficit very gradually by restraining defense, Medicare and overall discretionary spending.   This agenda may not usher in another historic boom, but it would provide a more solid foundation for long-term income progress.

It’s also time to help Americans rebuild their assets through new public steps to finally stabilize housing values.  The best way to do that is to provide direct loan assistance to those facing home foreclosures, since high foreclosures are the most powerful force still driving down housing prices in most places.  Otherwise, the voters may prove to be quite cranky again in 2012, endangering second terms for scores of congressional Republicans and perhaps even President Obama.

Employment increased by 297,000, exceeding the highest projection in a Bloomberg News survey, after a revised 92,000 rise in November, according to figures from ADP Employer Services. The median estimate in the Bloomberg survey called for a 100,000 gain last month.

 

Lesson from the New York Times Poll: Have a Plan for the Economy

Today’s poll from The New York Times tells the story of a country focused solely on frustration over the bad economy. Jobs and the economy, added together, are the top concern of 60% of Americans. (No other issue comes close to those figures, including the budget deficit, which sits at 3 percent.)

Additionally, the poll write-up reinforces the notion that we have discussed at NDN, neither party is where it wants to be right now:

The findings suggest that there are opportunities and vulnerabilities for both parties as they proceed into the final seven weeks of the campaign.

A case for Republicans: Voters are remarkably open to change, even if they are not sure where Republicans will lead them. Most Americans, including one-third of those in the coalition that elected Mr. Obama, now say he does not have a clear plan to solve the nation’s problems or create jobs. Democrats remain highly vulnerable on the economy.

A case for Democrats: They are seen as having better ideas for solving the country’s problems. The public steadfastly supports the president’s proposal to let tax cuts expire for the wealthiest Americans. And far more people still blame Wall Street and the Bush administration than blame Mr. Obama for the country’s economic problems.

Voters have a darker view of Congressional Republicans than of Democrats, with 63 percent disapproving of Democrats and 73 percent disapproving of Republicans. But with less than two months remaining until Election Day, there are few signs that Democrats have made gains persuading Americans that they should keep control of Congress.

So, while neither party is where it wants to be right now, there is good in this than bad for the President and his party. The American people are still far more with him than the alternative, they just angry and frustrated, and rightfully so. It’s also inarguable that the President’s ideas have been far better then the opposition's, and the truth is borne out in the polling.

Additionally:

The president’s overall job approval rating is 45 percent, with 47 percent disapproving. On the economy, his rating is worse, with 41 percent approving and 51 percent disapproving. When asked whether Mr. Obama has a clear plan for solving the nation’s problems, 57 percent responded that he did not, yet twice as many give him more credit than Republicans for having a plan.

The good news for the Democrats right now is that they have the ability to increase their standing with the American people, and the path is very clear: they must convince the country they have a plan for the economy. The President has a strong case to make about what his administration done over the last two years, and that it’s all been part of a plan to fix an economy with serious problems that have been playing out for the last decade. The next month and a half are all about making the American people believe that he has a plan for the future and his opponents have one that just doesn’t work.

For the Republicans, they have to step up if they really want to take advantage of this poor economy, which means they too have to offer a serious economic plan for the country. It's something the American people don't think they've done yet. 

Quoting Simon on Jeb Bush and Meg Whitman

What will the Republicans have to do in order to win in 2012? Simon has pointed out a few times that with the right presidential ticket, the Republicans could be unexpectedly competitive in the Latino Belt. Demographics are on the Democrats' side, but two leaders who shouldn't be underestimated are Jeb Bush...

http://ndn.org/blog/2010/06/taking-jeb-bush-seriously

...And, if she prevails in her race in California, Meg Whitman.

http://ndn.org/blog/2010/07/taking-meg-whitman-seriously

Bush is part of a Republican dynasty that has long been known for its skill at courting Latino voters; Bush himself is married to a Mexican woman and speaks fluent Spanish. Whitman has come out against Arizona's SB1070 law. The media is picking up on both these points and recently, Simon has been getting mentioned as one thinker who is urging Democrats to take these candidates seriously. Yesterday, Sam Stein's lead piece in the Huffington Post looked at how the Bush brand shouldn't be counted out just yet:

Simon Rosenberg is the most bullish of Democratic strategists. The former Clinton administration official and head of the young non-profit group NDN has been the chief proponent of the belief that Barack Obama's election produced the opportunity for a "30-to-40-year era of Democratic dominance." A specialist in the political habits of different demographic groups (specifically Hispanics), he insists that, absent a drastic makeover, the GOP risks cementing itself "as irrelevant to the 21st century."

Sagging poll numbers and policy setbacks have done little to dissuade these rosy prognostications. There's only one thing that makes Rosenberg nervous: another Bush.

"Jeb [Bush] is married to a Latina, is fluent in Spanish, speaks on Univision as a commentator, his Spanish is that good," Rosenberg said of the former Florida governor and brother to the 43rd president during a lunch at NDN headquarters last week. "And if you look at the electoral map in 2012, you have to assume that Obama is going to have a very hard time in holding North Carolina and Virginia. The industrial Midwest, where the auto decline has been huge, has weakened Obama's numbers... a great deal. So Ohio, Michigan, Indiana and Wisconsin become a bit more wobbly. So if you're Barack Obama, the firewall is the Latin belt from Florida to southwestern California. And there is only one Republican who can break through that firewall. And it is Jeb."

Such a sentiment, Rosenberg admits, carries a slight hint of hysteria. After all, there is a good chunk of the country that recoils at the idea of another pol with the Bush surname. But that chunk has begun narrowing. And even within Democratic circles, there is an emerging belief that in a Republican Party filled with base-pleasing dramatizers or bland conservatives, Jeb stands out.

And Simon's insights were also mentioned today on Fox News:

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President Obama's Weekly Address Focuses on Economy, Bipartisan Cooperation on Deficit

In his weekly address, President Obama talks about his focus on the economy in 2010 and covers his commitment to deficit reduction. Notably, he covers some of the politics that conservatives have been playing with deficit reduction.

Take a look:

The President's remarks on politically motivated changes on issues are a narrative that seems to be working pretty well:

Finally, I've called for a bi-partisan Fiscal Commission - a panel of Democrats and Republicans who would sit down and hammer out concrete deficit-reduction proposals by a certain deadline.  Because we've heard plenty of talk and a lot of yelling on TV about deficits, and it's now time to come together and make the painful choices we need to eliminate those deficits. 

This past week, 53 Democrats and Republicans voted for this commission in the Senate.  But it failed when seven Republicans who had co-sponsored this idea in the first place suddenly decided to vote against it. 

Now, it's one thing to have an honest difference of opinion about something.  I will always respect those who take a principled stand for what they believe, even if I disagree with them. 

But what I won't accept is changing positions because it's good politics.  What I won't accept is opposition for opposition's sake.  We cannot have a serious discussion and take meaningful action to create jobs and control our deficits if politicians just do what's necessary to win the next election instead of what's best for the next generation. 

On that note, if you haven't seen it, take a look at the President's "question time" from yesterday at the House Republican Issues Conference. I'll leave you to judge who got the best of that situation:

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The Key to the Fall Debate: Staying Focused on the Economy

The last few months have not been particularly good ones for Democrats.  That's the bad news.  The good news is there a clear roadmap for how they can use the coming months to get back on track, and it revolves around staying relentlessly focused on the economy and the struggle of every day people.  

1) The Lack of Income Growth for Average Families is the Greatest Domestic Challenge Facing America Today.   Depending on how you cut the data, American families have not seen their incomes rise in at least eight, and perhaps, ten years.  Even in the Bush recovery, which was by many measures, robust, median incomes declined, poverty levels increased, debt loads exploded.  The typical American family ended the Bush era making $1,000 less than at the beginning. 

Basic economics tells us when productivity increases wages and incomes rise.  When GDP expands, jobs are created at a certain rate.  Neither of these events took place in the Bush era, leading us here at NDN to argue that there is a large structural change being brought about by globalization that is making it harder for the American economy to create jobs and raise the standard of living of every day people.

That median incomes dropped during a robust economic recovery made the Bush recovery different from any other recovery in American history, and has made the current Great Recession different from other recessions.  The American consumer was already in a very weakened state before the current recession, which is why the recession has been more virulent than many predicted, and why the coming "recovery" might be so anemic.  The economy seems to be going through profound, structural change, making old economic models anachronistic.  We are literally in a "new economy" now, one that is not well understood, and one that is confusing even the President's top advisers. 

Simply put, getting people's incomes up is the most important domestic challenge facing those in power today.  It is not surprising that other issues like health care, energy policy and climate change are being seen through a prism of "will this make my life, my economic struggle better today?" because so many families have been down so long, and things have gotten an awful lot worse this year.   Regardless of what they hope to be graded on by the public, the basket of issues that will do more to determine the success of the President and his Party is both the belief that things are getting better, and the reality that they are for most people. 

2) The Public Believes the Economy Is By Far and Away the Most Important Issue Facing the Nation Today.   In poll after poll this year, the public has made it clear that the economy is their most important issue, with really nothing coming in a strong number two.  The new Pew poll out this week maintains the basic ratio we have seen for months: mid 50s say the economy is number one; 20 percent of the American people say health care is their number one concern; and literally "zero" pick energy (see the chart to the right).

While one could mount an argument that one should not govern by polls, one can also ignore them at their own peril.  The country wants their leaders focusing on what is their number one concern - their ability to make a living and provide for their families in a time of economic transformation - which also happens to be, in this case, the most important domestic issue facing the country. 

My own belief is that one of the reasons the President and the Democrats have seen their poll numbers drop is that they have spent too much time talking about issues of lesser concern to people while the economy has gotten worse.   There is a strong argument to be made that the President and the Democrats have taken their eye of the economic ball, and are paying a price for it.  This doesn't mean the President shouldn't be talking about health care, climate change, education, immigration reform, but they must be addressed in ways that reflects both their perceived and actual importance; and as much as possible discussed in the context of long term and short term benefit for every day people and not abstract concepts like "recovery," "growth," "prosperity," which in this decade are things that have happened to other people. 

We have long believed that the lack of a sufficient governmental response to the increasing struggle of every day people has been the central driver of the volatility in the American electorate in recent years (see here and here).  Given the poll and economic data of recent months it is possible that the conditions which have created this volatility remains, and simply cannot be ignored for too long.

3) The Way Forward - Make The Struggle of Every Day People The Central Focus Of the National Debate.    The great domestic challenge facing President Obama is to ensure that, in this new age of globalization and the "rise of the rest," the country sees not "growth" or "recovery" but prosperity that is broadly shared.  Until incomes and wages are rising again, fostering broad-based prosperity has to be the central organizing principle of center-left politics.  It is a job we should be anxious to take on given our philosophical heritage, and one that we simply must admit is a little harder and more complex than many have led us to believe.  

Luckily, the President has been given three significant events in September to begin to make this rhetorical and governing turn - Labor Day next week, and the G20 and UN General Assembly meetings in late September.  He can use this events to re-knit together his argument, weaving in health reform and energy/climate change (and we believe immigration reform too) along the way.  For there is no broad-based prosperity in 21st century America without health care costs coming down (which has to happen to allow us to cover more people), and a successful transition to a low-carbon economy.  Even though the Congressional committee and legislative process requires these to be separate conversations, in fact they are one conversation, one strategy for 21st century American success, one path forward for this mighty and great nation. 

Vice President Biden's speech about the economy today is a very good start in this needed repositioning.  But much more must be done.  In a recent essay I wrote:

There have been calls from some quarters for a 2nd stimulus plan, an acknowledgment that what the first stimulus has not done enough to stop the current economic deterioration.  This may be necessary, but I think what will need to be done is much more comprehensive than just a new stimulus plan.  Future action could include a much more aggressive action against foreclosures, a more honest assessment of the health of our financial sector, an immediate capping of credit card rates and a rollback of actions taken by credit card issuers in the last few months, a speeding up of the 2010 stimulus spending, a completion of the Doha trade round and a much more aggressive G20 effort to produce a more successful global approach to the global recession, the quick passage of the President's community college proposal, enacting comprehensive immigration reform which will bring new revenues into the federal and state governments while removing some of the downward pressure on wages at the low end of the workforce, and recasting both the President's climate and health care initiatives as efforts which will help stop our downward slide and create future growth.

These are some thoughts on how to re-engage the economic conversation but many other people also have great ideas on what to do now that the specter of a true global depression has been averted, and we have the luxury of talking about what to do next.  Which is why NDN is launching a new series of discussions on the global and American economies.  We begin next week with Dr Jagdish Bhagwati and Dr. Rob Shapiro.  Keep checking back on our site for the next events in this important new series based in Washington, DC but also webcast for anyone to watch no matter where they are.

The bottom line - the recent decline in the President's poll numbers are reversible.  The key is for he and his Party to make the struggle of every day people their number one rhetorical and governing concern.  A "new economy" is emerging in America, and it is not has been kind to most Americans.  Getting incomes and wages up in this new economy of the 21st century is in fact the most important dmoestic challenge facing the country, and one the American people are demanding a new national strategy for.  This fall is the time for the President to make it clear to the American people that he understands their concerns, has a strategy to ensure their success in this new economy, and will make their success the central organizing principle of his Administration until prosperity is once again broadly shared.

California "Always" Liberal? Ross Douthat Must Be Dreaming

In yesterday's New York Times, conservative columnist Ross Douthat accuses President Obama of "pushing a blue-state agenda during a recession that’s exposed some of the blue-state model’s weaknesses, and some of the red-state model’s strengths."

Asking readers to consider California, which he places against the stellar conservative governance of Texas, Douthat notes:

California, always liberalism's favorite laboratory, was passing global-warming legislation, pouring billions into stem-cell research, and seemed to be negotiating its way toward universal health care.

(his link points to a Time article about Arnold Schwarzenegger's work in this area, who, last I checked, has an R and a 28 percent in state approval rating next to his name)

While California is undoubtedly a national leader in trends of all stripes, understanding the legacy of California governance as being "liberalism's favorite laboratory," couldn't be more wrong. The reasons for California's epic struggles lie, not in the "always liberalism" that Douthat sees, but instead in the Ronald Reagan conservative tax revolt coming home to roost.

In contrast to, say, California's efforts on energy policy, which research shows have created prosperity in the state over the last generation, the tax revolt defining Proposition 13 destroyed a top notch public schools system and, more recently, rendered the state bankrupt. The 1978 ballot initiative, which capped property taxes and mandated a 2/3 rule for the state legislature to pass a budget, has created a structural shortfall in the state budget and a political inability for legislators to craft a solution -- but Douthat doesn't see fit to mention it.

Conservatives love to argue that California has incredibly high tax rates, and, in the case of some specific taxes, that's true. But that's only because Proposition 13 so drastically lowered property taxes as to necessitate raising taxes to compensate for lost revenue. As Ezra Klein, in discussing Robert Samuelson's op-ed on California (which, like Douthat's piece, conspicuously fails to mention Prop 13), notes this morning:

Total state and local taxes take up 11.73 percent of the average Californian's income. The national average is 11.23 percent. And it's been like that for many years:

CAtax

Far from being "always" liberal, California's electoral votes were supposed to be safe for Reagan's Republicans, giving them a generational lock on the White House. Here again, California was ahead of the nation, this time in discovering that conservatives couldn't govern and is now as deep blue as the Pacific Ocean.

Now that the nation has learned its lesson from eight years of red-state governance under Douthat's vaunted Texas leadership, America followed California, this time for the better, in overwhelmingly rejecting failed conservative governance. Blue-staters (a lot of folks these days) have only had six months on the job after eight years of botched "red-state" governance. It will be a lot longer than that if conservatives like Douthat can't even figure out where they went wrong; Proposition 13 was certainly one of the first places.

Update: Ezra Klein just blogged on Douthat's column as well. He does a nice job taking down the argument that Texas is a good model for anything and the broader red-blue frame that Douthat tries to use.

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