President Obama

Big Week Ahead for President Obama

There is little doubt now that the coming week will be a very important one for the nascent Obama Presidency.   On Monday he takes to the road, visiting Indiana and Florida, and speaks to the nation.  Also on Monday Treasury Secretary Tim Geithner will offer what now appears to be an outline, or sketch, of the Administration's plan to attack the financial crisis, beginning what will be a very important debate about this part of the emerging recovery plan.  Among the other things we are hoping for is a major initiative to keep people in their homes.  

Also up this week will be the attempt for the Senate and House to reconcile their different stimulus bills into one, and hit the deadline of getting the bill signed by President's day weekend.   Given news reports this morning about the late-night Senate deal, I don't know how easy this is going to be.  

One of the most interesting and important things to watch this week is how the Senate and House come together and "reconcile."   The internal dynamics of these two chambers are very different.   The bills that emerged from each chamber are different.   Will the path forward for future legislation be what we saw with the stimulus - seperate tracks for each chamber - or will the White House and Congressional leadership attempt to prenegotiate the big ones and try to reach a broad outline of a deal that can get through both chambers will little alteration?  How this stimulus bill comes together this week will be a big big test of the ability of the two chambers to reconcile their very different internal politics.

The Republicans.  We learned a lot about them these last few weeks.  Their great test will be whether they can do more than be angry that they are not in power anymore.  The signs so far are not so good. For the good of the nation we need the Republican Party to become a responsibile partner in cleaning up the incredible mess they left us all in.  I think the way The President began to remind the American people of the GOP's role in bringing about the troubles we now face was important - and may be his biggest weapon in bringing them to the table in the many legislative battles ahead (see this Washington Post news story on what could be a fatal political scandal for the new RNC Chairman, Michael Steele).  

Oh, and not to be forgotten, the President signed into law a bill this week that will bring health insurance and good medical care to millions of children who do not have it today.   It was a powerful early signal that the new government can bring people together to tackle our common challenges.  And for those of us optimistic about fixing our broken immigration system this year, that the provision to extend health insurance coverage to all legal immigrant children passed, over initial GOP opposition, is a good sign that reasonable people in both parties can come together and make progress on a broader immigration reform package this year.  

While there are pieces of the package we could do without, the emerging economic recovery plan is a very responsible and serious attempt to address the economic challenges of our time, and it contains many provisions long argued for by NDN.  President Obama and his team should be pleased with where things stand now - on their first major initiative they've shown far-sightedness, political dexterity and resolve.   But the next few days are very important, and will tell us much about our ability to meet the challenges ahead.

Sat 10pm Update - The NYTimes has a good piece running in the Sunday paper looking at the differences between the Senate and House bills.

Obama Makes His Case for a New Economic Strategy for America

In the Washington Post today President Obama makes his case:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Obama Whacks Conservative Economic Policies

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

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

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

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

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

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

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

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

More on Our Overleveraged World

Niall Ferguson in the Huffington Post today

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

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

Spend? Save? What Is the Right Course Now for Everyday Americans?

For those hoping for economic recovery, one of the most important questions that has come up is the role everyday Americans will play in bringing about a global and domestic turnaround.  In hearing discussions of the stimulus today, particularly in defense of the tax cuts, you hear about the need to put money in people's pocket so they will go out and spend, accelerating economic activity, helping bring about an end to the recession.  

But is this really the best course for American families now? If the story of everyday people this decade has been flat wages, declining incomes, easy credit, debt financed spending, overleverage - shouldn't there be a conversation taking place about encouraging Americans to get their own family balance sheets in order before they go out and spend some more?  After 9/11, Bush argued that it was important for Americans to go out and shop.  But is that the case now?  In this new age of responsibility, should we be talking about getting everyone on stable 30-year mortgages, paying off high-interest credit card debt, tackling home equity loans whose equity has vanished, saving more for retirement to make up for the stock market decline of recent years?  I understand that talking about saving more, paying down debt, cutting back on spending after the recent binge leads to slower economic activity in the short run - and a longer and deeper global recession - but isn't this the best course for American families? 

In the Times today there is an interesting piece on all this which concludes: 

"Consumers are rational," said Joshua Shapiro, chief United States economist at MFR. "They respond to incentives and conditions, and right now the conditions and incentives are: spend as little as you can, and pay down as much as you can. You hunker down. That's what the consumer's doing." 

But what will it mean for the American and global economies if American consumers waking up to the recession, their loss of 30-50 percent of their assets, uncomfortable and expensive levels of debt, decide to let all their stuff age for 3-5 years - no new cars, additions on the house, washing machines, tvs, clothes?  Make do with what they have. Pull back, hunker down, get the family balance sheet back in order, save for an uncertain future, adopt a new culture of thrift. 

Not sure this very real possibility is being given adequate consideration right now in our planning.

10pm Update - The auto companies are reporting that their January sales dropped 50% percent from a year ago.  50 percent in just 12 months. I don't think we are seeing a normal downturn, a normal business cycle. 

Kos's Weekly National Poll

This new weekly national poll released on fridays is very much worth reviewing.

The Utter Bankruptcy of Today's Republican Party

No Republican votes tonight.  None.  

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

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

For the last four years, Rob Shapiro and I have talking about the inability of the political class to come to terms with was happening to the American middle class.  For those with means, the Bush era - up until the last year - was a boom time.  Taxes were cut, assets appreciated. But for far too many Americans the economic crisis we talk about today began long before the financial crisis hit in 2007 and 2008 - and this crisis was the increasing struggle of every day people, the decline of median income even during a robust period of economic growth.  This lack of a proper response to this crisis is what drove the Republicans from power more than anything else in 2006, and it was Barack's finding of his voice on the struggle of every day people in the summer and fall of 2008 that was so critical to his pulling away from McCain.  The American people have come to feel that the modern GOP really didn't understand or have a plan to deal with their very real economic crisis.  They are right of course, and this more than any other issue is what has driven the GOP from power and given the Democrats their huge majorities today. 

But clearly the Republicans in charge of the House don't understand all this.  Their party only swung into action when the economic crisis began to affect the monied class.  Their actions were predictably inept, secretive, and misguided.  $500 billion of stimulus and TARP money was spent in 2008 and the crisis worsened.  They even blocked meaningful action on keeping people in their homes - key to solving the financial portion of this crisis - with predictable and cynical cries of "moral hazard" when two companies alone - AIG and Citigroup - received commitments from their Treasury Department of close to $500 billion.  More money, of course, than the one year cost of the stimulus plan passed tonight by the House.  That's right. Citigroup and AIG have commitments for more money from our government than all of the 2009 portion of the stimulus plan that has been derided by the GOP as an outrageous use of the people's money.  

The GOP will have two more chances on this stimulus to behave in much more constructive ways, with upcoming votes in the Senate and again when the bills are brought together and voted on again in each chamber.   I don't know what is going to happen, or how this will play across the nation over the next few days.  I wrote recently that the road back for the GOP, this party of "magic negros," would be a long one.  But if the Republicans continue to act in ways so clearly designed to serve the interests of the few over the interests of the many at a time of such great national challenge then their road back may be even longer than I could have imagined.

Times Offers Excellent Analysis of the Emerging Economic Debate

Edmund Andrews and David Herszenhorn of the New York Times today offer a very good overview of the how the debate over the economy is shaping up.  It begins:

WASHINGTON - The fresh evidence on Friday of the economy's downward spiral focused even more attention on two questions: Is the stimulus package being pushed by President-elect Barack Obama big enough? And will the component parts being assembled by Congress provide the most bang for the buck?

With the Federal Reserve having just about reached the limit of how much it can help the economy with cuts in the interest rate, Washington's ability to end or at least limit the recession depends in large part on the effectiveness of the big package of additional spending and tax cuts that Mr. Obama has made the centerpiece of his agenda.

And with the economy facing what now seems sure to be the sharpest downturn since the 1930s, the financial system balky and the government facing towering budget deficits, economists and policy makers acknowledge that there is no playbook.

"We have very few good examples to guide us," said William G. Gale, a senior fellow at the Brookings Institution, the liberal-leaning research organization. "I don't know of any convincing evidence that what has been proposed is going to be enough."

In part because Mr. Obama wants and needs bipartisan support, the package is being shaped by political as well as economic imperatives, complicating the process by putting competing ideological approaches into the mix.

It includes $300 billion in temporary tax cuts for individuals and businesses, in part to attract Republican support. It includes a big expansion of safety-net programs like unemployment insurance, which Democrats say makes both economic and social sense. It includes more money for highways, schools and other public infrastructure; more money for "green" energy projects; and more money to help state governments pay for health care and education.

Republicans, as always, are advocating for more and broader tax cuts. But the evidence is ambiguous about whether tax cuts will really spur economic activity at a time when consumers and businesses alike are frozen in fear and reluctant to let go of their money.

The risk is that Mr. Obama and the Congress will weigh down their effort with measures that cost many billions of dollars but may not have much impact on economic activity.

Tax breaks, for example, usually produce less than $1 of stimulus for every dollar they cost, economists say. Spending on public construction projects, like highways and bridges, produces the most economic activity - but there is a limit to how many projects are "shovel-ready," and even those take time to generate jobs and ripple through the economy.

You can read the rest here.  For more on our take on all this you can find many posts from recent weeks on the blog, and be certain to review this recent compilation of our economic writings over the last few years.  Be sure to review what has become one of our more influential works, A Stimulus for the Long Run.

Obama's Weekly Focuses on the Economy, Stimulus

The text: 

As the holiday season comes to end, we are thankful for family and
friends and all the blessings that make life worth living. But as we
mark the beginning of a new year, we also know that America faces great
and growing challenges—challenges that threaten our nation’s economy
and our dreams for the future.  Nearly two million Americans have lost
their jobs this past year—and millions more are working harder in jobs
that pay less and come with fewer benefits.  For too many families,
this new year brings new unease and uncertainty as bills pile up, debts
continue to mount and parents worry that their children won’t have the
same opportunities they had.

However we got here, the problems we face today are not Democratic
problems or Republican problems. The dreams of putting a child through
college, or staying in your home, or retiring with dignity and security
know no boundaries of party or ideology.

These are America’s problems, and we must come together as Americans
to meet them with the urgency this moment demands.  Economists from
across the political spectrum agree that if we don’t act swiftly and
boldly, we could see a much deeper economic downturn that could lead to
double digit unemployment and the American Dream slipping further and
further out of reach.

That’s why we need an American Recovery and Reinvestment Plan that
not only creates jobs in the short-term but spurs economic growth and
competitiveness in the long-term.  And this plan must be designed in a
new way—we can’t just fall into the old Washington habit of throwing
money at the problem.  We must make strategic investments that will
serve as a down payment on our long-term economic future. We must
demand vigorous oversight and strict accountability for achieving
results. And we must restore fiscal responsibility and make the tough
choices so that as the economy recovers, the deficit starts to come
down. That is how we will achieve the number one goal of my plan—which
is to create three million new jobs, more than eighty percent of them
in the private sector.

To put people back to work today and reduce our dependence on
foreign oil tomorrow, we will double renewable energy production and
renovate public buildings to make them more energy efficient.  To build
a 21st century economy, we must engage contractors across the nation to
create jobs rebuilding our crumbling roads, bridges, and schools.  To
save not only jobs, but money and lives, we will update and computerize
our health care system to cut red tape, prevent medical mistakes, and
help reduce health care costs by billions of dollars each year. To make
America, and our children, a success in this new global economy, we
will build 21st century classrooms, labs, and libraries. And to put
more money into the pockets of hardworking families, we will provide
direct tax relief to 95 percent of American workers.

I look forward to meeting next week in Washington with leaders from
both parties to discuss this plan.  I am optimistic that if we come
together to seek solutions that advance not the interests of any party,
or the agenda of any one group, but the aspirations of all Americans,
then we will meet the challenges of our time just as previous
generations have met the challenges of theirs.

There is no reason we can’t do this.  We are a people of boundless
industry and ingenuity.  We are innovators and entrepreneurs and have
the most dedicated and productive workers in the world.  And we have
always triumphed in moments of trial by drawing on that great American
spirit—that perseverance, determination and unyielding commitment to
opportunity on which our nation was founded.  And in this new year, let
us resolve to do so once again. Thank you.

See the video here.

For more on NDN's recent work on the economy and stimulus click here, and for our recommendation on including a national effort to give all American workers computer training visit here.

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