Politics and Social Justice Archive

Touch of Class

Monday, April 18th, 2011

President Obama did two things in his Wednesday address at George Washington University that he has been loath to do throughout his presidency. He spoke like a progressive partisan. And he spoke of that great unmentionable in centrist Democratic policies — the injuries of class.

Among the inspired zingers:

"They [the Republicans] want to give people like me a $200,000 tax cut that's paid for by asking 33 seniors to each pay $6000 more in health costs? That's not right, and it's not going to happen as long as I'm president."

And this:

"I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs. I will not tell families with children who have disabilities that they have to fend for themselves. We will reform these programs, but we will not abandon the fundamental commitment this country has kept for generations. That includes, by the way, our commitment to Social Security."

President Obama also raised the issue of class when he insisted that taxes on the wealthy had to be part of any deficit reduction deal:

"[A]t a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more. I don't need another tax cut. Warren Buffett doesn't need another tax cut. Not if we have to pay for it by making seniors pay more for Medicare. Or by cutting kids from Head Start. Or by taking away college scholarships that I wouldn't be here without. That some of you wouldn't be here without."

Well done, and long overdue! This isn't about fiscal responsibility. It's about Republicans using needless tax cuts for the rich to justify massive cuts in the social compact for everyone else. And with some presidential leadership, the progressive framing of the issue is the overwhelming majority position. It could blow the Republicans back to the fringe, minority position they were in when the financial collapse occurred and Obama won election.

That's the good news. And given the immense gift of Paul Ryan's blundering assault on Medicare, it would have been a travesty to have done anything less.

(I few weeks ago, on Huffington Post, I challenged President Obama to give a speech along these lines. Among the words I put in my imaginary president's mouth were: "I am here to say tonight that we are not going to balance the budget on the backs of kids, or elderly Americans, or sick people, or working families." Note to speechwriter Jon Favreau: call anytime.)

Just kidding.

But there is also plenty of worrisome news. Four things in particular.

First, there is far more deficit-cutting in Obama's proposed budget than fiscal circumstances warrant. The president proposes roughly two dollars in cuts for every one dollar in taxes. Most of these cuts will have to come out of the very areas Obama proposes to defend — education, health, the environment, kids, and aid to the poor — since only about 15 percent of the budget is domestic discretionary spending and most of that is social outlay.

Though Obama was too polite to say so, virtually all of the increase in the ten year deficit that is now the object of fiscal fetishism was the result of three things — the Bush tax cuts, the military buildup, the recession itself with its effects on reduced revenues and increased payouts from automatic stabilizers. Fix these, and you fix the deficit.

Additional optional federal outlays via the February 2009 stimulus package contributed just three percent of the ten year increase in the cumulative deficit.

Second, and closely related, Obama's welcome change of tone had almost nothing to say about jobs and recovery. In that respect, he played into the hands of the fiscal right by reinforcing the mantra that the deficit rather than the economic recovery is the prime challenge.

As Nobel laureate Joe Stiglitz said on Friday, speaking at a conference at the AFL-CIO, the recession caused the deficit, not vice versa. Fix the economy and restore a normal tax code, and most of the deficit problem is solved. Fail to fix the economy, and austerity only produces more austerity as falling purchasing power keeps bumping the economy downward — as the British government is finding out.

In that regard, one particularly unhelpful passage in Obama's speech reinforced the "belt-tightening" frame: "To meet our fiscal challenge, we will need to make reforms. We will all need to make sacrifices."

No, Mr. President, that's dead wrong. About 90 percent of Americans have already sacrificed in advance. Median income is now below where it was in the late 1990s. Young people are burdened with college debts, or can't afford college at all, and see the dream of joining the middle class evaporating. Tens of millions of Americans have lost jobs. Why on earth declare that we "all" need to sacrifice?"

Third, Obama has made too many concessions to the right already. The previous deal of April 7 that cut the 2011 budget by some $38 billion now becomes the left pole of the new normal. Obama's new progressive rhetoric begins practically in his own end zone.

Fourth, there is more mischief ahead. While Obama pointedly said he'd defend Social Security, the "Gang of Six", the bastard bipartisan spawn of Obama's own Bowles-Simpson commission, is talking about a grand bargain that would include cuts in Social Security as well as increases in taxes. And of course, these are not "increases" in taxes at all, but merely a tax code closer to that of the Clinton era, a period when the economy boomed and slightly higher taxes on the rich did not prevent them from increasing their share of the national income and wealth.

And if the Gang of Six, three of whom are Senate Democrats, agrees on a deal that includes Social Security cuts, the pressure will be overwhelming for both houses to pass it and Obama to sign it. And it will definitely be worse than what Obama proposed Wednesday.

As Obama himself said, his new posture of ostensible toughness in defense of what's left of America's social compact, "I don't expect the details in any final agreement to look exactly like the approach I laid out today. I'm eager to hear other ideas from all ends of the political spectrum."

No, Mr. President, you are not eager to hear what the Republicans have to offer. You just called them out as a bunch of elitist stooges for the right. You can't very well have it both ways.

Why do Democrats like Obama, Kerry, Gore, and Clinton embrace class only as a last resort? In part because they fancy themselves unifiers, but more importantly because the financial elite that underwrites their campaigns detests talk of tax-the-rich, and discourages any kind of broader populist rhetoric that might remind ordinary voters who crashed the economy and who exports their jobs.

At various points going back to the 1984 candidacy of Walter Mondale, Democratic candidates who spoke of the injustices of class were warned by their money men to tone it done. In Mondale's case the message came from Robert Rubin personally. When John Kerry talked about "Benedict Arnold CEOs," he was warned by some of those CEOs to drop the phrase. And he did.

Three days after Obama demonstrated a touch of class in his address at GW, he spoke at a gala fundraiser in Chicago where the big donors were treated like the royalty that they are in American politics.

It was the White House political team, according to my sources, who injected the class themes into Obama's Wednesday speech, because they are such winning politics. This tension will continue between now and November 2012.

Let's hope, if only for reasons of survival, that Obama continues to identify with the aspirations and frustrations of ordinary Americans against the delusions of the far right rather than the elite conceits about fiscal discipline.

If he does, he will be the early front runner and both the deficit and the campaign finance will take care of themselves.

Read the original article on The Huffington Post.

peril Robert Kuttner is the author of A Presidency In Peril.

Changing the Tone in Washington

Monday, April 4th, 2011

My fellow Americans,

I ran for president to do two things — to change the tone of bitter partisanship in Washington, and to accomplish constructive economic change so that more Americans can share the blessings of prosperity.

I need to speak candidly to you tonight. Despite my best efforts, I find that I cannot do both things. You see, it takes two to compromise.

I understand why many Americans voted against my party — the Democrats — last November. Recovery from the worst recession in 75 years was, and is, too slow.

It's understandable that many people who had high hopes in 2008 felt those hopes dashed in 2010. The president's party normally loses some seats in his first off-year election, especially in hard economic times, and these times have been more difficult than most.

Those of you who voted for the opposition had every right to do so. But the vast majority of Americans did not vote to slash public spending on children, university students, the elderly, the disabled, the sick, and people who are unemployed through no fault of their own. You did not vote to blame the recession on nurses, teachers, police and fire-fighters or to punish them for the sins of Wall Street.

The budget debate that has dominated the headlines has emphasized numbers — mind numbing numbers. Will Congress cut $70 billion dollars, or $50 billion dollars, or $100 billion dollars? But let me tell you, this budget debate is not just about numbers.

It's about whether kids who are eligible for Head Start are denied places in the classroom. Whether community health centers shut down. Whether students who want a chance to go to college are denied Pell Grants. Whether our families have safe drinking water and pure food. Whether Americans who are unemployed through no fault of their own lose their health insurance. And whether the most affluent Americans get still more tax cuts.

Although the Republican Party is increasingly captured by the Tea Party, I just don't believe most Americans voted for these slash and burn cuts that will only harm our economy.

We have done our best to find a middle ground. But the opposition party keeps moving the goal posts on us.

No sooner do we come to terms over a compromise to keep the government open than the price goes up. The price of keeping the government, it turns out, is to cripple the government and the services that it provides. Deep cuts in Social Security, Medicare, and Medicaid are next.

Well, not while I'm president. I am here to say tonight that we are not going to balance the budget on the backs of kids, or elderly Americans, or sick people, or working families.

Last December, we reluctantly compromised with the Republicans in order to extend unemployment insurance and help working Americans in other ways. Their price was two more years of tax cuts for the very wealthiest of Americans. The cost was over $125 billion — or more than the cost of spending cuts now being demanded.

Frankly, if anyone should be tightening their belts in these circumstances, it is the most fortunate among us. But the increase in the deficit caused by those tax cuts is now being use as the pretext to slash government help to everyone else.

That's not right. So don't make the mistake of thinking that this debate is about who has the sharpest knife for cutting deficits. It's about how we cut deficits, about whose belt is to be tightened, and how we get the economy back on track.

If the Republicans had been sincere about wanting to hold down deficits, they never would have demanded those tax giveaways as their price for aiding the unemployed.

Not only are the Tea Party Republicans demanding crippling cuts in public services. They have also larded up the budget bill with so called riders that have nothing do with the budget.

They would ban funding for the new bureau of consumer financial protection, and other regulatory agencies charged with keeping banks from repeating the abuses that got us into this mess.

They would ban funding for the Affordable Care Act, meaning insurance companies once again could deny coverage to people with pre-existing conditions.

They would prohibit the Environmental Protection Agency from regulating toxic substances like mercury, Dioxin, and arsenic in certain industries.

They would block the Department of Education from cracking down on well documented abuses on the part of for-profit colleges that deceive hard working students and their parents.

They would get rid of federally-funded family planning services, which also includes screening for breast and cervical cancer.

Most Americans do not support these policies. And as much as I want compromise and civility in Washington, I am not a damned fool.

Americans deserve to know just how extreme these ideas are. And if the far right wants to threaten to shut down the government if we don't accept these radical ideas, that's a fight I'm prepared to have.

So I will continue my efforts to change the tone in Washington. But sometimes that requires firmness in the face of reckless destruction.

I want you to know, this is not about the "partisan bickering" that the press loves to decry. The far right is trying to show its supporters that it can be tough enough to shut down the government. But I can be just as tough on behalf of working American families, who have already suffered enough.

This is the leader I thought I was voting for. Judging by his performance so far, I was wrong.

Obama's tactics could be one way for him to win re-election. He puts himself above party, hangs progressive Democrats out to dry, and lets Republican recalcitrance move the political center further and further to the right. When he eventually gets a budget deal, it doesn't matter to him that it is mostly on Republican terms. He wins points for keeping the government open.

This seems to be the preferred strategy of top White House political strategist David Plouffe and chief of staff Bill Daley. The bounce in the polls that Obama enjoyed in the aftermath of a craven tax cut deal is used as the object lesson in the value of the president as compromiser in chief.

But that bounce has pretty well evaporated. Obama's approval-disapproval ratings are now about dead even again. However, if you want to identify a set of policies that are opposed by margins of three or four to one, try the Tea Party package.

There is another way for Obama to win, by showing some toughness, standing up for principle, and exposing the sheer extremism of the Tea Party capture of the Republicans.

Can he work up the nerve? It would certainly change the tone in Washington.

Read the original article on The Huffington Post.

peril Robert Kuttner is the author of A Presidency In Peril.

An American Industrial Renaissance?

Monday, March 28th, 2011

In the sorting out of the wreckage after Japan's earthquake and tsunami, many Americans have begun paying more attention to a phrase they had barely known — "supply chains."

American manufacturing companies no longer make most of the parts that they use in production. Rather, both U.S. companies and foreign ones that produce for the U.S. market have long and complex chains of suppliers the world over, many of them in Japan. Now, a lot of that production is temporarily idle, while Japan digs out.

The outsourcing of so much production through extensive foreign supply chains, combined with lean and supposedly more efficient "just in time" inventories, leaves companies ranging from Apple to GM vulnerable to supply disruptions half a world away. A few writers such as Barry Lynn and Eamonn Fingleton have been warning about risks of supply-chain fragility for more than a decade, but were paid little attention.

Now, however, we not only have the wake-up call in the form of Japan's earthquake. Economists such as David Levy of the Jerome Levy Forecasting Center, and some dissenting corporate executives such as John Surna of US Steel, point out that it makes less and less economic sense to keep outsourcing production because labor represents a dwindling share of manufacturing costs.

As industry becomes more automated, it takes fewer human workers to manufacture a product. So even if a Chinese worker is paid just one-twentieth the wage of his or her US counterpart, there is only so much that can be saved by moving production abroad.

Almost four decades ago, the Nobel laureate in economics Vassily Leontieff famously imagined a time when machines would be so productive that there would be only one production worker, and her job would be to flip the switch. We are not there yet, but labor cost savings no longer justify the epidemic of outsourcing, given all of the vulnerabilities that it entails.

Meanwhile, as labor costs become less important in manufacturing, energy costs keep increasing. In short, does it really make sense for China to import coal and iron ore from Australia, so that it can fabricate giant wind turbines and send them by ship to the United States? Wouldn't it make more sense for the US to build more of what we consume?

Even in the case of miniature electronics which are less costly to ship, Apple, which designs mostly in the US but out-sources most component production to Asia, could be encouraging more production at home.

As energy and the cost of shipping become expensive, and production becomes more automated, the logic of production shifts back in favor of more domestic manufacturing. However, absent some kind of industrial policy, that will not be sufficient to bring back manufacturing jobs.

Why? Because labor and transportation costs are not the only factors weighing in the decisions of executives of multinational corporations to move production offshore.

Higher environmental and labor standards in the US also make it attractive for multinational companies to outsource production to nations where workers not only have lower wages but no rights, and companies are freer to pollute.

US companies also locate production offshore to take advantage of foreign government subsidies. These subsidies are illegal, in principle, under the World Trade Organization. But China's entire industrial system depends on subsidies intended to attract western companies to shift production to China.

In addition, producing worldwide makes it easier to book profits in such a way that avoids national tax liability. It was recently reported that GE, with worldwide profits of $14.2 billion in 2010, paid no US taxes. In fact, the US ended up owing GE $3.2 billion.

In January, President Obama named GE Chief Executive Jeff Immelt to chair a new presidential council on jobs and competitiveness. But based on GE's record of outsourcing and creative tax avoidance, Immelt should be the poster child for how corporate America ought not to behave.

There is a whole other approach to bringing back manufacturing to the US. Events in Japan and shifting relative prices of labor and energy costs give that approach new compelling logic.

Manufacturing is increasingly hollowed out in the US, but still accounts for upwards of 14 million jobs. It's hard to keep innovating in the US if we lose what's left of our manufacturing industry.

Manufacturing and energy together account for most of our trade deficit, now upwards of $46 billion a month.

As events in Japan remind us, doing more production at home is only prudent. It also makes increasing economic sense. What's missing is more political leadership to put the pieces together.

Read the original article on The Huffington Post.

rawmilkrevolution Robert Kuttner is the author of A Presidency In Peril.

The Continuing Mortgage Mess

Monday, March 14th, 2011

One of the most startling exit-poll results to emerge from the 2010 midterm elections was the finding that the 35 percent of voters who (correctly) blamed the economic collapse on Wall Street actually voted Republican by a margin of 56-42 percent. As Ruy Teixeira and John Halpin wrote in a sifting of the exit polls, "The Obama administration's association with bailing out Wall Street bankers, who are heavily blamed for the bad economy, apparently had a negative effect on Democratic performance in this election."

To put it mildly.

But since the election, Republicans keep on demonstrating that they are even better friends of the banks than the ambivalent Democrats. Tea Party populism at the grass roots coexists with close alliance with the financial industry where it counts. Under the guise of reducing the budget deficit, the Republican House and Senate budget would dramatically reduce funding for the agencies that regulate Wall Street.

Richard Shelby, the ranking Republican on the Senate Banking Committee, keeps inserting himself into a law-enforcement proceeding, trying to block the proposed legal settlement of abuses in mortgage foreclosures and documentation that has been put forward by the 50 state attorneys general.

Shelby last week called the plan:

"Nothing less than a regulatory shakedown by the new Bureau for Consumer Financial Protection, the FDIC, the Fed, certain Attorneys General, and the Administration, led by Elizabeth Warren. This proposed settlement appears to be an attempt to advance the Administration's political agenda, rather than an effort to help homeowners who were harmed by a servicer's actual conduct."

It's worth reviewing the back story. State attorneys general, led by Iowa's Tom Miller, but with the vigorous support of Republican as well as Democrat AGs, have documented a wide range of illegal abuses by mortgage companies and banks dealing with homeowners who were victimized by corrupt lenders.

So called "robo-signers" falsely signed affidavits that the bank or other mortgage service company had the right to foreclose when in fact it had no such legal right.

Timely payments that were sent in to pay principal and interest were improperly applied to late fees and other penalties, causing homeowners to fall behind in their payments and then fall into technical default, leaving them vulnerable to foreclosure.

While many homeowners who were working in good faith with the lender to secure refinancing or loan modifications, the loan servicer was proceeding on a separate track to foreclose and take away their house.

Cases are legion of frantic homeowners not getting phone calls returned and being unable to get a straight story of how much money they owe, and to whom.

Some military families lost their homes while a breadwinner was serving in Iraq, in flat violation of law.

The proposed agreement with the five largest banks that control 59 percent of the mortgage market, drafted by the state AGs, would prohibit such abusive practices, define permissible procedures, and collect a one-time penalty fee from the banks in the range of $20 billion as an alternative to the criminal prosecution that the mortgage industry so thoroughly deserves.

As the tireless Bill Black, a former senior financial regulator, keeps pointing out, in the savings and loan scandals of the 1980s, there were more than a thousand felony convictions. S&L executives went to jail. There was an interagency task force coordinating criminal prosecution, and this under the Reagan administration. And unlike the subprime disaster and its continuing fallout, the S&L collapse was largely contained to that industry, did not end up punishing homeowners, and caused little damage to the wider economy.

Instead of using their political influence to resist the proposed global settlement of mortgage abuses, banking executives should consider themselves lucky. The proposed settlement would be a two-fer. It would prohibit illegal and deceptive practices, define proper ones, and would produce some of the money needed for the principal reductions to keep some ten million Americans from losing their homes.

The Administration's Home Affordable Modification Program (HAMP) is a widely acknowledged failure. About 600,000 loans — fewer than one at-risk mortgage in ten — have gotten relief. The program, which includes a modest incentive payment to banks, is entirely voluntary to bankers.

The administration's reluctance to push for stronger medicine is rooted in the banking industry's reluctance to book losses on their balance sheets. By pretending that under-water mortgages are worth 100 cents on the dollar (until they are foreclosed) banks can pump up the stated value of their assets. But it would be far better for all concerned if banks reduced the principal amount of at-risk mortgages to roughly the actual market value of the home. That would compel honest accounting, and allow millions of homeowners to keep their homes.

The present policy, by contrast, continues the epidemic of foreclosures and the resulting drag on housing prices. The downdraft in the real estate sector, in turn, functions as a deadweight drag on the economy.

Leaks and counter-leaks suggest that the Obama administration is split on whether to strongly push for the AG's proposed global settlement. The Treasury Department, both Secretary Tim Geithner, and the Office of Comptroller of the Currency, basically are siding with the banks. Elizabeth Warren, assistant to the president and acting director of the Consumer Financial Protection Bureau, favors the plan, as does the FDIC, and the Department of Housing and Urban Development.

The banks and their Republican allies are, not surprisingly, dead set against it. But it is one thing for Republican politicians like Shelby to weigh in against policies they oppose. It is utterly shameful for them to try to block law-enforcement proceedings. Republicans like Shelby are all for states rights when it's convenient, but not when state AGs go after their banker pals.

As more and more abuses come to light, and more homeowners are fighting back against illegal foreclosures, the average foreclosure proceeding now drags on for almost two years. Just this month, the banking giant, HSBC had to suspend foreclosure actions because of questions about documentation and dubious practices.

With Republicans so explicitly in bed with bankers, and after the drubbing that the Democrats took last November, you would think that it might occur to the White House that it makes good political as well as economic sense to be more clearly aligned with the interests of consumers. But that is still contested terrain.

If the proposed global settlement does fail, bankers will face a continued legal morass, and some may yet face criminal proceedings for abuses. It would be tempting to wish that fate on an industry that is responsible for so much wider suffering. But it would be far better to get the mortgage mess behind us and get on with the economic recovery. Rather than political brickbats, the state AGs and Professor Warren deserve Shelby's thanks and Obama's strong support.

Read the original article on The Huffington Post.

rawmilkrevolution Robert Kuttner is the author of A Presidency In Peril.

Winning the Present

Monday, March 7th, 2011

How lunatic-fringe do the House Republicans have to be on budget cuts before President Obama starts calling them out on their plans? Evidently, they still have a ways to go, because the administration has been mostly silent on the sheer perversity of the Republican cuts.

The cuts proposed in the House budget would devastate spending on everything from Headstart (157,000 eligible kids denied services) to Pell grants (a 25 percent cut) and dozens of other programs including job training, energy assistance, safe food and clean water.

On paper, the Republicans would cut discretionary spending by "only" 14.3 percent, but since the fiscal year will be more than half over by the time the cuts become official, the actual cuts would be fully one-fourth — a staggering cut for any program to bear and an insane economic idea during a severe downturn. These cuts have nothing to do with reasonable fiscal policy; they are pure ideological retribution against government.

You would think that at some point, President Obama would be pointing to the recklessness of these proposals in a still soft economy. But instead, the president has doubled down on his bipartisanship.
Last Friday, in Miami, President Obama could found be sharing the spotlight with former Florida governor Jeb Bush, crowing about their shared views on educational reform.

Obama declared in his weekly address:

I'm talking with you from Miami, Florida, where I'm visiting Miami Central High School, a school that's turning itself around on behalf of its kids. And I came here with Jeb Bush, former governor of this state, because he and I share the view that education isn't a partisan issue — it's an American issue.

In other words, with Republicans slashing everything from Pell Grants to Headstart, there are no partisan differences on education. So why bother to have an election? Why bother to have two parties? Why not just give up and embrace the Republican budget?

What White House political geniuses dreamed up the idea of a joint presidential appearance with Jeb Bush? Evidently the same strategists who still think that voters care about bridging partisan differences more than they care about substantive progress to end the economic slump and to restore economic opportunity.

On Sunday, speaking on NBC's Meet the Press, White House Chief of Staff Bill Daley all but invited the Republicans to define the necessary goals of budget cutting:

DAVID GREGORY: The White House says a lot about how it's meeting Republicans halfway… The reality is you are far apart on cutting spending for this particular year. How do you bridge this and avoid a shutdown in two weeks?

WILLIAM DALEY: …We aren't that far apart. We're at over $50 billion in cuts. The House passed the HR1, which was $100 billion… So we're over halfway there.

Translation: The Republicans have set the goals. The Administration will meet them halfway, and more if necessary. Never mind the content of the budget cuts, or whether deep budget cuts are sensible at all while unemployment is still at 8.9 percent.

Daley added this:

The president's had conversations with Speaker Boehner, Leader Cantor, Congresswoman Pelosi, McConnell and Reid, Senators McConnell and Reid, and his — he is not going to play the Washington games. We've had enough in the last two years. I think the American people are sick and tired of it. They're tired of the partisanship. And if anyone thinks that, out of this last election, the American people were voting for more partisanship, more saying no, I think they're, they're going to have a rude awakening in the next election.

Translation: The Democrats lost 63 House seats in the 2010 midterm election, but this was not a victory for partisanship or for Republican hardball.

Well, you could have fooled me.

The president was more candid than his new chief of staff, when Obama admitted that the Democrats had taken a shellacking. And that will continue if the Republicans stand for something and Democrats just stand for making nice. The rude awakening in the next election will be that making nice doesn't impress the voters.

On a second crucial front last week — Wall Street versus Main Street — the administration was sending mixed signals on its long awaited plan to settle legal claims against banks for fraudulent mortgage practices, in exchange for a $20 billion bank contribution towards mortgage refinancing that would allow more people to keep their homes.

The plan was the result of discussions between the administration and state attorneys general. Banks and other loan servicers seeking to foreclose on homeowners are often finding that they lack the legal right because of their own slipshod documentation and collection practices.

But the Obama administration is divided, with Elizabeth Warren's new Consumer Financial Protection Bureau pushing for at least $20 billion in penalties, which would go to fund mortgage refinancings and loan modifications. This plan, which was circulated last Thursday, has the support of many of the attorneys general and the Federal Deposit Insurance Corporation. The Treasury Department, however, is lukewarm to the plan, and the Office of Comptroller of the Currency, based at the Treasury, has put out leaks disparaging the plan as anti-bank. Industry leaders have been quoted as calling the plan a "shakedown."

In fact, the plan would help financial markets surmount a legal tangle of the banks' own making. Just last week, another of the largest lenders, HSBC, admitted major "deficiencies" in its handling of mortgages, and became the latest bank to suspend foreclosures. To date, according to the Mortgage Bankers Association, more than four million homes are in foreclosure, and another 8 million are 90 days or more delinquent and headed for foreclosure. This state of affairs drags down the balance sheets of banks and homeowners alike, and sandbags wider economic recovery. The existing voluntary plan for mortgage refinancings, HAMP, is widely considered a failure.

Here is a case where a strong regulatory presence is necessary both to stem a lingering economic catastrophe and to normalize loan documentation practices. But any regulation worthy of the name is now considered radioactive. With Obama's strategy of extending an olive branch to both the Republicans and to corporate elites, evidently all that executives have to do is to disparage necessary regulatory policies as "anti-business," and many in the administration are inclined to back off.

Daley, formerly a lobbyist for JP Morgan Chase, epitomizes the Administration strategy of not uttering a critical word about the Republicans and getting even cozier with the very banks that caused the financial collapse. This approach does not solve real economic problems. It lets both Republicans and bankers off the hook for practices and policies that are justifiably unpopular, and is the opposite of presidential leadership.

The Administration's new slogan is "Winning the Future." A good place to start would be to win the present.

Read the original article on The Huffington Post.

rawmilkrevolution Robert Kuttner is the author of A Presidency In Peril.

The Left Edge of the Possible

Monday, February 28th, 2011

My friend, the late Mike Harrington, used to describe his politics as "on the left wing of the possible." It's a fine aspiration. But if anything, economic problems have become more politically intractable since Mike died in 1989.

Scanning the various economic ills afflicting our Republic and its citizens, it's evident that nearly all of the solutions lie beyond what is currently deemed thinkable in mainstream politics — beyond the left edge of the possible.

It's not that my own views and values have become more radical in two decades. What has changed is that the American political center has shifted further to the right, while the twin assault on the good society by the private financial system and the organized right has become more intense.

There are only two possibilities: either we act to expand the boundaries of the possible, or we suffer the consequences.

Consider these five prime economic challenges:

Economic Recovery and the Budget.
We are told by Beltway solons of both parties that the prime malady harming the economy is the budget deficit. But nobody can explain how fiscal austerity will promote economic recovery. On the contrary, the more we cut, the more we retard economic recovery and the more we remove the cushions that make the recession slightly more bearable for regular people.

Out here in the real world, the problem isn't the deficit; it's the recession, the high rate of joblessness and the stagnant earnings.

The solution? Significantly more public investment to get the economy on a faster road to recovery and to generate more and better jobs. In the short run, the deficit increases. But over time the economy grows faster and the debt burden recedes.

Unfortunately, both parties are mainly jousting over budget cutting. We have the party of cuts versus the party of deeper cuts. Neither is putting forth a serious recovery plan. The win-win solution that benefits Main Street is beyond the left edge of the possible.

The Health System.
Once recovery comes and tax receipts return to something like normal (assuming that the right doesn't further gut the tax code), America doesn't have a deficit problem; we have a health system problem.

President Obama's Affordable Care Act insures more people, but does so through the private insurance system, and doesn't reduce overall health care costs. The Republicans would cut costs by cutting care.

Every other wealthy nation insures everyone for about 10 percent of GDP. Our system leaves out some 50 million people, and costs 17 percent of GDP. That's a difference of seven percent of GDP, far more than the structural budget deficit.

The solution? National health insurance, of course; or if you'd like to sound more like motherhood and apple pie, Medicare for All. Polls show that large majorities of Americans support it. But in mainstream politics, national health insurance is considered beyond the left edge of the possible (makes you wonder who controls mainstream politics.)

The Banking/Housing Mess.
Seven million Americans are on a path to foreclosure, one home in three has more mortgage debt than the value of the home, and housing values declined last year in 18 of the top 20 metro areas. Home ownership as a ticket of lifetime asset accumulation is being denied to the next generation.

The Administration's relief program, the Home Affordable Modification Program or HAMP, is voluntary to the banks. It is helping less than one out of ten homeowners in trouble. Stronger medicine to keep people in their homes is rejected because it would force banks to recognize losses. So foreclosures continue and housing prices continue to sag.

The solution: give bankruptcy judges the power to order reductions in mortgage principal owed. Use leverage on banks rescued by government to insist on deep refinancings, so that distressed homeowners are not forced onto the street. In the long run, banks would incur less loss, neighborhoods would be less blighted.

Are you kidding? The banks would never sit still for this, and they own too many legislators of both parties. The common-sense solution is in the usual place — beyond the left edge of the possible.

American Economic Competitiveness in the World.
We are getting our clock cleaned by Chinese state capitalism. "We," in this case, is the American economy. American-owned business is doing just fine.

The rules of the trading system, as indulged by U.S. presidents of both parties, allow China and other mercantilist nations to subsidize their industry, and to make American business an offer it can't refuse — locate in China on our terms, and you get state subsidies and docile workers. All you have to do is give sensitive trade secrets to your new Chinese partners, who will soon displace you.

The U.S., uniquely among western nations with the exception of Britain, doesn't mind if domestic industry gets hollowed out. Industrial policy is considered a sin, but it's okay for our fate to be an artifact of China's industrial policy.

The solution: one set of rules for all nations that benefit from the trading system, and strategic investments to rebuild U.S. industry.

Sorry, neither party will touch that one with a rake — beyond the left edge of the possible. Business may complain a bit about intellectual property theft, but basically the business elite likes the present deal just fine.

Petroleum and Global Climate Change.
Rising oil prices, reflecting revolutionary events in the Middle East, have dealt another setback to the shaky U.S. economy. Imported oil adds hundreds of billions of dollars to our trade deficit, and contributes to escalating global climate change.

You would think that investment in clean, domestic, job-creating, revolution-proof renewable energy, would be a no-brainer.

But that sensible policy is in the usual place, beyond the left edge of the possible.

Every one of these areas has in common this reality: the longer we delay the sensible solution, the more we suffer. Only bankers, corporate elites and oil companies gain. Tea parties benefit from the citizen confusion and frustration.

None of these alternative policies is extreme. They are simply impossible given the present constellation of American politics. Rather, it is the politics that pass for mainstream conventional wisdom that are extreme — in the sense of extremely unhelpful.

I draw one simple conclusion. We need to take back our politics, so that what is sensible is also possible. Maybe, just maybe, events in Madison and elsewhere are the beginning of that process.

Read the original article on The Huffington Post.

rawmilkrevolution Robert Kuttner is the author of A Presidency In Peril.

Wisconsin's Tunisia Moment

Wednesday, February 23rd, 2011

As events in Egypt showed, you never know what will set off mass protest.

Here at home, over-reaching by a novice Republican governor of Wisconsin has finally triggered the protest marches that have been eerily missing during the more than three years of an economic crisis that has savaged the middle and bottom and rewarded the top.

It's not as if we lack a politics of class. As mega-investor Warren Buffett famously said, there is plenty of class warfare in America, but the billionaire class is winning.

This economic crisis, after all, was brought on by excesses on Wall Street. Yet with the rest of the economy still mired in high unemployment and fiscal crises of public services, Wall Street was first to be bailed out, the first to return to exorbitant profitability, and the last to be held accountable.

Month after month, progressives have been asking each other, where are the mass protests?

You might expect popular indignation to be focused on the banks. Instead, the economic unease of ordinary people has been substantially captured by the Tea Party right and directed against government, while Beltway politicians of both parties are outdoing one another to vie for the role of more austere deficit hawk, which will hardly win back popular support for the public sector.

Then the newly energized Republicans made a couple of big mistakes. One was trying to cut too deep, on the heels of a massive tax cut for the rich. But the other miscalculation was to declare war on the one bastion of organized economic representation of regular people — the labor movement.

With new legislative majorities in 18 states, several freshman Republican governors are hoping to withdraw collective bargaining rights from public employees and to otherwise demonize nurses, teachers, fire-fighters, cops, sanitation workers and others who have managed to hang on to decent pensions and health coverage.

This looked to be a cakewalk. Public workers, seemingly, are an easy target. After all, they still have jobs and benefits. Instead of demanding to know why our own pension and health coverage is so lousy, the rest of us are supposed to resent middle income workers in the public sector for having health and pension benefits better than ours. It is a carefully cultivated politics of division and resentment.

But this time, Republicans overreached, and the long smoldering economic unease has finally sparked mass demonstrations. Rather than following the script and resenting public employees as a privileged "other," the citizens of Madison increasingly view teachers, nurses, cops, firefighters, and other public workers as their violated neighbors.

One recent poll showed that two-thirds of Wisconsin citizens polled (none from public employee families) felt that Walker had gone too far. Even citizens who wanted public workers to pay more of the costs of their benefits concluded that his scheme was excessive. Another poll, sponsored by an Illinois Manufacturers Association, found a similar result.

Now, mass protest has broken out in other states where Republican governors are attacking unions, tens of thousands of other citizens are joining their union brothers and sisters, and even the mainstream press is taking sympathetic notice. In a fine piece in Saturday's Times, Michael Cooper and Kit Seelye asked: "Is Wisconsin the Tunisia of collective bargaining rights?"

Maybe it is. And not just of collective bargaining rights.

At long last, resentment against the economic crisis is beginning to find its natural home, where it always belonged — against financial elites, their privileges and Republican allies. It is dawning on ordinary voters that something is wrong when hedge fund billionaires and investment bankers are making more than ever, while public workers (average Wisconsin pay: $48,000) are being made the scapegoats.

Why did this take so long? For one thing, organizing against this economic collapse was always a challenge because the details of the financial crisis are esoteric. Though the crisis was triggered by deregulation, by the capture of both parties by financial elites, and by reckless greed on Wall Street, the right was able to sow just enough confusion about "deadbeat" sub-prime borrowers and corrupted government guarantors at Fannie Mae as to diffuse culpability.

A Democratic president of the United States, moreover, has been reluctant to point the finger at bankers, and seeks reconciliation with a business elite which claims hurt feelings. So over time, the recession seems like a natural disaster like the extreme weather (which lately is a man-made disaster too, but I digress). Anxious people hunker down rather than taking to the streets. Responsibility is obscured.

And, what is being done to private sector workers seems impersonal. Orders are down, so layoffs ensue. Outsourcing seems inevitable if America are to stay competitive. It's all in the passive voice. The invisible hand did it.

But unlike the broader economic crisis, which is mistakenly viewed as a random unfortunate event, the actions by Governor Scott Walker are as intentional and explicit as they are malicious. Walker cut corporate taxes, then proclaimed a budget crisis, and then proposed to cut worker pensions and health benefits — and just to rub salt in workers' wounds to eliminate collective bargaining rights as well.

Unlike the nameless financial elite, Walker has a face and an address. He is directly accountable politically.

And how fitting that it was the labor movement that fought back and kindled broader protests. We needed a reminder that individual, unorganized citizens are largely powerless against the predations of highly organized economic elites.

The labor movement may directly represent only one worker in eight, but it is the strongest organized counterweight to economic elites and a wall-to-wall rightwing takeover. As it the 1930s, labor needs to come out of this economic crisis reborn and strengthened.

It is also fitting that former senator Russ Feingold has praised the demonstrators and called on all politicians who stand with labor to join them. This is an overdue reminder of the importance of political leadership. And — hosannas! — even a conflict-averse President Obama has rebuked Walker for "an assault on unions."

All of this will energize not only the labor movement and "Democratic base," but clarify what this economic crisis is all about, and alter the dynamics of its politicals.

I recently interviewed Mary Kay Henry, the new president of the Service Employees International Union. "Politicians put their fingers to the wind," she memorably said. "We need to be the wind."

Governor Walker and the Republican majority in the Wisconsin legislature may win this round. Public workers in Wisconsin and elsewhere may end up paying more for their heath coverage and pension benefits, a compromise already offered by Marty Beil, president of the Wisconsin State Employees Union.

But something important that was largely missing has been kindled. Popular protest against financial abuses, top-down class warfare, clueless Republicans, and misplaced austerity is finally in the air. The labor movement is leading, and even non-union Americans are realizing why organized labor is all about protecting the middle class generally. On all counts, it's about time.

Read the original article on The Huffington Post.

rawmilkrevolution Robert Kuttner is the author of A Presidency In Peril.

Gandhi in East Boston

Sunday, February 20th, 2011

How wonderful that an obscure, 83-year-old American disciple of Gandhi helped inspire and facilitate the Egyptian revolution. But the mainstream media don't quite know what to make of Gene Sharp, the man whose theories of non-violence and practical training manuals have helped inspire and train pro-democracy activists from Albania to Zimbabwe.

The New York Times sent reporter Sheryl Gay Stolberg to track down Sharp at his very modest East Boston home that doubles as his Albert Einstein Institute. But in an otherwise informative page one profile, Stolberg (or her editors) composed this appalling paragraph, which could be used in journalism classes as an epic example of both missing the point and botching an attempt to cover one's ass lest the reporter look like a radical sympathizer:

Some people suspect Mr. Sharp of being a closet peacenik and a lefty — in the 1950s, he wrote for a publication called "Peace News" and he once worked as personal secretary to A.J. Muste, a noted labor union activist and pacifist — but he insists that he outgrew his own earlier pacifism and describes himself as "trans-partisan."

Jesus wept! Of course Gene Sharp is a pacifist. Non-violent, passive resistance has been the whole point of his life's work. You might as well write that some people suspect Gandhi of being a pacifist.

There is an American chain that links Sharp to Martin Luther King, to the Wobblies, to Susan B. Anthony, Fredrick Douglass, right back to Tom Paine and Thomas Jefferson. If the modern America that props up despots like Mubarak retains any credibility at all in a world suffering repression but trying to declare independence, it is due to this authentically American lineage.

Read the original article at The American Prospect.

rawmilkrevolution Robert Kuttner is the author of A Presidency In Peril.

From Depression to Public Inspiration

Monday, February 14th, 2011

Gingerly driving home from northern New Jersey to Boston in a last minute rented car, on a snowy day when the airlines were unreliable and Amtrak was vulnerable to freezing brakes, I crossed over the George Washington Bridge (completed 1931). It was the longest suspension bridge in the world until the completion of the Golden Gate Bridge (1937), which was opened for traffic just after the Oakland-San Francisco Bay Bridge (1936). I also crossed the Triborough Bridge (completed 1936) and drove through the blizzard along a chain of the Northeast's loveliest highways, the Hutchinson River (1937), Merritt (1940), and Wilbur Cross parkways (1949).

Oddly enough, these and other very large scale pioneering public works were launched or completed during the Great Depression, despite a crisis of public finance and a call in some quarters for belt-tightening. Indeed, the Triborough Bridge, now renamed for Robert F. Kennedy, was literally begun on October 29, 1929, the day of the stock market crash; work was suspended until financing was rescued by Franklin Roosevelt's New Deal.

Did you ever wonder why some of America's greatest public works projects were accomplished during its worst depression? Because that generation of leaders, at every level of government, did not see a depression as a moment for further belt-tightening, but as a time for expansive public activity.

While some of these bridges, dams, tunnels, highways, reclamation and conservation projects were initiated at the state level, most eventually relied on federal help. These and thousands of other New Deal projects employed millions of people, helped the American economy become more efficient and productive, led to breakthroughs in design and engineering, and paid for themselves many times over. When pre-1929 funding dried up, Roosevelt used public funds from the Reconstruction Finance Corporation, the Tennessee Valley Authority, and other public agencies to make sure that projects were expanded, not deferred.

President Obama has the right idea when he calls for major investment in 21st Century infrastructure. But he sends a mixed message when he also calls for a freeze on other domestic spending and cuts in public employment, undercutting the theme of the necessity of government during an economic emergency. The Republicans, meanwhile, are divided between fiscal conservatives who would slash public outlay and tea-party militants who would gut it even further.

The Republican triumph of November 2010 could be short lived. The public is starting to notice just how divided the party is, how destructive and unhelpful is its economic program, and how easily its already far-right "mainstream" increasingly gives into the GOP's lunatic fringe.

Obama, with his characteristic tone of bridge-building and moderation, may hope the gods will smile on him and the Republican Party will self-destruct while he holds the reasonable high ground. But that won't just happen. And he could be helping it along. He should be calling out the GOP's economic crazies, not just appealing to the better angels of the US Chamber of Commerce.

The fact that a majority of the voters who turned out in November 2010 voted Republican should not deter him. Many did not quite appreciate what they were getting. Many more might have turned out, and might do so in 2012, to vote for a Democrat with a better and more compelling story.

We need actual bridge building, as we had during the last great depression, not just metaphoric bridge building.

I started to compose a sentence that referred to the "third-world" condition of America's infrastructure. But that gets it backwards, for the third world today is where a lot of pioneering infrastructure is underway. China has something like one-sixth our per capita GDP. But somehow China can afford high speed rail at more than token levels; as well as large scale conversion to a green economy. As a far richer society, we could be doing even better.

President Obama spoke brave words about a high speed rail system within the reach of 80 percent of Americans within 25 years. This would be an achievement comparable to the great public works of the New Deal. It would revive major industries and supply chains, jump start transportation engineering, increase the efficiency of our economy, and create millions of jobs. But first, we need a politics to support it. That will take more than rhetoric — it will take real leadership.

I have worked for a number of organizations in my career, as a journalist, activist, and teacher. In every case, the presence or absence of leadership has made an immense difference in an enterprise's success or failure.

This is also the case when it comes to nations. Imagine the world if Gandhi, or Mandela, or Havel had never lived. Or if Lincoln or Rabin or Sadat or King or the Kennedys had not been murdered just when their leadership was most needed. We will soon see whether the skill of Egypt's leaders is equal to the bravery of its people.

Barack Obama could yet prove to be an inspirational leader. The Republicans are setting the table for a real Democratic resurgence. But this will require a far more assertive leader, painting a picture of a very different economy — a leader not meeting Republicans halfway, but greeting their insane vision of America with the jaunty scorn that it invites.

Read the original article on The Huffington Post.

rawmilkrevolution Robert Kuttner is the author of A Presidency In Peril.

Business Doesn't Need American Workers

Monday, February 7th, 2011

Once again, the job numbers are dismal. In January, the U.S. economy created just 36,000 domestic jobs, far below the roughly 145,000 that economists had forecast. The unemployment rate fell, to 9 percent, but only because more and more discouraged workers are giving up and leaving the workforce.

The U.S. still has a jobs gap of about 14 million jobs, and that number is increasing as the labor force grows. Counting people who've given up, or who are working part time when they want full time jobs, the real unemployment number is around 17 percent. America now has about 25 million people either out of work or underemployed.

Meanwhile, corporate profits continue to set records. Profits in the third quarter of 2010 were 1.659 trillion, about 28 percent higher than a year before, and the highest year-to-year increase on record.

What's going on? Very simply, America's corporations no longer need America's workers.

As Harold Meyerson documents in a brilliant piece for The American Prospect, our most admired corporations — GE, Apple, Hewlett Packard, Intel — are creating ever more jobs overseas and relatively fewer at home. This has the double benefit of taking advantage of cheap labor abroad and disciplining workers to accept low wages at home. Along with the high unemployment rates have come declining earnings. Meyerson writes:

"In 2001, 32 percent of the income of the firms on Standard & Poor's index of the 500 largest publicly traded U.S. companies came from abroad. By 2008, that figure had grown to 48 percent."

This record contrasts dramatically with that of the right's favorite whipping boy — Western Europe. Germany is gaining jobs at a rapid clip. Its industrialists are committed to producing at home, and just in case they get ideas of making outsourcing a way of life, they have strong unions who negotiate agreements on where production is located.

Germany's labor costs are the highest in the world, but Germany nonetheless runs the world's largest export surplus — 7 percent of GDP — while America runs chronic trade deficits.

Barring drastic policy changes, our jobless recovery is likely to continue. There are three parts to the problem.

First, while the economy is still in deep recession, both the administration and its Republican critics are already talking about steeper budget cuts. President Obama talks a good game about infrastructure spending, but it's hard to see where the funds will come from as deficit hawks in both parties prevail.

In Sunday's New York Times, Jacob Lew, the president's budget director, wrote a depressing (in both senses of the word) oped piece on the case for deeper budget cuts. In theory, massive infrastructure spending could create a lot of good jobs, but the Obama budget is likely to offer new spending at token levels to prove his good faith as a deficit-hawk, and the Republicans will likely deny him even that.

Then there is the problem that Meyerson nails. The Obama administration is not about to take issue with American companies that profit from locating ever more production abroad. The corporate elite is fiercely opposed to any limits on its freedom to relocate, and Obama is on a mission to make peace with big business. The administration continues to promote "free trade" deals on the premise that they will create jobs — but more and more of those jobs get created offshore.

Both political parties are in denial about the plain fact that American industry is competing against an industrial system in China radically different from our own. If a company like GE wants to operate in China, the Beijing regime extracts conditions that violate the spirit if not the letter of the World Trade Organization.

Companies are made to take on Chinese partners, to transfer sensitive proprietary technology, and to shift their production and R&D to China. In exchange, they get government subsidies and docile workers. Eventually, much of their production is displaced by their Chinese partners, but in the meantime they make a lot of money.

In the past two decades, company after company concluded that the U.S. government didn't really care if we lost our manufacturing base. The Chinese government was making them an offer they couldn't refuse, so one by one they made a separate peace with Beijing.

At the latest U.S.-China summit, there was clucking about its overvalued currency, though last week the Treasury, out of solicitude for the feelings of Beijing's leaders, once again declined to name China as a currency manipulator.

But the overvalued Renminbi is a sideshow. The main game, which even relative hawks in the U.S. government just won't raise, is China's rigged industrial system. Why won't American officials go there? Because American corporations have adapted just fine.

Finally, there is the service economy. As many defenders of off-shoring have pointed out, even if Apple produces most of its products in China, a lot of the value-added stays in the U.S. Apple sales create jobs for workers in retail stores, warehouses, and shipping, as well as a relative handful of elite software and hardware designer jobs, not to mention corporate profits.

Swell, but in the absence of a labor movement, or higher minimum wages, or other pressure for decent retailing wages, the service economy is turning into a Wal-Mart economy, where domestic service jobs that are created mostly pay lousy wages.

These alarming job trends were not caused by the financial collapse that began in 2007. Rather, the prolonged recession revealed deep structural changes in the U.S. economy that reflect a gross imbalance between a corporate elite and ordinary working people.

So if you want to know why the Democratic Party did so badly in the 2010 midterms, it's because the administration lacked a plausible story about how to alter these basic dynamics. And it lacked that story because it was unwilling to challenge the corporate business model that disdains American workers. In light of that reality, the latest gestures by the president to show the business elite just what a good fellow he is are not just disappointing, but they are foolish politics.

The president's approval ratings may be up slightly in the wake of the Tucson shootings. The attack gave Obama an opening to shame the Republicans for their shrill partisanship and to model civility. But high-minded gestures will not cure the jobs crisis. The 2012 election will be won or lost in the industrial heartland, where states like Michigan, Ohio, Wisconsin, Missouri, and Pennsylvania are devastated from the recession, and whose jobs are not coming back as long as current policies continue.

There is a whole other strategy available for dealing with the jobs crisis — a constructive economic nationalism. But neither the White House nor the Republican opposition is offering it.

Read the original article at The Huffington Post.

rawmilkrevolution Robert Kuttner is the author of A Presidency In Peril.