Why The Economy Can't Get Out Of First Gear

By Robert Reich, cross-posted from his website

DonkeyHotey

Rarely in history has the cause of a major economic problem been so clear yet have so few been willing to see it.

The major reason this recovery has been so anemic is not Europe’s debt crisis. It’s not Japan’s tsumami. It’s not Wall Street’s continuing excesses. It’s not, as right-wing economists tell us, because taxes are too high on corporations and the rich, and safety nets are too generous to the needy. It’s not even, as some liberals contend, because the Obama administration hasn’t spent enough on a temporary Keynesian stimulus.

The answer is in front of our faces. It’s because American consumers, whose spending is 70 percent of economic activity, don’t have the dough to buy enough to boost the economy – and they can no longer borrow like they could before the crash of 2008.

If you have any doubt, just take a look at the Survey of Consumer Finances, released Monday by the Federal Reserve. Median family income was $49,600 in 2007. By 2010 it was $45,800 – a drop of 7.7%.

All of the gains from economic growth have been going to the richest 1 percent – who, because they’re so rich, spend no more than half what they take in.

Can I say this any more simply? The earnings of the great American middle class fueled the great American expansion for three decades after World War II. Their relative lack of earnings in more recent years set us up for the great American bust.

Government Is Not The Problem

Robbie Conal

Democrats have been on the defensive about the role of government at least since Ronald Reagan declared in his first inaugural address that  "government is not the solution to our problem; government is the problem."  Reagan was so effective in portraying government intervention as nothing more than providing assistance to Cadillac-driving welfare queens that his successor, Bush the Elder, was able to  disparage his opponent Michael Dukakis merely by referring to him as a "liberal."  And when the Democrats finally took back the White House, it was Bill Clinton who boasted in his second State of the Union address that "the era of big government is over." 

E.J. Dionne argues in an excellent column today that we must "turn Ronald Reagan’s declaration on its head: Opposition to government isn’t the solution. Opposition to government was and remains the problem."

Decades of anti-government rhetoric have made liberals wary of claiming their legacy as supporters of the state’s positive role. That’s why they have had so much trouble making the case for President Obama’s stimulus program passed by Congress in 2009. It ought to be perfectly obvious: When the private sector is no longer investing, the economy will spin downward unless the government takes on the task of investing. And such investments — in transportation and clean energy, refurbished schools and the education of the next generation — can prime future growth.

Yet the drumbeat of propaganda against government has made it impossible for the plain truth about the stimulus to break through. It was thus salutary that Douglas Elmendorf, the widely respected director of the Congressional Budget Office, told a congressional hearing last week that 80 percent of economic experts surveyed by the University of Chicago’s Booth School of Business agreed that the stimulus got the unemployment rate lower at the end of 2010 than it would have been otherwise. Only 4 percent disagreed. The stimulus, CBO concluded, added as many as 3.3 million jobs during the second quarter of 2010, and it may have kept us from lapsing back into recession.

So when conservatives say, as they regularly do, that “government doesn’t create jobs,” the riposte should be quick and emphatic: “Yes it has, and yes, it does!”

Indeed, our unemployment rate is higher today than it should be because conservatives blocked additional federal spending to prevent layoffs by state and local governments — and because progressives, including Obama, took too long to propose more federal help. Obama’s jobs program would be a step in the right direction, and he’s right to tout it now. But he should have pushed for a bigger stimulus from the beginning. The anti-government disposition has so much power that Democrats and moderate Republicans allowed themselves to be intimidated into keeping it too small.

As Dionne concludes, "It is past time that we affirm government’s ability to heal the economy, and its responsibility for doing so."

The Big Lie Coup d'Etat

By Robert Reich, cross-posted from his website

JP Morgan Chase,  Goldman Sachs, BP, Chevron, WalMart, and billionaires Charles and David Koch are launching a multi-million dollar TV ad buy Tuesday blasting President Obama over the national debt.

Actually, I don’t know who’s behind this ad because there’s no way to know. And that’s a big problem.
The front group for the ad is Crossroads GPS, the sister organization to the super PAC American Crossroads run by Republican political operative Karl Rove.

Because Crossroads GPS is a tax-exempt nonprofit group, it can spend unlimited money on politics — and it doesn’t have to reveal where it gets the dough.

By law, all it has to do is spent most of the money on policy “issues,” which is a fig leaf for partisan politics.
Here’s what counts as an issue ad, as opposed to a partisan one. The narrator in the ad Crossroads GPS is launching solemnly intones: “In 2008, Barack Obama said, ‘We can’t mortgage our children’s future on a mountain of debt.’ Now he’s adding $4 billion in debt every day, borrowing from China for his spending. Every second, growing our debt faster than our economy,” he continues. “Tell Obama, stop the spending.”
This is a baldface lie, by the way.

Obama isn’t adding to the debt every day. The debt is growing because of obligations entered into long ago, many under George W. Bush – including two giant tax cuts that went mostly to the very wealthy that were supposed to be temporary and which are still going, courtesy of Republican blackmail over raising the debt limit.

In realty, government spending as a portion of GDP keeps dropping.

As I said, I don’t know who’s financing this big lie but there’s good reason to think it’s some combination of Wall Street, big corporations, and the billionaire Koch brothers.

According to the reliable inside-Washington source “Politico,” the Koch brothers’ network alone will be spending $400 million over the next six months trying to defeat Obama, which is more than Senator John McCain spent on his entire 2008 campaign.

Big corporations and Wall Street are also secretly funneling big bucks into front groups like the U.S. Chamber of Commerce that will use the money to air anti-Obama ads, while keeping secret the identities of these firms.

Looking at the all the anti-Obama super PACs and political fronts like Crossroads GPS, Politico estimates the anti-Obama forces (including the Romney campaign) will outspend Obama and pro-Obama groups by 2 to 1.

How can it be that big corporations and billionaires will be spending unlimited amounts on big lies like this one, without any accountability because no one will know  where the money is coming from?

Blame a majority of the Supreme Court in its grotesque 2010 Citizens United vs. Federal Election Commission decision — as well as the IRS for lax enforcement that lets political front groups like Crossroads GPS or the U.S. Chamber of Commerce pretend they’re not political.

But you might also blame something deeper, more sinister.

I’m not a conspiracy theorist (you can’t have served in Washington and seriously believe more than two people can hold on to a big story without it leaking), but I fear that at least since 2010 we’ve been witnessing a quiet, slow-motion coup d’etat whose purpose is to repeal every bit of progressive legislation since the New Deal and entrench the privileged positions of the wealthy and powerful — who haven’t been as wealthy or as powerful since the Gilded Age of the late 19th century.

Its technique is to inundate America with a few big lies, told over and over (the debt is Obama’s fault and it’s out of control; corporations and the very rich are the “job creators” that need tax cuts; government is the enemy, and its regulations are strangling the private sector; unions are bad; and so on), and tell them so often they’re taken as fact.

Then having convinced enough Americans that these lies are true, take over the White House, Congress, and remaining states that haven’t yet succumbed to the regressive right (witness Tuesday’s recall election in Wisconsin).

I desperately hope I’m wrong, but all there’s growing evidence I may be right. 


Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley.  He writes a blog at www.robertreich.org.  His most recent book is Beyond Outrage

The Bain Of Our Existence

By Mike Lux, cross-posted from Crooks and Liars

I love this Bain debate. It is exactly the kind of debate about the nature of business and job creation we need to be having in this campaign. The Republicans, along with pro-Wall Street Democrats, are squealing like stuck pigs about the Obama campaign “attacking free enterprise” because they want to change the subject fast. They are saying to themselves: please, let’s talk about anything else. Deficits would be their first choice, but anything would be preferable. Maybe we’ll see them start talking about contraceptives and how people shouldn’t have sex again just to change the subject. Because this debate goes straight to the heart of what kind of economy we should be trying to build in this country.

This is isn’t about being for or against free enterprise. This is about how the economy should work better for everyone in it, not just the top 1 percent. The Republicans -- and Democrats like Cory Booker and Harold Ford, who both have raised millions of dollars in Wall Street money (including money from Bain) for their campaigns -- say that it is great when financial corporations like Bain make money by loading up the companies they buy with debt, taking all the tax write-offs the law allows, and then walking away with tons of money whatever happens to the original company. In fact, the companies Bain bought frequently went bankrupt, and Bain usually profited when those companies did go belly-up because of tax write-offs and sucking the companies’ assets dry. But in this line of reasoning, it’s all good, because capitalism should be unrestrained and some people got very rich.

What Obama and other Democrats are arguing is that our government should be on the side of the businesses that create not just wealth for a few at the top, but jobs and incomes for a lot of people. That is why Obama made the incredibly gutsy move to save the American auto industry, a policy that saved 1.45 million jobs in the short run, and kept desperately needed manufacturing jobs in this country for years to come. It is why Obama has made big investments in the budget for Small Business Administration jobs. It is why investments have been made in clean energy jobs of the future. It is why the U.S. Department of Agriculture has emphasized rural economic development and small business development in areas where jobs and incomes are desperately needed.

Democratic policies are in fact far more pro-business than policies like the Romney-Ryan budget, which independent studies estimate would cost the nation more than 4 million jobs in the next two years. That’s a lot of business customers who no longer have money to spend.

The Republican attack machine (helped by Democrats like Booker and Ford who have been feeding at the Wall Street trough for their entire careers) wants to intimidate the Obama campaign by making the claim that any attack on greedy business practices like the ones Romney perfected at Bain is an attack on all business and the market. It’s the same kind of argument Republicans make when they complain about class warfare politics when Democrats suggest that millionaires ought to pay a little more in taxes. It is an utterly soulless, amoral argument. But this is a fight Democrats can and will win if we make our case, because I think most people understand that there are ethical and unethical business practices. And they get that there is a difference between making money by manipulating the tax code and squeezing all the value out of businesses before throwing them away, and making money by making and selling good products that people want to buy. Biden laid this case out beautifully in a speech in Youngstown:

Of Boardrooms And Bedrooms

By Robert Reich, cross-posted from his website

Mario Piperni

The 2012 election should be about what’s going on in America’s boardrooms, but Republicans would rather it be about America’s bedrooms.

Mitt Romney says he’s against same-sex marriage; President Obama just announced his support. North Carolina voters have approved a Republican-proposed amendment to the state constitution banning same-sex marriage. Minnesota voters will be considering a similar amendment in November. Republicans in Maryland and Washington State are seeking to overturn legislative approval of same-sex marriage there.

Meanwhile, Republicans have introduced over four hundred bills in state legislatures aimed at limiting womens’ reproductive rights – banning abortions, requiring women seeking abortions to have invasive ultra-sound tests beforehand, and limiting the use of contraceptives.

The Republican bedroom crowd don’t want to talk about the nation’s boardrooms because that’s where most of their campaign money comes from. And their candidate for president has made a fortune playing board rooms like checkers.

Yet America’s real problems have nothing to do with what we do in our bedrooms and everything to do with what top executives do in their boardrooms and executive suites.

We’re not in trouble because gays want to marry or women want to have some control over when they have babies. We’re in trouble because CEOs are collecting exorbitant pay while slicing the pay of average workers, because the titans of Wall Street demand short-term results over long-term jobs, and because of a boardroom culture that tolerates financial conflicts of interest, insider trading, and the outright bribery of public officials through unlimited campaign “donations.”

Our crisis has nothing to do with private morality. It’s a crisis of public morality – of abuses of public trust that undermine the integrity of our economy and democracy and have led millions of Americans to conclude the game is rigged.y and democracy and have led millions of Americans to conclude the game is rigged.

What’s truly immoral is not what adults choose to do with other consenting adults. It’s what those with great power have chosen to do to the rest of us.

It is immoral that top executives are richly rewarded no matter how badly they screw up while most Americans are screwed no matter how hard they work.

Regressive Republicans have no problem intruding on the most personal and most intimate decisions any of us makes while railing against government intrusions on big business.

They don’t hesitate to hurl the epithets “shameful,” “disgraceful,” and “contemptible” at private moral decisions they disagree with, while staying stone silent in the face of the most contemptible violations of public trust at the highest reaches of the economy.

We must protect and advance private rights of individuals over intimate bedroom decisions. We must also stop the abuses of economic power and privilege that are characterizing so many decisions in the nation’s boardrooms and executive suites.

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley.  He writes a blog at www.robertreich.org.  His most recent book is Beyond Outrage.

What America Can Learn From The Revolt In Europe

By Robert Reich, cross-posted from his website

Who’s an economy for? Voters in France and Greece have made it clear it’s not for the bond traders.

Referring to his own electoral woes, Prime Minister David Cameron wrote Monday in an article in the conservative Daily Telegraph: “When people think about the economy they don’t see it through the dry numbers of the deficit figures, trade balances or inflation forecasts — but instead the things that make the difference between a life that’s worth living and a daily grind that drags them down.”

Cameron, whose own economic policies have worsened the daily grind dragging down most Brits, may be sobered by what happened over the weekend in France and Greece – as well as his own poll numbers. Britain’s conservatives have been taking a beating.

In truth, the choice isn’t simply between budget-cutting austerity, on the one hand, and growth and jobs on the other. 

It’s really a question of timing. And it’s the same issue on this side of the pond. If government slices spending too early, when unemployment is high and growth is slowing, it makes the debt situation far worse.

That’s because public spending is a critical component of total demand. If demand is already lagging, spending cuts further slow the economy – and thereby increase the size of the public debt relative to the size of the overall economy.

You end up with the worst of both worlds – a growing ratio of debt to the gross domestic product, coupled with high unemployment and a public that’s furious about losing safety nets when they’re most needed.

The proper sequence is for government to keep spending until jobs and growth are restored, and only then to take out the budget axe.

If Hollande’s new government pushes Angela Merkel in this direction, he’ll end up saving the euro and, ironically, the jobs of many conservative leaders throughout Europe – including Merkel and Cameron.

But he also has an important audience in the United States, where Republicans are trying to sell a toxic blend of trickle-down supply-side economics (tax cuts on the rich and on corporations) and austerity for everyone else (government spending cuts). That’s exactly the opposite of what’s needed now.  

Yes, America has a long-term budget deficit that’s scary. So does Europe. But the first priority in America and in Europe must be growth and jobs. That means rejecting austerity economics for now, while at the same time demanding that corporations and the rich pay their fair share of the cost of keeping everyone else afloat.

President Obama and the Democrats should set a clear trigger — say, 6 percent unemployment and two quarters of growth greater than 3 percent — before whacking the budget deficit.

And they should set that trigger now, during the election, so the public can give them a mandate on Election Day to delay the “sequestration” cuts (now scheduled to begin next year) until that trigger is met.

Welcome To The 2012 Hunger Games

Sending Debt Peonage, Poverty, and Freaky Weather Into The Arena

By Rebecca Solnit, cross-posted from TomDispatch

When I was growing up, I ate books for breakfast, lunch, and dinner, and since I was constantly running out of reading material, I read everyone else’s -- which for a girl with older brothers meant science fiction. The books were supposed to be about the future, but they always turned out to be very much about this very moment.

Some of them -- Robert Heinlein’s Stranger in a Strange Land -- were comically of their time: that novel’s vision of the good life seemed to owe an awful lot to the Playboy Mansion in its prime, only with telepathy and being nice added in. Frank Herbert’s Dune had similarly sixties social mores, but its vision of an intergalactic world of disciplined desert jihadis and a great game for the substance that made all long-distance transit possible is even more relevant now.  Think: drug cartels meet the oil industry in the deep desert.

We now live in a world that is wilder than a lot of science fiction from my youth. My phone is 58 times faster than IBM’s fastest mainframe computer in 1964 (calculates my older brother Steve) and more powerful than the computers on the Apollo spaceship we landed on the moon in 1969 (adds my nephew Jason). Though we never got the promised jetpacks and the Martians were a bust, we do live in a time when genetic engineers use jellyfish genes to make mammals glow in the dark and nerds in southern Nevada kill people in Pakistan and Afghanistan with unmanned drones.  Anyone who time-traveled from the sixties would be astonished by our age, for its wonders and its horrors and its profound social changes. But science fiction is about the present more than the future, and we do have a new science fiction trilogy that’s perfect for this very moment.

Sacrificing the Young in the Arenas of Capital 

The Hunger Games, Suzanne Collins’s bestselling young-adult novel and top-grossing blockbuster movie, is all about this very moment in so many ways. For those of you hiding out deep in the woods, it’s set in a dystopian future North America, a continent divided into downtrodden, fearful districts ruled by a decadent, luxurious oligarchy in the Capitol. Supposedly to punish the districts for an uprising 74 years ago, but really to provide Roman-style blood and circuses to intimidate and distract, the Capitol requires each district to provide two adolescent Tributes, drawn by lottery each year, to compete in the gladiatorial Hunger Games broadcast across the nation.

That these 24 youths battle each other to the death with one lone victor allowed to survive makes it like -- and yet not exactly like -- high school, that concentration camp for angst and competition into which we force our young. After all, even such real-life situations can be fatal: witness the gay Iowa teen who took his life only a few weeks ago after being outed and taunted by his peers, not to speak of the epidemic of other suicides by queer teens that Dan Savage’s “It Gets Better” website, film, and books aspire to reduce.

But really, in this moment, the cruelty of teens to teens is far from the most atrocious thing in the land. The Hunger Games reminds us of that.  Its Capitol is, of course, the land of the 1%, a sort of amalgamation of Fashion Week, Versailles, and the KGB/CIA. Collins’s timely trilogy makes it clear that the 1%, having created a system of deeply embedded cruelty, should go, something highlighted by the surly defiance of heroine Katniss Everdeen -- Annie Oakley, Tank Girl, and Robin Hood all rolled into one -- who refuses to be disposed of.

Now, in our world, gladiatorial entertainment and the disposability of the young are mostly separate things (except in football, boxing, hockey, and other contact sports that regularly result in brain damage, and sometimes even in death). But while the Capitol is portrayed as brutal for annually sacrificing 23 teenagers from the Districts, what about our own Capitol in the District of Columbia? It has a war or two on, if you hadn’t noticed.

In Iraq, 4,486 mostly young Americans died.  If you want to count Iraqis (which you should indeed want to do), the deaths of babies, children, grandmothers, young men, and others total more than 106,000 by the most conservative count, hundreds of thousands by others. Even the lowest numbers represent enough kill to fill nearly 5,000 years of Hunger Games.

Then, of course, there are thousands more Americans who were so grievously wounded they might have died in previous conflicts, but are now surviving with severe brain damage, multiple missing limbs, or other profound mutilations. And don’t forget the trauma and mental illness that mostly goes unacknowledged and untreated or the far more devastating Iraqi version of the same. And never mind Afghanistan, with its own grim numbers and horrific consequences.

Our wartime carnage has been on a grand scale, but it hasn’t been on television in any meaningful way; it’s generally been semi-hidden by most of the American media and the government, which censored images of returning coffins, corpses, civilian casualties, and anything else uncomfortable (though in our science-fiction era when every phone is potentially a video camera, the leakage has still been colossal). Most of us did a good job of being distracted by other things -- including reality TV, of course.  The US Ambassador and military commander in Afghanistan were furious not that our soldiers struck jokey poses with severed limbs, but that the Los Angeles Times dared to publish them last month. And those whistleblowers who took the effort to reveal the little men behind the throne are facing severe punishment.  Witness one Hunger-Games-style hero, Bradley Manning, the slight young soldier turned alleged leaker, long held in inhumane conditions and now facing a potential life sentence.

The Zombie Rises: The Return Of Simpson-Bowles

By Robert Borosage, cross-posted from Campaign for America's Future

Take a good look at Europe - bloody riots in Athens and Madrid, rising unemployment, spreading poverty and suicide, and a deepening recession - because the current American elite consensus bizarrely wants to drive America down that same path.

Europe's miseries come from imposing austerity before recovering from the recession caused by the financial collapse. Conservatives in Germany and England inflicted harsh measures to enforce budget discipline - hiking taxes, cutting spending.

In the US, the Obama recovery plan and the deal with Republicans over extending the Bush tax cuts combined to limit and slow the imposition of austerity. The result: Europe is sinking, while the US economy retains slow, but halting growth.

But now the deficit hawks are gearing up for another run at driving the US back into economic recession.

At the end of the year, we face a train wreck. After the November election, the Bush tax cuts, the payroll tax cut and extended unemployment benefits expire. The automatic cut - "sequester" in budget speak - of nearly 10% of military and domestic discretionary spending (everything except guaranteed programs like Medicare and Social Security and interest on the national debt) kicks in. We even hit the debt limit to add to the high stakes.

If all this is allowed to occur, it will subtract over 3% of GDP from an economy growing at 2.5% or less. A drop back into recession would be almost inevitable. So a deal is needed.

But the deal in everyone's head is some kind of "grand bargain," like that almost cut by House Speaker John Boehner and President Obama last year, or like that outlined by the co-chairs of the President's deficit commission, Erskine Bowles and Alan Simpson (which failed to gain the needed votes to pass the commission).

A Fair Economy Is Not Incompatible With Growth But Essential To It

By Robert Reich, cross-posted from his website

One of the most pernicious falsehoods you’ll hear during the next seven months of political campaigning is there’s a necessary tradeoff between fairness and economic growth. By this view, if we raise taxes on the wealthy the economy can’t grow as fast.

Wrong. Taxes were far higher on top incomes in the three decades after World War II than they’ve been since. And the distribution of income was far more equal. Yet the American economy grew faster in those years than it’s grown since tax rates on the top were slashed in 1981.

This wasn’t a post-war aberration. Bill Clinton raised taxes on the wealthy in the 1990s, and the economy produced faster job growth and higher wages than it did after George W. Bush slashed taxes on the rich in his first term.

If you need more evidence, consider modern Germany, where taxes on the wealthy are much higher than they are here and the distribution of income is far more equal. But Germany’s average annual growth has been faster than that in the United States.

You see, higher taxes on the wealthy can finance more investments in infrastructure, education, and health care – which are vital to a productive workforce and to the economic prospects of the middle class. 

Higher taxes on the wealthy also allow for lower taxes on the middle – potentially restoring enough middle-class purchasing power to keep the economy growing. As we’ve seen in recent years, when disposable income is concentrated at the top, the middle class doesn’t have enough money to boost the economy.

Finally, concentrated wealth can lead to speculative bubbles as the rich in the same limited class of assets – whether gold, dotcoms, or real estate. And when these bubbles pop the entire economy suffers.

What we should have learned over the last half century is that growth doesn’t trickle down from the top. It percolates upward from working people who are adequately educated, healthy, sufficiently rewarded, and who feel they have a fair chance to make it in America.

Fairness isn’t incompatible with growth. It’s necessary for it. 

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley.  He writes a blog at www.robertreich.org.  His most recent book is Aftershock.

Quote Of The Day

"The "Jumpstart Our Business Startups Act" (in addition to everything else, the Act has an annoying, redundant title) will very nearly legalize fraud in the stock market."

Matt Taibbi, Rolling Stone, Why Obama's JOBS Act Couldn't Suck Worse

Here's more:

In fact, one could say this law is not just a sweeping piece of deregulation that will have an increase in securities fraud as an accidental, ancillary consequence. No, this law actually appears to have been specifically written to encourage fraud in the stock markets.

Ostensibly, the law makes it easier for startup companies (particularly tech companies, whose lobbyists were a driving force behind its passage) to attract capital by, among other things, exempting them from independent accounting requirements for up to five years after they first begin selling shares in the stock market.

The law also rolls back rules designed to prevent bank analysts from talking up a stock just to win business, a practice that was so pervasive in the tech-boom years as to be almost industry standard.

Even worse, the JOBS Act, incredibly, will allow executives to give "pre-prospectus" presentations to investors using PowerPoint and other tools in which they will not be held liable for misrepresentations. These firms will still be obligated to submit prospectuses before their IPOs, and they'll still be held liable for what's in those. But it'll be up to the investor to check and make sure that the prospectus matches the "pre-presentation."

The JOBS Act also loosens a whole range of other reporting requirements, and expands stock investment beyond "accredited investors," giving official sanction to the internet-based fundraising activity known as "crowdfunding."

But the big one, to me, is the bit about exempting firms from real independent tests of internal controls for five years.

And more:

There's just no benefit that the JOBS Act brings to an honest startup company. In fact, it puts an honest company at a severe disadvantage, because now it has to compete against other, less scrupulous companies that can simply make their projections up on the backs of envelopes.

Candidate Obama Would Make A Great President

Barack Obama must be running for President again.  He gave a wonderful speech today, indicting the Republican worldview as exemplified by Paul Ryan's budget proposal that has been adopted by the Republicans in the House and endorsed by Mitt Romney.

Obama described the Ryan budget as "laughable" and said Ryan's Medicare “premium support” plan would “end Medicare as we know it.”

Here's a summary of the speech from Talking Points Memo:

Obama decried key planks of the Republican agenda — particularly calls for large tax cuts for wealthy Americans, and a plan to phase out traditional Medicare — which he took care to describe accurately, though in hostile terms.

And in response to questions from the audience, Obama urged the press not to confuse rancor over the parties’ competing visions for the country as typical partisan bitterness for which Democrats and Republicans are equally culpable.

Chiding Republicans for not learning anything from the failure of trickle-down policies that defined the last decades, Obama attacked the GOP budget head-on. “They have proposed a budget so far to the right it makes the Contract for America look like the New Deal,” he said. “In fact, that renowned liberal, Newt Gingrich, first called the original version of the budget radical. He said it would contribute to right-wing social engineering. … This is now the party’s governing platform. This is what they are running on. One of my potential opponents, Gov. Romney, has said he hopes a similar version of this plan from last year would be introduced as a bill on Day One of his presidency.”

This is how Greg Sargent summed up the political case made by Obama:   "The GOP approach has already failed us. In its current, more radical iteration, it’s a departure from longtime consensus about government’s proper role in spurring economic growth and in guarding against the excesses of unfettered capitalism. And that addressing inequality and tax unfairness isn’t just morally right; it’s the only way to secure the country’s future."

Quote Of The Day

"So the Ryan budget is a fraud; Mr. Ryan talks loudly about the evils of debt and deficits, but his plan would actually make the deficit bigger even as it inflicted huge pain in the name of deficit reduction. But is his budget really the most fraudulent in American history? Yes, it is."

Paul Krugman, Pink Slime Economics

A Progressive Budget Or The Ryan Plan: American Dream Or American Nightmare

 Who Pays The Bill For Wall Street's Mess?

By Robert Borosage, cross-posted from Campaign For America's Future

DonkeyHotey

Yesterday, House Republicans rolled out their budget plan in the Washington version of a Hollywood movie opening. There was a star turn for Budget Chair Paul Ryan at a conservative think tank. Gaseous rhetoric -- "liberties endangered, time to choose" -- fouled the air. There were dueling videos, and furious salvos of partisan messaging. And a backup document -- the "Path to Prosperity" -- festooned with tables for wonks to wallow in.

Today, with fewer trumpets and less fanfare, the Congressional Progressive Caucus releases its budget plan -- A Budget for All.

Each of the two documents is designed to define a message. Their contrasts help clarify the real choices the country faces. Federal deficits exploded after Wall Street's excesses blew up the economy. The questions now are who gets the bill and when does the payment start? Ryan's Republican budget and the CPC's offer starkly different answers that would take the country in starkly different directions.

The Bathtub Fantasy

"My goal is to cut government... to get it down to the size where we can drown it in the bathtub." Grover Norquist.

Ryan's Republican budget, like a speedo bathing suit on a corpulent geezer, is revealing, but not flattering. Even by Washington standards, this is a remarkably dishonest document. It claims to be serious, but offers targets that are simply preposterous. It calls for leveling with the American people, but cravenly ducks laying out who will pay for top end tax cuts. It calls itself a "blueprint for American renewal" while systematically trampling the American dream.

Republicans have lined up like lemmings to sign Grover Norquist's infamous pledge never to raise taxes on anyone at any time. But turns out they even treat the quips of the conservative gadfly as gospel. As the Center for Budget and Policy Priorities pointed out, the Ryan budget, by its own numbers, assiduously pursues Grover's bathtub fantasy.

The Congressional Budget Office reports that under the Ryan budget, by 2050 most of the federal government would simply cease to exist. Ryan's budget would shrink all federal expenditures outside of interest payments, Social Security, Medicare, Medicaid and children's health to 3.75 percent of gross domestic product (GDP).

To translate that arcane measure, CBO notes that "spending for defense alone has not been lower than 3 percent of GDP in any year [since World War II]. " Ryan and Republicans call for increasing defense spending -- so the rest of the government would have to be cut to bathtub size. Ryan argues that the "challenges this nation faces are among the largest in its history," but the budget target he offers is, well, goofy.

Voters Get It, Elites Not So Much

By Mike Lux, cross-posted from Crooks and Liars

Throughout American history, some of our greatest political thinkers have understood that at the end of the day, democracy works better when average Americans rather than elites run things, because regular people instinctively get the truth of what is going on in the real world — on Main Street — more than out-of-touch elites. Thomas Jefferson, Benjamin Franklin, and Thomas Paine got this; as did Abe Lincoln, who believed in a government of, by, and for the people. So did the reformers and organizers of the 20th Century like Saul Alinsky and Walter Reuther. They all knew that the people might get things wrong some of the time, but that ultimately it was better to trust and empower regular folks because the elites generally messed up a lot more of the time than democracy did.

When I read the great memos and reams of data that Stan Greenberg and James Carville at Democracy Corps put out, and read focus group and polling reports from other pollsters I respect, I am reminded of that truth once again. It is striking how much better regular folks understand, than most of the elites in this country, what is really going on with this economy. They aren’t following the moment-to-moment blips in the job or GDP numbers so much as they know deep in their guts that the American middle class is in real danger, that it is on a long downhill decline, and that there needs to be big fundamental changes. This has big implications for the 2012 election.

The swing voters swing because they go back and forth on whom to blame more — Wall Street and big business or the government — and what then to do about it. They think both sides of that equation are bad: that Wall Street screwed up the economy, and that government can’t succeed because it is bought off by Wall Street and other wealthy special interests. They think both political parties are bad. And they for the most part aren’t feeling like the economy is getting much better, or that, as President Obama put it in his State of the Union address, “America is back!” They are pessimists (at least in the short term), populists, alienated from the establishment. That is why I continue to fear a more upbeat message on how the economy really is getting better from the Obama team will cause him to lose. Stan and James reminded me recently of the last ad we ran in the 1992 Clinton campaign, the single most effective ad we ran that fall. I wish I could find the video for you, but I haven’t been able to. It was a 15-second ad that had a clip of George Bush talking about how the economy really was getting better and jobs were starting to pick up again (both of which were technically true), and then the screen just cut to lettering and a voice saying “How ya doing?” People responded strongly to it, feeling in their gut that the economy the last four years had not been getting better, and that Bush was out of touch for saying so. It turned a race that had been tightening into an easy six-point win.

My concern isn’t just, as I have written about before, that the Obama team doesn’t brag too much about economic improvements that most voters aren’t feeling yet. My bigger worry is that Obama, other Democrats, and the broad progressive movement will just miss the moment we are in: middle-class voters have a deep understanding that something is profoundly wrong with the direction our economy has been heading for the last 30 years. They understand, far better than most elites, the underlying trends that are grinding middle-class families into the dirt, and are making it harder and harder for poor people and young people to climb the ladder into the middle class. They are cynical about politicians bragging about job growth because they know that most new jobs don’t pay what the ones that were lost used to, or are temp jobs that will be gone all too fast. They know that wage growth is flat, housing prices are down, and the costs of necessities — gas, groceries, health care — keep going up. They worry about being able to retire with enough money to live on, about taking care of their elderly parents and grandparents, and about sending their kids to college with tuition rates skyrocketing.

This kind of frame of mind for voters makes things challenging for an incumbent President trying to win re-election, but it also presents an opportunity. The Osawatomie, Kansas speech, where Obama cast himself as the fighter for the middle class in tough times, is a part of the answer, and I am glad he has taken on that mantle. But I think he needs to be more explicit and more expansive in creating the narrative, telling the story, of how we got here. The 30-year frame is helpful in part because that is clearly where voters are — that our problems started quite a while back and we have been in decline too long — and in part because it doesn’t make it seem like Obama is just trying to blame Bush, which feels too partisan and blame-gamy. (I also like the fact that it is true. It was Reagan’s policies 30 years ago which decimated our manufacturing base, started us on our current path of massive trade deficits year after year, began the massive deregulation of the financial sector, and embraced supply side economics that first led to massive tax cuts for the wealthy, big budget deficits, and a concentration of both income at the top and industry concentration in one sector of the economy after another.)

Housing Solutions: Principal Reduction And DeMarco Removal

The housing crisis remains one of the biggest drags on the economic recovery.  Nearly 12 million Americans live in homes financed through Fannie Mae or Freddie Mac who owe more on their mortgage than their homes are worth. 

The solution is Principal Reduction, which would reduce mortgages to their fair market value.

The primary obstacle is Edward DeMarco, the Acting Director of the Federal Housing Finance Agency, who, as Isaiah Poole explains, "is a Bush administration holdover who is still in his position because Republicans in the Senate blocked the person President Obama nominated as his replacement."

DeMarco remains stubbornly resistant in the face of increasing demands for him to help end the housing crisis by allowing principal to be reduced for struggling homeowners with Fannie Mae and Freddie Mac mortgages.

The Congressional Progressive Caucus has urged DeMarco to act or be removed, backed up by the new America Underwater partnership between progressive grassroots groups Rebuild the Dream and the New Bottom Line.

But it isn't only progressives.  As Bill Scher writes, "Mortgage Bankers Association CEO David Stevens last week lent his support for principal reductions, saying they would put "cash flow into the hands of families." He joins other Wall Street voices such as famed hedge fund manager Greg Lippman, the world's largest bond fund, Pimco and the mortgage analysts at Amherst Securities."

 An article in The Atlantic authored by analysts from the Center for American Progress noted  the "growing consensus among economists, investors, academics, and consumer advocates that more 'principal reduction' -- writing off a portion of a mortgage that exceeds a home's value in exchange for a higher likelihood of repayment -- can help avoid another wave of costly and economy-crushing foreclosures."  As they write, that's "good for homeowners and lenders, and because millions of underwater mortgages are controlled by the government, it's also good public policy."

Still DeMarco won't budge.  And since, he won't move, it is time for the President to remove him and use a recess appointment to replace him.  As Robert Borosage urges:

The President has the power to right this wrong. He has used recess appointments before to stand up to obstructionist conservatives. Now he needs to act again. And he needs to hear from us. It is time to move.

Click here to tell President Obama: Fire Edward DeMarco and replace him with a recess appointment.

The Widening Wealth Divide

And Why We Need A Surtax On The Super Wealthy

By Robert Reich, cross-posted from his website

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The rest of us ought to be having a serious discussion about a wealth tax. Because if you really want to know what’s happening to the American economy you need to look at household wealth — not just incomes.

The Fed just reported that household wealth increased from October through December. That’s the first gain in three quarters.

Good news? Take closer look. The entire gain came from increases in stock prices. Those increases in stock values more than made up for continued losses in home values.

But the vast majority of Americans don’t have their wealth in the stock market. Over 90 percent of the nation’s financial assets – including stocks and pension-fund holdings – are owned by the richest 10 percent of Americans. The top 1 percent owns 38 percent.

Most Americans have their wealth in their homes – whose prices continue to drop. Housing prices are down by a third from their 2006 peak.

So as the value of financial assets held by American households increased by $1.46 trillion in the fourth quarter, the wealthiest 10 percent of Americans became $1.3 trillion richer, and the wealthiest 1 percent became $554.8 billion richer.

But at the same time, as the value of household real estate fell by $367.4 billion in the fourth quarter, homeowners – mostly middle class – lost over $141 billion (owners’ equity is 38.4 percent of total household real estate).

Presto. America’s wealth gap – already wider than the nation’s income gap – has become even wider. The 400 richest Americans have more wealth than the bottom 150 million Americans put together.

Given this unprecedented concentration of wealth – and considering what the nation needs to do to rebuild our schools and infrastructure while at the same time saving Medicare and reducing the long-term budget deficit – shouldn’t we be aiming higher than a “Buffet tax” on the incomes of millionaires?

There should also be a surtax on the super rich.

Drawing The Line With The Right

By Robert Borosage, cross-posted from Campaign for America's Future

We're headed into an election that will feature the clearest ideological divide since Goldwater-Johnson. Romney and Gingrich and Santorum paint America on the brink of ruin -- about to "descend" into becoming an "entitlement society, not an opportunity society," a "European welfare state," a "socialist," not a free market nation." This is the predicate for recycling the failed bromides of the right: tax cuts for the rich, more military spending, more corporate trade, more deregulation, and cuts in everything else from Medicare and Social Security to education and child nutrition.

For many months, the president chose not to engage this battle of ideas in the futile pursuit of bipartisan agreement. That began to change last Fall, when the President finally put forth his American Jobs Act and stumped for it across the country.

Now, in his recent speech to the United Auto Workers, the president is beginning to draw the line -- and develop the themes that will help frame the election. The entire speech is worth reading. Republicans immediately accused the president of delivering a campaign speech. Shocking, gambling in Casablanca. Here's the core of the argument:

President Obama: "Let me tell you, I keep on hearing these same folks talk about values all the time. You want to talk about values? Hard work -- that’s a value. (Applause.) Looking out for one another -- that’s a value. The idea that we're all in it together, and I'm my brother's keeper and sister's keeper -- that’s a value. (Applause.) 

They're out there talking about you like you're some special interest that needs to be beaten down. Since when are hardworking men and women who are putting in a hard day's work every day -- since when are they special interests? Since when is the idea that we look out for one another a bad thing? 

Why Is Obama Proposing A Tax Cut For Corporations?

One step forward, two steps back.  Just when you think Obama just might ride the wave of the 99%, provide a contrast with his Republican opponents, and push for a more populist agenda he undercuts it by once again spouting conservative talking points, this time about how the current tax code is unfair to corporations.  Instead of arguing that corporations need to pay more -- or at least their fair share -- he proposes to cut their taxes while closing loopholes, a plan intended to be "revenue neutral."  There is nothing neutral about it.  --- Lovechilde 

By Robert Reich, cross-posted from his website

The Obama administration is proposing to lower corporate taxes from the current 35 percent to 28 percent for most companies and to 25 percent for manufacturers.

The move is supposed to be “revenue neutral” – meaning the Administration is also proposing to close assorted corporate tax loopholes to offset the lost revenues. One such loophole allows corporations to park their earnings overseas where taxes are lower.

Why isn’t the White House just proposing to close the loopholes without reducing overall corporate tax rates? That would generate more tax revenue that could be used for, say, public schools.

It’s not as if corporations are hurting. Quite the contrary. American companies are booking higher profits than ever. They’re sitting on $2 trillion of cash they don’t know what to do with.

And it’s not as if corporate taxes are high. In fact, corporate tax receipts as a share of profits is now at its lowest level in at least 40 years. According to the Congressional Budget Office, corporate federal taxes paid last year dropped to 12.1 percent of profits earned from activities within the United States. That’s a gigantic drop from the 25.6 percent, on average, that corporations paid from 1987 to 2008.

And it’s not that corporations are paying an inordinate share of federal tax revenues. Here again, the reality is just the opposite. Corporate taxes have plummeted as a share of total federal revenues. In 1953, under President Dwight Eisenhower, a Republican, corporate taxes accounted for 32 percent of total federal tax revenues. Now they’re only 10 percent.

But now the federal budget deficit is ballooning, and in less than a year major cuts are scheduled to slice everything from prenatal care to Medicare. So this would seem to be the ideal time to raise corporate taxes – or at the very least close corporate tax loopholes without lowering corporate rates.
The average American is not exactly enamored with American corporations. Polls show most of the public doesn’t trust them. (A recent national poll by the University of Massachusetts at Lowell found 71 percent with an unfavorable impression of big business – about the same as those expressing an unfavorable view of Washington.)
 
The Administration’s initiative doesn’t even make sense as a bargaining maneuver.

Manufacturing Illusions

 By Robert Reich, cross-posted from his website

Suddenly, manufacturing is back – at least on the election trail. But don’t be fooled. The real issue isn’t how to get manufacturing back. It’s how to get good jobs and good wages back. They aren’t at all the same thing.

Republicans have become born-again champions of American manufacturing. This may have something to do with crucial primaries occurring next week in Michigan and the following week in Ohio, both of them former arsenals of American manufacturing.

Mitt Romney says he’ll “work to bring manufacturing back” to America by being tough on China, which he describes as “stealing jobs” by keeping value of its currency artificially low and thereby making its exports cheaper.

Rick Santorum promises to “fight for American manufacturing” by eliminating corporate income taxes on manufacturers and allowing corporations to bring their foreign profits back to American tax free as long as they use the money to build new factories.

President Obama has also been pushing a manufacturing agenda. Last month the President unveiled a six-point plan to eliminate tax incentives for companies to move offshore and create new lures for them to bring jobs home. “Our goal,” he says, is to “create opportunities for hard-working Americans to start making stuff again.”

Meanwhile, American consumers’ pent-up demand for appliances, cars, and trucks have created a small boomlet in American manufacturing – setting off a wave of hope, mixed with nostalgic patriotism, that American manufacturing could be coming back. Clint Eastwood’s Super Bowl “Halftime in America” hit the mood exactly.

What The 2013 Budget Says About The Fight For Our Future

By Isaiah J. Poole, cross-posted from Campaign for America's Future

DonkeyHotey

One does not have to accept all of the specific choices in the administration's budget to appreciate the fact that the administration is trying to lay the groundwork for a broad and sustainable economic recovery, while the administration's opponents continue to be hell-bent on austerity policies that would stall that recovery.

President Obama explained his vision today in an address today at the Northern Virginia Community College. As reported by Politico:

“At a time when our economy is growing and creating jobs at a faster clip, we’ve got to do everything in our power to keep this recovery on track,” Obama said at Northern Virginia Community College. “We can settle for a country where a few people do really, really well, and everybody else struggles to get by, or we can restore an economy where everybody gets a fair shot, everybody does their fair share, everybody plays by the same set of rules, from Washington to Wall Street to Main Street.”

Meanwhile, The Washington Post reported today that Republican leaders on Capitol Hill, in addition to their usual complaints that Obama's policies would leave "America drowning in debt," reprised a version of their Medicare privatization plan. Yes, that same voucher plan that was roundly rejected by a majority of Americans when Rep. Paul Ryan, the chairman of the House Budget Committee, persuaded House Republicans to back it last year. That plan exemplifies the Republican economic agenda: A few people would do really, really well as congressional conservatives fight to maintain inequitable, record-low tax rates for the wealthiest Americans; everybody else would struggle to get by in a world where what were once shared commitments, such as Medicare to maintain the health of seniors, are turned into yet another opportunity for private gain and another source of economic insecurity for the vast majority of Americans.

This contrast will be exemplified vividly this week when the House of Representatives begins debate on funding for the nation's transportation network. The White House budget includes a $476 billion, six-year funding commitment for highways and public transportation, and administration officials were working with the Senate toward turning that commitment into legislation.

This is a huge spending commitment to make, but President Obama recognizes correctly that some investments can't be compromised, even at a time of large budget deficits. Even so, this is a fraction of what groups such as the American Society of Civil Engineers say America needs for a globally competitive economy. Nonetheless, this transportation spending will generate hundreds of thousands of jobs in the near term in areas ranging from construction to engineering to beautification, and in the long term this spending will establish a platform for a more efficient and greener economy.