Wave Prediction

I think David Dayen is spot-on with his prediction here.

We are coming out of three straight wave elections and I predict we’ll see a fourth in 2012. People don’t know which side to blame but they sure know that this group of elites has failed completely. This episode over the debt limit only confirms that.

We could see something along the lines of 469 incumbents – every member of the House, Senate, and the President – voted out of office next year. Obviously that’s hyperbole, but I would guess the 2012 election will have the largest percentage change of newly elected officials since World War II.

The Ideological Continuum

Over at ThinkProgress, Brad Johnson has a good post about the deficit reduction debate that’s been tied to the debt ceiling. He puts the political positions of progressives, President Obama, and the Tea Party side by side to draw out a continuum of recommended actions (or non-action). Johnson writes, “As of this moment, the president’s negotiating stance is a lot closer to the radical, destructive goals of the far right than to the climate hawks and progressives.”

Not included in Johnson’s analysis are the positions of the mainstream Democratic Party (arguably represented by Harry Reid) and the mainstream Republican Party (arguably represented by John Boehner and Mitch McConnell). I think the omission here is interesting in part because it would show the near-total capture of the mainstream Democratic Party by the President’s conservativism, which places them in the same place as most of the Republican Party. Yes it’s important that in Johnson’s chart, Obama is closer to the Tea Party than Progressives. But it’s probably more important that he’s where the non-Tea Party GOP is and he’s brought the non-progressive Democratic Party along with him. This is an incredibly important  dynamic as it signifies the functional end of the Democratic Party as a vehicle for liberalism (let alone populism or progressivism).

Build Stuff!

Matt Yglesias writes in response to a broken water main in New York City:

Are we suffering from a metal shortage of some kind that makes it impossible to take advantage of cheap lending to hire construction workers to fix broken pipes? If so, I haven’t heard about it. Instead, we seem to be suffering from a shortage of effective political leadership. Not coincidentally, we’re talking about a rich, low-tax country that’s also the world’s military hegemon losing its AAA-rated bond status. Interesting times.

Duncan Black adds:

I don’t know the details of the water systems of all cities, but I imagine the water departments of New York, Philadelphia, Baltimore, and Boston would have no trouble spending money quickly and on very legitimate projects.

Which really just adds to Yglesias’ point. There are plenty of things that can be built, that are legitimate projects, and are not limited by scarcity or resources. It’s a question of leadership and while there’s plenty of effective political leadership for doing things like anti-stimulus spending cuts and reduction in programs which have good economic multipliers, there isn’t any effective leadership for spending money in effective ways that create jobs and grow the economy. Interesting is one way to put it. Pull your hair out, batshit crazy is another way.

Bachmann got GSE loan days before calling for end to GSEs

Originally posted at AMERICAblog Elections: The Right’s Field

The Washington Post reports today in 2008 Michele Bachmann and her husband took out a $417,000 loan from Fannie Mae or Freddie Mac only days before she called for the end of Fannie and Freddie.

Just a few weeks before Bachmann called for dismantling the programs during a House Financial Services Committee hearing, she and her husband signed for a $417,000 home loan to help finance their move to a 5,200-square-foot golf-course home, public records show. Experts who examined the loan documents for The Washington Post say that they are confident the loan was backed by Fannie Mae or Freddie Mac.

Bachmann quickly sought to blame Fannie and Freddie as the financial crisis, driven by the bursting of the housing bubble, unfolded in 2008. Not shockingly, she thought Fannie and Freddie were lending to, you know, the wrong type of people. And just so there wasn’t any confusion, Bachmann made clear that she means poor people of color made it harder for deserving people (it turns out she means herself) to get loans from the GSEs. At a hearing on September 25, 2008, Bachmann said:

While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was President Clinton who supercharged the process. After he entered office in 1993, he extensively rewrote Fannie’s and Freddie’s rules, and in doing so he turned the two quasi-private mortgage funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democrat voting blocks, and handed favors, jobs, and money to political allies.

The HUD Secretary at that time was Andrew Cuomo. He made a series of decisions, reported the Village Voice newspaper, between 1997 and 2001 that gave birth to the country’s current crisis. These were changes that led Freddie and Fannie to get into the subprime loan market in a big way.

Between campaign donations and between the changes in the rules of the Community Reinvestment Act, we have seen a dramatic impact on the current subprime mortgage meltdown. It is important that minorities have access to money. It is important that communities of color have access to homeownership; however, we need to have strong lending rules that have served our Nation so well. This has hurt, unfortunately, the minority community and communities of color even more than other communities.

This was a well-intentioned law. I firmly believe that the Community Reinvestment Act was well-intentioned and meant to put more minorities and people of color into homes. This is a good, positive movement; however, the final event of this Act was to, in fact, remove communities of color from true homeownership and subject other communities to a more difficult time to receive the loans that they so desperately need to be able to get into homeownership. Fannie and Freddie, with their massive loan portfolios stuffed with securitized mortgage-backed paper created from subprime loans, are a failed legacy of the early 1990’s era.

In Bachmann’s telling, the expansive lending policies of the GSEs to poor communities of color, created the risk that was shaking the housing and financial markets in the fall of 2008. Bachmann says Fannie and Freddie’s relaxed lending rules gave poor people of color loans they didn’t deserve and this is the cause to all of our economic problems. As a result, she wants to tear the programs down.

On September 28, 2008, she praised Bush administration efforts to stabilize the GSEs, while simultaneously saying that they shouldn’t be given government support without instituting big changes to these institutions.

Many financial experts predicted this day would come as the GSEs grew in size and scope. Out (sic) government must not shore them up this time and fail to put in place the necessary reforms that will keep us from reaching this point again down the road.

What sort of reforms did Bachmann want? On September 24th, 2008, at a House Financial Services Committee hearing, Bachmann endorsed a plan by the Republican Study Committee that sought to address the financial crisis by, among other things, breaking apart Fannie and Freddie. Speaking approvingly of the RSC plan, Bachmann said:

“It breaks up Fannie Mae and Freddie Mac — who are, after all, at the heart of all of this — so that the encumbered taxpayer no longer backs them — implicitly or explicitly — and so that they do not artificially grow larger than the market will allow.”

So, to be clear, Bachmann blamed Fannie and Freddie for giving too much money to poor communities of color, which fueled a housing bubble, which while bursting put the whole economy at risk, and therefore requires the GSEs to be broken apart and privatized. While there is plenty of non-demagogic literature which shows that GSEs were a real part of inflating the housing bubble, Bachmann was putting forward a racist, reductive account of what had happened in the housing market. She utterly fails to account for the lack of understanding of executives at Wall Street banks of the financial instruments they were using to leverage themselves out into eventual oblivion. She doesn’t account for fraud perpetrated by banksters. She doesn’t account for the nature of the bubble nor the drive by shorts to keep inflating it so there would be more dangerous instruments for them to place bets on. She just wasn’t interested in understanding the whole picture of the housing crisis, for she already new it was the fault of poor minorities and the GSEs that gave them loans. Oh and she was simultaneously taking out the largest loan she could possibly get from a GSE.

In the annals of political hypocrisy, this is pretty outrageous. It’s not just hypocrisy. Bachmann went to the government and got the largest-possible government backed loan she could possibly get and then turned right around and said other Americans should not be able to get similar loans. She tried to pull the ladder to home ownership up behind her, all while questioning the sort of people Fannie and Freddie gave loans to and attacking homeowners for taking on more house than they can afford. Even for Bachmann and her regular habit of sucking dollars from the federal government’s teat, this is pretty outrageous.

Clawing Back the Top 1%

At Crooked Timber, Joe Quiggin thinks it’s time for the policy debate to do like Willie Sutton and go where the money is: the wealthiest 1% in the US. Quiggin writes, “The wealth that has accrued to those in the top 1 per cent of the US income distribution is so massive that any serious policy program must begin by clawing it back.”

Matt Yglesias bizarrely thinks this misses the point and politics should also care about quality of life issues like traffic jams and the high murder rate. He also unintentionally suggests things which go directly towards reversing the unequal distribution of wealth – improving healthcare, reducing the number of hours Americans work and increasing the amount of vacation workers can take. It’s not really relevant that Americans on average have more wealth than most of the rest of the world’s peoples. Most workers making $30,000 a year aren’t poised to move to Nairobi and get more value for their money. Saying something should come first doesn’t mean subsequent quality of life issues can’t be addressed. As I read it, Quiggin is simply saying that by addressing the top 1% first, you’re in a position to actually address those other issues effectively.

The power of wealthy elites – specifically the top 1% – manifests itself by almost every current policy debate being a question of how best to transfer wealth from working and middle class Americans to the rich. The debt ceiling/deficit debate is a perfect example in that the only two sanctioned poles for an appropriate solution are a large, rapid transfer of wealth to the rich and a massive, rapid transfer of wealth to the rich. This is the sign of a truly broken political system (a problem that Yglesias seems to have no desire to confront).

Quiggin has a prescription for how to begin a move towards policies which take aim at wealthy elites:

One thing the Tea Party has shown is that, in the current dire state of the US, there are few penalties for abandoning moderation. What the US needs at this point is someone willing to advocate a return to the economic institutions that made America great – 90 per cent top marginal tax rates, strong trade unions, weak banks and imprisonment for malefactors of great wealth.

Quiggin sees the best starting point for this is a primary challenger to Obama. Maybe that’s right, maybe it isn’t. I’m not sure that aggressive, populist policies need to necessarily to fit into the framework of electoral politics first and foremost. The things Quiggin suggests – taxing the rich at more historically high levels, increasing worker rights and bank accountability – don’t actually have a basis in electoral politics. Their basis is in policy, advocacy and organizing. So I’d put it differently. While I don’t think a primary is sufficient to achieve these things, if there were a primary it would necessarily have to address these issues and elevate them in national debate. This isn’t to say that a primary can’t or shouldn’t happen. But coming out of the last five-plus years of electoral politics qua grassroots organizing I’m not confident that it’s the best vehicle for achieving positive societal change.

Debt Ceiling Craziness

Writing about specific proposals being floated about how to get Congress to address the looming debt ceiling is a bit crazy. There’s a new band of pols, a new gang or a new Grand Bargain (none of which are ever grand or bargains) every 36 hours. But the latest one is pretty remarkable, in that the Senate Democrats are now essentially offering the GOP everything that they want and are asking for nothing in return. Even for Democrats, this is remarkable.

Ezra Klein makes the case that the Republicans have won (duh) but likely won’t be able to take the victory and move on. But this is basically what President Obama said in his press conference Friday – that the Republicans are incapable of saying “yes.” Given that this is coming from both the President and Klein, a favorite outlet for administration thinking, it’s hard to see what the political plan of Democrats is at this point. From what I can tell and separate from any assessment of the policy content, the White House and Reid are implementing a strategy that looks like this:

  1. Give the GOP everything they want so that…
  2. The GOP rejects the Democrats’ deal that has everything they want
  3. ???
  4. PROFIT!

I really don’t know what #3 is meant to be. Obviously the President made a forceful case on Friday that the GOP is incapable of accepting a deal on their own terms and are trying to leverage this all to their electoral advantage. But to believe that giving the GOP what they want and expecting them to reject that is a winning political strategy, you have to believe that the American public is paying as close attention to the deficit debates as the most savvy political reporters in Washington. Or at leas that the general tone will be “Democrats tried to make a deal and Republicans wouldn’t accept it.” But even that doesn’t convey that the GOP would be rejecting what is essentially a Republican proposal.

Maybe I’m wrong that giving the GOP what they want and hoping they reject it is not the strategy currently being employed by Reid and the White House. But if it is, I don’t get the politics of it. The policy explanation is pretty straightforward – the outcomes sought by the White House and most congressional Democrats is not dissimilar from the outcomes sought by Republicans. The sole difference has, to this point (and with the exception of Bernie Sanders and the Congressional Progressive Caucus), been one of optics. Both sides have always proposed massive spending cuts, while Democrats have sought a fig leaf of tax increases on the rich and Republicans oppose any revenue increase.

The differences here between trying to evaluate a political argument around effective policy agreement here matter, simply because you have to presume that Obama does want to win reelection, as do Democratic members of Congress. Making similar policy proposals look different is important for them politically.  If I had to make a guess, I’d think the administration is going to have #3 be a large part of what the reelection is about. Maybe the public will buy it, maybe they won’t. But I can’t say any of this approach makes me happy in the slightest to be associated with the Democratic Party.

Redistribution of Wealth

In the midst of a very solid recap of what’s gone on with the debt ceiling and deficit reduction debates, Elizabeth Drew at the New York Review of Books addresses the key flaw of Republican attacks on plans which increase taxes on the rich as socialism:

Finally, the antitax position of many conservatives would seem to be illogical, since they also hate deficits: but their real aim is to reduce or eliminate federal programs. They call efforts to redistribute wealth “socialism,” but have no problem redistributing from the poor and middle class to the wealthy through taxes, as set forth in Paul Ryan’s budget plan, which the House approved on April 15. Under the Ryan plan, the taxes of the richest one percent of Americans would be cut in half, while taxes would be raised on most of the middle class. People earning over $1 million would be taxed at a lower effective rate than the middle class.

I guess part of the point is, sure, taxing the rich to fund programs which help poor, working, and middle class Americans is a redistribution of wealth. But the same goes for raising the taxes on poor, working, and middle class Americans while slashing social spending and giving tax cuts to the rich! There is a class war going on, but to this point it’s really only been fought by wealthy elites against working class people. As a result, the rich are winning and everyone else is losing. The ostensible fight back coming from Democrats is so piddling and inconsequential any sober rich person should just swallow it, for it is a placebo and not a truly bitter pill. Again we’re talking about the accounting for private jets here, not a return to an 80% tax on the top bracket. Perspective would be helpful, though I don’t think it will be forthcoming from wealthy elites.