Author: Matt Browner Hamlin

http://holdfastblog.com

Countering McConnell

I think it’s worth talking more about what a counter-offer to McConnell would look like. The biggest flaw with McConnell is that it would mean Obama would be required to put up $2.5 trillion spending cuts, with no offsetting revenue increases. This gives the GOP what they wanted: deficit reduction entirely through spending cuts and it takes away the fig leaf of revenue raises (coming in large part from the rich & corporations) that the administration and congressional Democrats have sought. To me the natural counter offer from Obama would be to have the freedom to meet the tranched offset requirements through a combination of spending cuts and revenue increases, at a rate which is agreed upon now. While I’m certain that rate would be something I personally find outlandish (anywhere from 3-6:1 spending cuts/revenue increases), it would at least be an opportunity to negotiate and do so in a way that preserves some semblance of victory in terms of achieving the desired split between spending cuts and revenue increases. And as much as I think a 5:1 deal would be different from a 1:0 in optics alone, the reality is with the size of the numbers being tossed around here, getting a few hundred billion back through revenue increases is better than nothing.

I’ll be curious to see what the President’s counter-offer to McConnell looks like, but right now I’d bet that it involves carving out space for him to put in some revenue increases.

Taibbi on debt ceiling debate

Matt Taibbi:

The blindness of the DLC-era “Third Way” Democratic Party continues to be an astounding thing. For more than a decade now they have been clinging to the idea that the path to electoral success is social liberalism plus laissez-faire economics – in other words, get Wall Street and corporate America to fund your campaigns, and get minorities, pro-choice and gay marriage activists (who will always frightened into loyalty by the Tea Party/Christian loonies on the other side) to march at your rallies and vote every November. They’ve abandoned the unions-and-jobs platform that was the party’s anchor since Roosevelt, and the latest innovations all involve peeling back their own policy legacies from the 20th century. Obama’s new plan, for instance, might involve slashing Medicare and Social Security under “pressure” from the Republicans.

I simply don’t believe the Democrats would really be worse off with voters if they committed themselves to putting people back to work, policing Wall Street, throwing their weight behind a real public option in health care, making hedge fund managers pay the same tax rates as ordinary people, ending the pointless wars abroad, etc. That they won’t do these things because they’re afraid of public criticism, and “responding to pressure,” is an increasingly transparent lie. This “Please, Br’er Fox, don’t throw me into dat dere briar patch” deal isn’t going to work for much longer. Just about everybody knows now that they want to go into that briar patch.

Yes, exactly. With the noticeable exception of the Congressional Progressive Caucus and a small handful of liberal Democratic senators, basically everyone in DC has gone happily along with creating a debt ceiling crisis as a means of instituting painful austerity measures. This has been most obvious with President Obama, but as Taibbi says, it’s also the case with the entire Third Way cohort in both chambers and the administration.

The result is that we have two political parties with, at minimum, constituent parts of their party in power who share effectively the same goals. Republicans want to reduce the deficit entirely through cutting spending. The Democrats as lead by Obama share that goal, though they think a small portion of the deficit reduction should come through increased revenue. Mitch McConnell is floating a deal (which may not be that bad given where we are today) that will require 100% spending cuts for three tranches of debt ceiling increases. Given that the consequences of defaulting on our debt, here’s why McConnell’s offer may win out. It is vastly preferable to (a) hitting the debt ceiling & the consequences therein; (b) a $4 trillion “bargain” at 4-6:1 spending cuts to tax increases; (c) anything that cuts SS, Medicare, or Medicaid. The flip side of this is that it will be the President agreeing, as mentioned above, to the exact same all spending, no revenue deficit plans as the GOP. The sole difference is that he will have input as to what gets cut. And yes, Social Security, Medicaid and Medicare may end up on Obama’s cut list again.

This simply brings me back to the point that there was never any ideological difference between the GOP’s “all cuts” demands and the Obama administration’s “some taxes for rich people”. The difference is merely one of optics, they are functionally the same, especially if the cuts still end up including things like Head Start, Social Security, student loans, Medicare, and Medicaid.

We’ll see if McConnell’s solution goes through. Obviously I think there are fundamental upsides to it, namely not destroying the economy with default and not gutting three of the great programs ever produced in America. But we’re here largely because this was someplace that Obama wanted to be. More importantly, we’re here because the Obama administration pointedly choice, as Taibbi notes, not to pursue aggressive job creation, not to go after banksters, and not to make sure the rich were actually (not optically) being asked to pay their fair share. This is a sad and sorry place to be in as a party. But if we avoid another economic collapse without giving up the farm, I suppose that’s better than the alternative.

Mitt Romney & the economy


While Kombiz is right to point out Romney’s repeated failure in claiming credit for job creation as Governor of Massachusetts, the Romney campaign sent out a fundraising email that drives donors to a landing page with the above web video embedded. Beyond the silliness of a campaign sending out a fundraiser to a video that starts “Today the unemployment rate rose to 9.2%” when that happened this past Friday, we get to see the silliness of a campaign stealing a poster from a British politician two and a half decades ago. I have no clue how many independent voters (1) know who Margaret Thatcher is, (2) know a lot about the British Labour Party and (3) can contextualize the iconic Thatcher anti-Labour poster and campaign slogan from 1979 in a way that resonates with Romney’s edited version of it. See, “Labour isn’t working” makes sense because Labour should work – it is work! “Obama isn’t working” is just a hit on Obama. It doesn’t raise larger questions about his party nor is it normative about what Obama should be doing in a self-evident way.

Anyway, pardon my digression. The larger point is that despite the good objections Kombiz (and many other liberal bloggers) have made about how awful Mitt Romney’s record of job creation is, the Romney campaign still thinks that they are best served by attacking the President’s economic record. And while they’ve taken Plouffe’s comment horribly out of context in the video, the larger crime is that Mitt Romney is actively in favor of policies which would guarantee that unemployment would rise and the social safety net would be cut in order to benefit the richest Americans. There is something so deeply cynical about Romney’s willingness to pursue this line of attack that it’s quite revolting. Of course at the same time, this is an attack that could be made against the President by someone of either political party and the larger problem for the President is that regardless of how the unemployment number affects individual voters’ decision-making process, a high unemployment percentage is indicative of an economy that isn’t working for a large number of Americans.

Romney isn’t going to just stop hitting the President on the economy. He is going to keep making these web videos and hammering on the fact that the economy stinks. Sadly I don’t think there’s a lot of disagreement outside of Washington that the economy stinks. But for Mitt Romney to pursue this, it’s largely like him having a campaign saying, “The Wire is a really great show.” Of course it’s true, but it doesn’t tell us anything about Mitt Romney…other than the fact that he’s willing to state the obvious about the economy.

Originally posted at AMERICAblog Elections: The Right’s Field

Doomed

What Duncan said:

We can’t read minds, so at some point we have to judge people by their words and actions. This press conference tells us that the austerity crap isn’t some bit of political posturing, it’s a belief.

We’re doomed.

I don’t know why it’s so hard to judge people by their words and actions, but it’s a lot easier than deluding yourself about the virtues of a politician playing 11 dimensional chess.

Bernstein on the jobs report

Jared Bernstein, formerly Vice President Biden’s senior economic advisor and arguably the most liberal economist in the administration, tries to offer a wake up call to the administration following today’s dismal jobs report.

Look, I’m not trying to be unduly negative here. Obviously, a stall is better than the massive job losses that characterized the Great Recession. But if policy makers fail to recognize that our most pressing problem right now is job creation, they are a big part of the problem. We need them to be part of the solution.

Yes, exactly. It’s not time for spending cuts or crashing through the debt ceiling. It isn’t even an ideal time for raising taxes on the rich.

Mike Konczal has more on what makes this jobs report terrible. He follows up with what I think is a simple, straightforward and accurate prescription for fixing the economy:

The discussion immediately needs to shift away from deficit reduction to jobs growth, in terms of public works, tax breaks for workers and getting to the bottom of the foreclosure crisis and shadow housing inventory.

Again, exactly right.

What is so infuriating about the economy stalling and there being long-term high unemployment is that it’s not as if the answer to this problem is mystifying. The answer is not located in some economic lacuna, unknowable unto death. The answer is staring us in our collective faces. But political elites don’t really care about joblessness and are instead turning to deficit reduction via austerity and the destruction of our social safety network.

Deeply Insane

Greg Sargent on the sense of the Senate resolution that says millionaires should “make a more meaningful contribution to the deficit reduction effort”:

That this vote is happening at all perfectly captures just how surreal this debate has become. Democrats have agreed to over $1 trillion in spending cuts, and have reportedly agreed to tens of billions in Medicare cuts as part of that package. The American people have declared in poll after poll after poll that they think the deficit should be addressed through a combination of spending cuts and tax hikes. Yet Republicans are simply refusing to entertain the possibility of any revenue increases of any kind — to the point where even conservative columnists like David Brooks are growing seriously alarmed by the anti-tax fanaticism that’s on display.

The notion that the wealthy should sacrifice anything at all in the way of higher taxes or revenues is now such a nonstarter that Dems are finding themselves forced to hold a vote on the general concept that the rich should contribute something “meaningful” to deficit reduction.

This is insane.

David Dayen adds:

I made this point implicitly, but yes, it’s deeply insane that we have to have a debate over the notion that the rich should contribute in a small way to any deficit reduction, when trillions are already on the table impacting the most vulnerable in society.

Yep, that about captures it. It’s insane and there really isn’t any effort from Democrats to point out this insanity and use that as leverage, alongside public opposition to cuts, for political purposes. The natural conclusion is that while Democrats are content to fight for the optics of taxing millionaires (this plus the notion that a 5:1 ratio is dramatically different than an all spending cuts deficit deal), they don’t actually care to tax millionaires or reduce the deficit by increasing revenue.

The TARP balance sheet

I’d really like to know why David Dayen is wrong here, but sadly I don’t think he is:

Treasury is claiming a $10 billion profit in TARP bank loans. But a substantial portion of TARP was supposed to be directed to supporting HAMP and foreclosure mitigation programs. We know by now that HAMP will not come close to reaching its goals. The latest HAMP stats show that the program has ground to a near-halt, with only 30,000 or so monthly pickups of trial modifications for nearly a year. So far, the program has spent less than $2 billion of a $50 billion commitment. And this money is supposed to be delivered to banks in incentive payments to help families facing foreclosure. So saving $48 billion on those incentive payments provides more than four times the “profit” from TARP bank loans. In other words, the nice shiny TARP balance sheet is built by reneging on the commitment to help homeowners and the greater economy.

Frank Rich Is Back

This piece by Frank Rich in New York Magazine got a lot of traction over the weekend, and deservedly so as it’s incredibly well-written, powerful, and all-encompassing. It’s a fairly long read that resists easy distillation, so I recommend reading the whole thing. Not surprisingly, the most interesting parts to me relate directly to the failures of the Obama administration to pursue accountability for the people who are responsible for the financial collapse and still-unfolding destruction of the housing market. Rich writes:

What haunts the Obama administration is what still haunts the country: the stunning lack of accountability for the greed and misdeeds that brought America to its gravest financial crisis since the Great Depression. There has been no legal, moral, or financial reckoning for the most powerful wrongdoers. Nor have there been meaningful reforms that might prevent a repeat catastrophe. Time may heal most wounds, but not these. Chronic unemployment remains a constant, painful reminder of the havoc inflicted on the bust’s innocent victims. As the ghost of Hamlet’s father might have it, America will be stalked by its foul and unresolved crimes until they “are burnt and purged away.”

Rich goes on to look at the twin failures of the President to push for accountability with his penchant for hiring Ivy Leaguers with a background in Wall Street. While I don’t buy the notion that association with elite academic institutions is bad, the optics Rich identifies are certainly a problem, especially as it means that Obama left an opening for the right to embrace anti-elite, anti-immigration, anti-Obama populism.

Obama had taken office at a true populist moment that demanded more than this. People were gagging over their looted 401(k)s and underwater homes, the AIG bonuses, and the bailouts. Howard Dean rage has never been Obama’s style—hope-and-change was an elegant oratorical substitute—and had he given full voice to the public mood, he would have been pilloried as an “angry black man.” But Obama didn’t have to play Huey Long. He could have pursued a sober but determined execution of justice and an explicit, major jobs initiative—of which there have been exactly none, the too-small stimulus included, to the present day.

By failing to address that populist anger, Obama gave his enemies the opening to co-opt it and turn it against him. Which the tea party did, dishonestly but brilliantly, misrepresenting Obama’s health-care-reform crusade as yet another attempt by the elites to screw the taxpayer. (The Democrats haplessly reinforced the charge with marathon behind-the-scenes negotiations with insurance and pharmaceutical-­industry operatives.) Once the health-care law was signed, the president still slighted the unemployment crisis. A once-hoped-for WPA-style public-works program, unloved by Geithner, had been downsized in the original stimulus, and now a tardy, halfhearted stab at a $50 billion transportation-infrastructure jobs bill produced a dandy Obama speech but nothing else.

I think this is exactly right and remains true today, even with a number of missed opportunities in the last few years. Obama could have well stepped into office as the sober, smart adult who was going to put his foot down, hold people accountable for breaking the economy, and fix it with massive jobs creation initiatives.  And no, following the Tea Party’s lead on austerity and spending cuts on the backs of public workers, retirees, young people, and the sick is not the sort of turn towards “popular” anger that should be pursued at this point in time (well, or any other).

Rich struggles with the extent to which Obama should be held personally accountable for the policy choices Tim Geithner has advocated for, saying at one point:

Geithner has pushed deficit reduction as a priority since before the inauguration, the Washington Post recently reported in an article greeted as a smoking gun by liberal bloggers. But Obama is the chief executive. It’s his fault, no one else’s, that he seems diffident about the unemployed.

Rich shifts away from this position later in the piece, as he tries to provide a justification for insufficient action on joblessness, refusal to prosecute Wall Street criminals, pursuit of Wall Street campaign donations and (until a few days ago) a lack of viciousness in fighting the Republicans in the debt ceiling/deficit debates. Rich writes:

There’s not much Obama can do to alter the economy by 2012, given the debt-ceiling fight, the long campaign, and nihilistic Capitol Hill antagonists opposed to any government spending that might create jobs and, by extension, help Obama keep his own. But the central question before the nation couldn’t be clearer: Who pays? The taxpayers bailed out the elite; now it’s the elite’s turn to return the favor. Massive cuts to the safety net combined with scant sacrifice from those at the top is wrong ethically and politically. It is, in the truest sense, un-American. Obama knows this, and he hit a welcome note last week when he urged some higher corporate taxes for hedge funds and the like. But his forays in this direction are tentative and sporadic. You have to wonder why he isn’t seizing the moment to articulate and fight for the big picture instead of playing a lose-lose game of rope-a-dope with the Republicans on their budgetary turf.

…

“A nation cannot prosper long when it favors only the prosperous,” Obama declared at his inauguration. What he said on that bright January morning is no less true or stirring now. For all his failings since, he is the only one who can make this case. There’s nothing but his own passivity to stop him from doing so—and from shaking up the administration team that, well beyond the halfway-out-the-door Geithner and his Treasury Department, has showered too many favors on the prosperous. This will mean turning on his own cadre of the liberal elite.

I think this is a case of Rich not really wanting to accept the consequences of the arguments he’s put forward. It’s undoubtedly scary to think that the reason the President has not pursued a course separate from the one advocated by people like Tim Geithner, Larry Summers and Jeff Immelt is it’s because it’s the course that he agrees with politically and ideologically.  It’s not a matter of passivity, it’s a matter of not wanting to do the things Rich wants him to do. Time and again we’ve seen the President be an incredibly effective advocate for the things he wants to accomplish. From a strictly legislative standpoint, there really isn’t a time when he’s sought after something in a committed way and not gotten it, whether it’s restructuring the auto industry, passing health care reform, or funding the wars in Afghanistan and Iraq.

More importantly, for the President to turn “on his own cadre of the liberal elite,” he would have to agree with Rich’s assessment that this group of advisers have lead him to a place that he is unhappy with politically, economically and ideologically. While I would say that’s a move he should make, I don’t think the evidence is there to say that the President has taken away the same conclusions about what has and has not worked and what should be done differently as Rich, let alone me. All of that said, I do think Rich is right in his final assessment of the consequences for more of the same choices pushed by the same advisers:

The alternative is a failure of historic proportions. Those who gamed the economy to near devastation—so much so that the nation turned to an untried young leader in desperation and in hope—would once again inherit the Earth. Unless and until there’s a purging of the crimes that brought our president to his unlikely Inauguration Day, much more in America than the second term of his administration will be at stake.

But yet again, the issue is, “Does the President agree with liberals like Frank Rich?”  In a sense, Obama needs to get back to his liberal roots to change course. I’m not sure that it is a reasonable expectation for this to happen.

Since the start of the Obama administration there have been frequent citations by folks on the left of the famous FDR story of  wherein he told reform advocates, “I agree with you, I want to do it, now make me do it.” The implication was that this, too, was what President Obama thought of the left. But Obama has never said this and there has been little willingness within the administration to accept pressure from outside to move him to the left. That makes it harder for outside groups to organize around things like job creation or holding Wall Street banksters accountable for criminal behavior.

For President Obama to turn around in the direction that Rich is advising, he’d have to first have his own “now make me do it” moment with the left. There would need to be a call for people to help in a way that hasn’t really happened to this point. But it’d be an important first step and one that would show me that Obama and his administration were ready to get serious about accountability, joblessness, and fighting back against poisonous Republican populism.

Obviously AIG execs are more important than public workers

The New York Times has an outrageous story about how courts in Minnesota and Colorado have ruled it permissible for state governments to cut public worker pensions and retired workers have no recourse to sue to keep the benefits that they negotiated and have been promised for years. Dean Baker has a good response to the rulings. He writes:

In effect the courts were saying that contracts with workers do not have the same standing as other contracts. It is almost inconceivable that the courts would allow a state government to unilaterally cut its contracted payments to a supplier or other government contractor.
…
It is worth noting that government officials have openly pushed the sanctity of contracts in other contexts. For example, when he was head of President Obama’s National Economic Council Larry Summers argued for the importance of the sanctity of contract in the context of the bonuses going to AIG executives. Many of the top executives of the company, which was saved from bankruptcy by a massive government bailout, had bonuses that ran into the billions of dollars.

It is likely that the vast majority of the public did not support giving bonuses to these executives. (Bankruptcy voids contracts.) However, these bonuses were paid.

The hypocrisy in terms of how both government officials and the judicial system look at the validity of contracts is staggering. Quite simply in the case of the banksters and Wall Street executives who destroyed their companies and the US economy, it was an unthinkable, unAmerican notion that the contracts governing their bonuses not be honored (even though as Baker points out, “bankruptcy voids contracts”). But in the case of public workers whose pensions have been around for years and were negotiated to cost tax payers less money in salary to public workers, it’s A-OK for state governments to welch on the money they owe these workers. Worse still, the only reason that there are pension shortfalls in the first place is because Wall Street wrecked the economy and wiped out twenty years of stock market growth. Value that had been in pensions was wiped out, making small underpayments look like massive shortfalls. But it’s not because of public workers, it’s because of the financial collapse. Now, for these workers to be punished a second time and have no recourse under the law to protest, it’s beyond disgusting. It’s as clear an example as any that there are two tiers of justice in America: one for the super rich and one for everyone else.