Well, shock of shocks, it turns out that not only is walking away from properties that are underwater something that businesses do all the time, but rich people are doing it with their homes. The New York Times has a long, detailed analysis of people who are underwater and just walking away from their homes rather than paying more and more. Of note:

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars is seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

So, to put it a different way, homes with mortgages over one million dollars are 75% more likely to be delinquent than homes with values under one million dollars. And if mortgage delinquency is the big underlying cause of the popped housing bubble (see what happened when Wall Street started packaging subprime mortgage backed CDO tranches that couldn’t muster a Triple A rating together to get ones that magically did), then the blame cannot rightly be placed on poor people who took out mortgages they couldn’t pay to buy houses they couldn’t afford. As Duncan Black writes, “As is so often the case, the mainstream media got it completely wrong initially, painting it as a “subprime” crisis due to bad behavior by unworthy brown people.”

Beyond the straight economics of who and what caused this crisis, it’s important to note that there has been a strong push in the media and from the CNBC types to define strategic defaul as inherently immoral (even though businesses do it daily). The morality play targeted largely poor minorities and intrinsically sought to taint anyone who does decide to walk away with the tinge of culpability for nearly bringing down Wall Street. Of course, walking away is neither immoral, nor as we now see, limited to the subprime sector.

Tim Geithner and a dubious talking point:

“We have a pro-growth agenda. Part of the agenda is growing exports. They’re central to our future. … [W]e’re going to be committed to making sure we’re that we’re expanding opportunities for American business everywhere. Now, this president understands deeply that governments don’t create jobs, businesses create jobs. And our job as government is try to make sure we’re creating the conditions that allow businesses to prosper so they can hire people back, get this economy going again.”

Government doesn’t create jobs? Um, really? Sadly, this looks like a bit of the party line coming out of the White House of late. In May, President Obama said:

“Now, government can’t create jobs, but it can help create the conditions for small businesses to grow and thrive and hire more workers,” President Barack Obama said yesterday as he urged Congress to take up new jobs legislation at an event honoring Small Business Owners of the Year. “Government can’t guarantee a company’s success, but it can knock down the barriers that prevent small-business owners from getting loans or investing in the future.”

Um, really? I’d really like the President to go to AIG or Goldman Sachs or Bear Stearns or GM and say, with a straight face, that “government can’t guarantee a company’s success.”

First, the government obviously can create jobs. Infrastructure improvement, school construction, hiring more civil servants to police the streets, stop fires from taking lives, or driving ambulances are all direct ways the government can create jobs. Hell, the Census has been the main driver of job creation over the last three months. So this is a talking point that tests well, but doesn’t have any basis in reality.

Beyond that, our economy is moving forward out of the collapse caused by Wall Street speculators solely because the federal government stepped in and prevented these firms from taking  any losses on their bad bets (bets which were also ignorant, uninformed and just plain stupid). That the Captains of Finance on Wall Street now have the temerity to complain that the administration is “anti-business” only speaks to the true extent to which these buffoons care nothing for the the country on whole and only value enriching themselves.

Government can create jobs. Government can guarantee private companies’ success. The only way out of this depression is unleashing the power of the government spending to stimulate the economy and create jobs. Of course, this can be done in a way that benefits small businesses, though we should be deeply skeptical of blanket tax cuts that will likely only benefit the richest of the rich.

What’s really frustrating is that a persuasive communicator could get past the binary that has been presented by conservatives for decades of Business vs Government. But this administration buys into this dichotomy whole-heartedly and, even worse, repeats patently wrong conservative talking points.

Look, I don’t care how deeply you bow before Wall Street and the GOP, they’re never going to like you guys. And while you pursue the support of people who slur you regardless of whatever you do for them, the economy gets worse and working Americans suffer ever more.

James Galbraith has a very interesting idea for how we can help the economy and create jobs without spending money (though he does think spending money is the right course). Galbraith says we need to shrink the labor force by lowering the Medicare eligibility age to 55, as well as temporarily removing the early retirement age, which will allow people to retire earlier. Add in more funding for college, and you’ve reduced the work force and lowered unemployment, while providing substantial benefits through programs that we all know work well. Getting on to why the government needs to still actually spend money, Galbraith writes:

But with work to do and people to do it, the government should spend more. States and localities could hire teachers, teachers’ aides, doctors and nurses, fire and police, librarians and park attendants and street cleaners. If they do not have the cash, the easy way to create jobs is for Washington to write checks. This is called “revenue sharing” and it was invented by President Richard Nixon.

Galbraith’s ideas represent three major prongs of progressive policy that has been pushed through legislation recently or is expected to be done soon. Health care reform briefly looked at, but did not include, lowering the age people were eligible for Medicare. While most expect Social Security “reform” will inevitably lead to a shrinking of the program, the best course would actually be to expand it in ways that help more people. And jobs bills before Congress – including one rejected yesterday by the Senate – have the opportunity to provide states with major funding to support the important work of fire fighters, teachers, police, and medical professionals. That is, the pieces of Galbraith’s plan aren’t outside the range of conversations going on in Washington. The problem is that these are not Serious ideas held by Serious people, only by dirty hippies and accomplished economists with an honest understanding of the crisis our country is in. Conventional Wisdom says these are Unserious ideas and so I don’t have any hope that we’ll get this sort of smart, progressive, policy making out of decision-makers in Washington.

The austerity measures unveiled by the David Cameron’s conservative government in the UK are really brutal and certain to put a huge hurt on working families in Britain. But at least conservatives across the pond have the honesty to recognize that if deficit concerns are to be addressed, you can’t simply cut spending and not raise taxes. I don’t know enough about how the tax hikes are distributed, though it’s clear they will disproportionately hurt lower income Britons based on the hike in the VAT and the capital gains tax is still relatively low.

Nonetheless, deficits are not the problem when the economy is in freefall and unemployment is rising. I don’t think the conservative plan in UK will help solve their economic problems. But at least, and this really isn’t much but for the fact that conservatives in the US are so fundamentally dishonest and craven, they are willing to tax the rich more as well.

Paul Krugman does a mitzvah and donates yet another column to fighting back against the deficit hype while defending the need for continued stimulating expenditures and job creation.

Penny-pinching at a time like this isn’t just cruel; it endangers the nation’s future. And it doesn’t even do much to reduce our future debt burden, because stinting on spending now threatens the economic recovery, and with it the hope for rising revenues.

The sudden switch from attention to job creation to attention to the deficit is truly bizarre. But it’s coming in fast and furious from conservatives of both parties. Without major education efforts as to the idiocy of these ideas, as Krugman is doing with regularity, I’d expect timid Democrats to buy the deficit bullshit and start helping Republicans inflict real pain on working Americans.

I rarely buy into the “whose side are you on?” messaging common with some progressive groups, but I really believe Democrats are approaching an inflection point where they will have to genuinely start representing the interests of working Americans or fully concede that they are full-blown corporatists in the Republican model. Leadership needs to recognize this taking place and be prepared to excise corporatists in the Party. They must prioritize clear ideological contrast from the GOP over marginal differences in the size of our majorities in the Senate and House. Failure to do so will actually only result in larger electoral losses, both in the near term and the long term. I hope the leaders of the Democratic Party have the sense to see what is unfolding before their eyes.

Busy day, but just want to highlight this passage by Paul Krugman.

In America, many self-described deficit hawks are hypocrites, pure and simple: They’re eager to slash benefits for those in need, but their concerns about red ink vanish when it comes to tax breaks for the wealthy. Thus, Senator Ben Nelson, who sanctimoniously declared that we can’t afford $77 billion in aid to the unemployed, was instrumental in passing the first Bush tax cut, which cost a cool $1.3 trillion.

Creating jobs is too costly, but funding unlimited wars with unlimited budgets will never be questioned.