Taibbi on Ryan’s Austerity Plan

Matt Taibbi:

We are in the middle of a major national disagreement over budget priorities, and that debate is going to turn into a full-scale cultural shooting war once the 2012 presidential election season comes around. It is obvious that we have a debt problem in this country and that something needs to be done about it. But a huge part of the blame for the confusion and the national angst over our budget issues has to be laid at the feet of media assholes like Brooks, who continually misrepresent what is actually happening with national spending.

The last ten years or so have seen the government send massive amounts of money to people in the top tax brackets, mainly through two methods: huge tax cuts, and financial bailouts. The government has spent trillions of our national treasure bailing out Wall Street, which has resulted directly in enormous, record profit numbers – nearly $100 billion in the last three years (and that doesn’t even count the tens of billions more in inflated compensation and bonuses that came more or less directly from government aid). Add to that the $700 billion or so the Obama tax cuts added to the national debt over the next two years, and we’re looking at a trillion dollars of lost revenue in just a few years.

You push a policy like that in the middle of a shaky economy, of course we’re going to have debt problems. But the issue is being presented as if the debt comes entirely from growth in entitlement spending. It’s bad enough that middle-class taxpayers have been forced in the last few years to subsidize the vacations and beach houses of the idiots who caused the financial crisis, and it’s doubly insulting that they’re now being blamed for the budget mess.

Amen. Taibbi also debunks the idea that Ryan is somehow courageous:

The absurd thing is that Ryan’s act isn’t even politically courageous. It’s canny calculation, but courage it is not. It would be courageous if Ryan were, say, the president of the United States, and leaning on that budget with his full might. But Ryan is proposing a budget he knows would have no chance of passing in the Senate. He is simply playing out a part, a non-candidate for the presidency pushing a rhetorical flank for an out-of-power party leading into a presidential campaign year. If the budget is a hit with the public, the 2012 Republican candidate can run on it. If it isn’t, the Republican candidate can triangulate Ryan’s ass back into the obscurity from whence it came, and be done with him.

No matter what, Ryan’s gambit, ultimately, is all about trying to get middle-class voters to swallow paying for tax cuts for rich people. It takes chutzpah to try such a thing, but having a lot of balls is not the same as having courage.

Right again.

Stiglitz on income inequality

Joseph Stiglitz has a must-read piece in Vanity Fair this month, titled, “Of the 1%, by the 1%, for the 1%.” There’s too much great analysis in it quote adequately, so I’ll just tease this part:

But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.
…
America’s inequality distorts our society in every conceivable way. There is, for one thing, a well-documented lifestyle effect—people outside the top 1 percent increasingly live beyond their means. Trickle-down economics may be a chimera, but trickle-down behaviorism is very real. Inequality massively distorts our foreign policy. The top 1 percent rarely serve in the military—the reality is that the “all-volunteer” army does not pay enough to attract their sons and daughters, and patriotism goes only so far. Plus, the wealthiest class feels no pinch from higher taxes when the nation goes to war: borrowed money will pay for all that. Foreign policy, by definition, is about the balancing of national interests and national resources. With the top 1 percent in charge, and paying no price, the notion of balance and restraint goes out the window. There is no limit to the adventures we can undertake; corporations and contractors stand only to gain. The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries for business, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the “core” labor rights, which include the right to collective bargaining. Imagine what the world might look like if the rules were designed instead to encourage competition among countries for workers. Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about. But the top 1 percent don’t need to care.

It is all a very sad, scary picture. But it’s time to confront it and offer policy solutions that seek to tilt the balance in the other direction and stop the massive transfer of wealth from working Americans to the top 1%.

Ryan’s Austerity Budget

Duncan Black seems to be the only person who regularly tries to remind people that Republicans won big in 2010 by criticizing Democrats for trying to take away Medicare.  What’s so bizarre about Ryan’s budget plan, which includes a massive privatization and the effective destruction of Medicare for everyone under 55, is that it ignores what was for the GOP good politics in favor of a policy agenda rife with political risk. Duncan writes:

For some reason only crazy liberal bloggers watching political campaign ads on the teevee in their basements noticed that GOP candidates’ only semi-substantive issue in the last election was an attack on Obama Medicare cuts. And they went hard on it. And old people freaked.

David Brooks says the Ryan budget, “will become the 2012 Republican platform, no matter who is the nominee.” As Ryan moves his plan forward and it becomes the center of debate, Democrats have the opening to basically do exactly what the GOP did in 2010. Dems can run on defending Medicare and while correctly attack Republicans for wanting to take it away.

Ezra Klein points out that even if Ryan doesn’t get everything he wants, a “compromised” version of his plan would still be a huge win for Republicans seeking to destroy social programs in the US:

Ryan is beginning the debate far to the right. He won’t get everything he wants, but if he gets 50 percent of what he wants, or even 35 percent, it’ll be the most dramatic victory that conservatives have scored against the social safety net in a generation — larger, at least in dollar terms, than anything done to welfare in 1996.

The one wrinkle in this is that for the most part would be an outcome the White House would be fine with. After all, it was the president who put together a deficit commission, which Paul Ryan served on. The details on what a solution look like may be different, but Obama and Ryan do share the belief that entitlement spending is a problem that needs to be solved now. As Atrios wrote a few days ago, “one party says big spending cuts are necessary but sorta sad, one party says spending cuts are necessary and awesome.”

All of this adds up to a bizarre situation where politically Democrats are in a position to protect Medicare and other entitlement programs, while ideologically the people controlling the Democratic Party seem unlikely to actually use this political advantage, as they too want to see spending cuts. It’s not shocking to me that Republicans want to speed up the transfer of wealth from working people to wealthy elites; this is who they are and they’ve never been shy about it. What is incredibly frustrating and disempowering is the extent to which Democrats will, in some way or another, end up going along with this because they too want the same outcome, they’ll just feel a bit worse about it. Sure, they’ll want to be seen as opposing it, but unless the counter-offer from Democrats is not only making no cuts, but expanding spending for the social safety net, this opposition will be based on the premise set by the Republicans that there is a budget crisis and a deficit crisis and cuts must be made (but never raising revenues!). I hope I’m wrong, but I’m not ready to be optimistic about how Ryan’s budget will be fought against.

60 Minutes on Foreclosure

http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf

I agree with Yves Smith take on this piece:

this 60 Minutes report covers familiar ground. However, the fact that the story is coming now shows that even with bank efforts to pretend that there is nothing to see here, in fact the problems are widespread and difficult to solve. This segment, as highlighted in the text advanced release last Friday, includes a discussion of DocX and the practice of using “surrogate signers“, which are temps signing….in the name of robosigners! Having robosigners relying on corporate authorizations wasn’t low cost enough, apparently. Rather than take the time and effort to have more robosigners authorized (which is already not kosher, as we know, since the robosigners were attesting to have personal knowledge when they clearly didn’t), they went beyond providing bogus affidavits to having workers engage in forgery.

It also showed the work of NACA, but didn’t provide the most crisp description of the NACA process and how it addresses servicer bottlenecks (see here for more details). But it does feature Lynn Szymoniak and the procedures of the now-shuttered DocX, the infamous document fabricating subsidiary of LPS.

So consider this an interesting view of the state of play. The MSM is willing to cover practices that banks have been forced to admit they engage in and they claim to be cleaning up. This is helpful in terms of public outrage, as in validating the charges made on specialist blogs for blogs for more than two years, but is still far from the hot button issues now, such as servicer-driven fraud or chain of title problems.

The Guardian Project

orbot
Tor+Android=Orbot

Nancy Scola at techPresident has a long article about The Guardian Project, an effort lead by my friend Nathan Freitas, that seeks to create secure software for mobile communications. Mobile devices are critically important for activists, dissidents, and leaders of change movements. But most are incredibly insecure and using them can put activists at risk. The Guardian Project seeks to make open-source technology that gives people the ability to talk, message, browse the web, and store data securely on their mobile devices.

[T]he Guardian Project is working on tools to make those devices more secure. Their flagship product is Orbot, an implementation of Tor, a network of servers that routes users in ways that obscure where they’re coming from and where they’re going. Freitas built Orbot with computer security expert Jacob Applebaum. And then there’s Gibber, an encrypted, firewall-evading chat application. The Secure Smart Camera App is an innovation in the works with Witness.org, the group that sprang up after the Rodney King beating in Los Angeles that works to document situations where human rights are at risk. The camera app aims to use automatic facial recognition software to obscure identifies on video taken from mobile phones. It uploads the documentary footage extra-slowly. That’s useful not only in low-bandwidth spots on the globe, but for shielding the video from network censors by making it look like any other type of Internet traffic. There are plans in the works for a “poison pill” program that would allow you or an ally to wipe your phone clean in a dangerous situation. (All Guardians apps in progress are listed on their website.)

This is some of the most inspiring and important work I see taking place at the nexus between technology and progressive activism.

Anti-business Tea Party?

An article in today’s New York Times by Mike McIntire about the close relationship the Tea Party movement has had with American business is pretty damning. It highlights a string of bizarre synergy between a supposedly populist movement and business interests around things like keeping Asian paper tariff free, opposing net neutrality, and commercial space travel. Amidst some really good reporting on the Tea Party’s fealty to big corporate interests, McIntire includes this paragraph:

The Tea Party movement is as deeply skeptical of big business as it is of big government. Yet an examination of the Institute for Liberty shows how Washington’s influence industry has adapted itself to the Tea Party era. In a quietly arranged marriage of seemingly disparate interests, the institute and kindred groups are increasingly the bearers of corporate messages wrapped in populist Tea Party themes.

I honestly don’t know what makes McIntire think “The Tea Party movement is as deeply skeptical of big business as it is of big government.” The Tea Party has been largely engineered by money from rightwing corporate donors like the Tea Party. The actual activists have been funneled towards activities that protect corporate interests and fly in the face of any claims to populism.

More to the point, the Tea Party has never been anything other than the same old Republican dead enders who stood by the Bush administration while they turned a massive budget surplus into our largest deficits ever. None of these grassroots Republicans said one word about the Bush administration’s fiscal irresponsibility. Only when a Democrat occupied the White House did these self-described deficit hawking populists remember they cared about the deficit.

McIntire’s piece is otherwise quite good. It goes deep into the realities of the Tea Party and exposes the “movement” as being run by corporate Republican operatives, funded by corporate Republican businessmen, and used as a tool to further corporate Republican interests. The only thing which McIntire isn’t able to report is why grassroots Tea Party activists actually let themselves take part in this sort of shilling against their own economic interests.

Konczal on Homeowner Organizing

Mike Konczal at Rortybomb runs with some of Stephen Lerner’s ideas about homeowner organizing.

Collective bargaining is the cure to this kind of power differential – give consumers access to the same expertise that businesses would draw on in these circumstances. Explicit in unions are that a small fee up front gets you full representation later – an insurance fund against fraud and exploitation, something that Marine could have used when paying lawyer expenses by the hour out of pocket. It also creates organizations for putting political pressures on what are clearly political problems.

Because this is, at its core, a distributional issue. If we had let the banks fail then these mortgages could have been sold off for a fraction of what they were worth, and the principal writedowns could have happened efficiently. Instead we backstopped their losses, didn’t force writedowns, tried to push programs like PPIP which would have used FDIC money to inflate the value of these mortgage bonds, and in general have hoped the banks could become whole by recapitalizing through earnings. The only way to do that is to keep extensive pressure on homeowners and consumers.

To put it a different way, these losses have happened. They are here. It’s just a matter of how they get shared. We’ve done everything we can to protect the banks on this. Meanwhile, unnecessary foreclosures are running rampant across the country, putting balance-sheet pressures on neighborhoods, hurting municipality budgets and hitting investors and making residential and business investment difficult. And on the other side, one of the most durable pieces of the safety net created in the United States, the bankruptcy code, something that manages the distribution of losses when debts go horribly wrong, is broken when it comes to first mortgages. Bankruptcy court can temper moral hazard by making both sides take an upfront hit and share any appreciation later on, but Obama and the Treasury team have had no interest in making these adjustments.

Lerner responds to Beck’s attacks

Stephen Lerner goes to The Nation to respond to the attacks Glenn Beck has launched on him:

What did I say that led Beck to spend two nights attacking me and defending big banks and Wall Street CEOs?

I think I may have found part of the answer in what disgraced former Wall Street stock analyst Henry Blodget admitted when he echoed Beck’s wild theories on Business Insider. Describing my remarks, he wrote, “Many Americans will undoubtedly sympathize with and support them.”

So that was it: Beck, right-wingers and Wall Street sympathizers went ballistic because they knew the ideas I talked about are far from being a secret leftist conspiracy; in fact, they’re in sync with the thinking of most Americans. In my talk, I raised a very simple yet powerful idea: that homeowners, students, citizens and workers should make the same practical decisions Wall Street and corporate CEOs make every day—they should reject bad financial deals.

Beck and Wall Street are terrified that regular Americans will begin to challenge the double standard that allows one set of rules for the rich and another for the rest of us. They are petrified of the growing understanding, among people of diverse political backgrounds, that our country isn’t broke; that the tiny elite at the top has manipulated the economic crisis it created to grow even richer and more powerful while the rest of us suffer the consequences; and that Wall Street and corporations, sitting on record profits, are holding the country hostage, essentially threatening a capital strike if they don’t get further tax and regulatory breaks.

As long as Wall Street and the superrich feel secure and confident, they have no reason to negotiate a fair deal with the rest of us. Only by creating uncertainty and instability for them—by disrupting unfair business as usual—can we build the strength to challenge their stranglehold on our economy and our democracy.

Mortgage Modification Dealings

Last week I took a guess and wrote “meaningful principle modifications could run $800-900 billion plus.” That was a shot in the dark, but recent reporting by Shahien Nasiripour at Huffington Post shows that I was likely a good ways off the mark, at least in so far as how the CFPB has estimated the number of underwater homeowners and what it will take to get them to a reasonable level of equity in their homes.

The proposed settlement, as envisioned by the consumer agency, could reduce loan balances for up to three million homeowners. If mortgage firms targeted their efforts at reducing mortgage debt for three million homeowners who owe as much as their homes are worth or have less than 5 percent equity, the total cost would be $41.8 billion, according to estimates cited in the presentation.

If firms lowered total mortgage debt for three million homeowners who are underwater by as much as 15 percent and brought them to 5 percent equity, that would cost more than $135 billion, according to the presentation. That would include reducing second mortgages and home equity lines of credit.
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The CFPB estimates that there are about 12 million U.S. homeowners underwater, most of whom are not delinquent, according to its presentation. Of those, nine million would be eligible for this new principal-reduction scheme born from the foreclosure deal. The new initiative would then “mandate” three million permanent modifications.

Getting to 5% equity for 3 million homeowners would be $135 billion, but getting to 5% equity for all 12 million underwater homeowners would be $540 billion. That’s a ways off from what I’d suggested, but it’s still many times bigger than any number that’s actually being discussed for a settlement.

Yves Smith is skeptical about the validity of the numbers being put out being justified.

But arguing over a pretty much made-up figure misses the critical point: the money the servicers saved is not even remotely the right basis for thinking about the appropriate settlement level. Settlements are based on potential liability. For instance, in 1998 the tobacco settlement, the tobacco companies agreed to pay a minimum of $206 billion over 25 years to be released from liability on Medicare lawsuits on health care costs plus private tort liability.

The saved costs bear no relationship to the banks’ legal liability for servicer-driven foreclosures, nor to the damage they have done to homeowners or broader society through their actions. It’s like basing the penalties in a robbery on the unpaid parking fees and rental costs of the car used to make the heist.

This resorting to completely irrelevant metrics results from the problem we have harped on from the onset of the settlement talks: the lack of investigations. You can’t settle what you haven’t investigated.

What’s most troubling is Smith’s conclusions:

This document looks to be rooted in Jean Baptiste Colbert’s saying: “The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing”. Any number that was within hailing distance of the real damage done by foreclosure (which father of securitization Lew Ranieri was astonished to learn in 2008 was standard practice), rather than by doing mods for viable borrowers, would be a multiple of the levels under discussion here; and the servicer-driven foreclosure aspect pushes the figure higher still. This document bears the hallmarks of looking to rationalize a figure that would sound big enough to impress the public as being punitive, yet not hurt the banks at all (as page 4 demonstrates). But having a settlement designed around not damaging predators is certain to perpetuate their destructive conduct.

I actually don’t think that’s right. Already this number of $20-30billion has been under massive attack from the banks’ representatives in Washington: the Republican Party. They’re pitching a fit and will be certain to continue to do that. The political fight is a way for banks to ensure that even a number like this is viewed as too big and too putative. They are rejecting the opening bid and they’re able to do this knowing the number will be reduced. But yes, whatever comes from this, I don’t see it deterring banks from continuing “their destructive conduct.”