On NBC, Sen. Kay Bailey Hutchison (R-Texas), said she wanted the bill to have more spending on infrastructure, but she wanted it to be on military infrastructure, even though much of that winds up as scrap metal in Iraq and Afghanistan, not bridges and schoolhouses in the United States.
She said she would strip from the bill all the "social spending that is not going to create jobs," but when pressed by Sen. John F. Kerry (D-Mass.), her on-air debating partner, she agreed to preserve some social spending, such as unemployment benefits. The effect of this exchange was to leave Hutchison sounding as though she made up her position as she went along.
Very little of these discussions addressed the principle underlying the stimulus bill. The idea is that when the private sector withdraws from the economy by cutting back on capital spending and laying off workers, it is up to the government to take up the slack, if necessary via deficit spending.
This isn't radical thinking. It's endorsed by, among others, Martin Feldstein, who was Ronald Reagan's chief economic advisor and is consistently voted by his peers as the Economist Least Likely to be Mistaken for a Democrat. Feldstein opposes most of the tax cuts favored by the GOP, especially business tax cuts. To be fair, he isn't entirely enamored of President Obama's proposal -- he thinks it should spend more on programs that will produce more short-term employment and less on open-ended programs.
Yet the plan before the Senate includes hundreds of billions of dollars in near-term programs and projects. There's $90 billion for school construction and renovation and educational grants and $79 billion for state educational programs, most of which would be spent within two years. Of the $27 billion for highway construction, most would be spent within four years.
The bill also appropriates billions for the kind of forward-looking projects we've neglected during the last two decades, such as broadband infrastructure, water and anti-pollution programs, and alternative energy research, which will produce long-term economic benefits for the entire country.
Is it possible to slip pork into a bill this massive? Well, duh. But pork is often in the eye of the beholder. House Republicans this week released a list of $19 billion in provisions they called "wasteful" (i.e., 2% of the total package). But the list includes numerous projects that many Americans would support and that would plainly stimulate our limping construction and manufacturing sectors. For example, the purchase of new computers and vehicles for federal agencies, the building of fire stations and other public facilities, and the upgrade of rail lines.
Is this the best the GOP can come up with? Or are Republicans just determined to undermine the recovery effort? It's hard to disagree with Obama's complaint that "modest differences" over the package are being inflated to stall the whole program.
Friday, February 06, 2009
John Steward Evicerates Republican "principled" opposition to Stimulus Bill.
President Obama Calls Stimulus Bill Delay 'Inexcusable'
WASHINGTON – President Barack Obama decried as "inexcusable and irresponsible" the delay of his economic recovery legislation in Congress with an estimated 3.6 million Americans losing their jobs since the recession began.
Obama's remarks were some of his most direct and pointed in support of the massive economic package that the Senate considered Friday and tried to pare down below its $900-billion-plus price tag. Obama acknowledged it was not perfect and pledged to work with lawmakers to refine the measure, which he called "absolutely necessary."
"But broadly speaking, the package is the right size, it is the right scope, and it has the right priorities to create 3 to 4 million jobs, and to do it in a way that lays the groundwork for long-term growth," Obama said at a ceremony in the White House East Room.
The president named an outside economic team of advisers as the nation dealt with more bad news in the unemployment report for January. Employers slashed payrolls by 598,000, the most since the end of 1974, propelling the unemployment rate to 7.6 percent. The rate is the highest since September 1992.
"These numbers demand action. It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay or politics as usual while millions of Americans are being put out of work," Obama said bluntly. "Now is the time for Congress to act."
Borrowing themes from an address the night before to fellow Democrats on retreat in Williamsburg, Va., Obama reminded lawmakers that voters gave them the White House and control of Congress.
"They did not choose more of the same in November," Obama said Friday. "They did not send us to Washington to get stuck in partisan posturing, to try to score political points. They did not send us here to turn back to the same tried and failed approaches that were rejected because we saw the results. They sent us here to make change with the expectation that we would act."
Obama's feisty speeches, delivered back-to-back, were a reminder of the aggressive campaigner who helped his party boot Republicans from office. It also was a sign that the administration was increasingly worried about losing their first major legislative priority so soon after taking office.
He warned inaction would only deepen the problems.
"These Americans are counting on us, all of us in Washington. We have to remember that we're here to work for them. If we drag our feet and fail to act, this crisis will turn into a catastrophe. We'll continue to get devastating job reports like today's month after month, year after year," Obama said grimly.
He reminded his audience that some 3.6 million Americans had lost their jobs as the economy has gone into a free fall.
"That's 3.6 million Americans who wake up every day wondering how they are going to pay their bills, stay in their homes and provide for their children. That's 3.6 million Americans who need our help," he said.
Obama had already tapped Paul Volcker, a former Federal Reserve chairman and a top Obama adviser, as the leader of the newly created Economic Recovery Advisory Board.
Volcker said he expects Congress to share the president's "sense of urgency" that something must to be done to remedy a skidding economy.
Other members of Obama's panel include former Securities and Exchange Commission Chairman William Donaldson, TIAA-CREF President-CEO Roger Ferguson and Harvard University professor Martin Feldstein, who wrote a Wall Street Journal op-ed piece last year titled "John McCain Has a Tax Plan To Create Jobs."
Obama friend and campaign finance chairwoman Penny Pritzker also is on the board, as is Caterpillar Inc. Chairman-CEO Jim Owens and General Electric Co. CEO Jeffrey R. Immelt. Two labor officials — Anna Burger of Change to Win and Richard Trumka of the AFL-CIO — also were named to the 15-member board designed to offer Obama advice as he seeks a way to rebuild the economy.
The new council is intended to be an economic sounding board for Obama — an outside-the-Beltway group that will report to the president directly. It will meet regularly with Obama, perhaps once a month. Its mission will include responding to requests from Obama — such as delving into a particular subject — without competing with the National Economic Council or day-to-day, decision-making at the White House.
Labels: Republican Obstructionists
Republicans Try To Score Political Points While U.S. Economy Loses 1 Million Jobs Every Two Months.
Friday’s dismal report on the rapid loss of jobs in January has added new urgency to the government’s efforts to reverse one of the worst economic downturns in memory.
But even if Congress and the White House can agree on a huge program of fresh spending and tax cuts to get the economy going again, it could take years to create enough new jobs to rehire the idle workers and keep up with growth in the labor force, economists say.
The U.S. economy has been shedding about a million jobs every two months, and there are no signs that pace will ease up soon. New figures published Friday morning showed the U.S. economy lost 598,000 jobs in January, the most since the end of 1974, pushing the U.S. unemployment rate up to 7.6 percent.
“There can be no sugar-coating this report,” John Ryding, chief economist of RDQ Economics, wrote in a note to clients. “The rate of job losses massively intensified in November and there has been no change in trend since then.”
Job losses in the last two months of 2008 were worse than originally reported; revisions in the government data showed businesses cut 577,000 jobs in December and 597,000 in November. That brings to 3.6 million the total number of jobs lost since the recession began in Dec., 2007.
The data provided fresh evidence of the urgency for government action to try to head off the loss of millions more jobs. As President Barack Obama announced a new economic recovery advisory board Friday, he said the jobs data demand action and that it's "inexcusable and irresponsible" for Congress to delay his economic recovery package. He cautioned that recovery won't come quickly.
"No single act can meet the challenges of this moment," said Obama. "This process is just the beginning of a long journey back to progress and prosperity."
The White House is also scrambling to revise a $700 billion financial rescue program that has drawn fire for failing to spur banks to ease tight credit and lend more to businesses and consumers. Treasury Secretary Timothy Geithner is expected to deliver a speech on Monday outlining the new plan.
Evidence began mounting before Friday’s report that the pace of layoffs may be picking up speed. The number of workers filing their first claim for jobless benefits last week was much higher than expectations — up by 35,000 to 626,000, the highest level in 26 years.
And it's taking longer for those who lost jobs to find new ones. The average time it took for an unemployed person to find new work — full or part time — rose to 19.8 weeks in January, compared with 17.5 weeks a year ago, according to government data.
Big companies announced over 240,000 layoffs last month, a seven-year high, according to Challenger, Gray and Christmas, an outplacement firm. As job cuts deepen, they’re also widening to industries that had been holding up relatively well.
"We're certainly seeing layoffs coming from all corners of the economy," said John Challenger, the firm's CEO. "That's one of the things that is really unique about what's happening right now. It's not just automotive and banking and housing. We're seeing it in pharmaceuticals and telecom and heavy equipment."
For much of the past two decades, the bulk of job creation came from small businesses, which account for more than half of all private sector jobs. While large-scale layoffs at big companies are getting the biggest headlines, weakness in the job market is now spreading to smaller companies, according to Joel Prakken, chairman of Macroeconomic Advisers, which manages a monthly employment survey conducted by payroll processor ADP.
"Early in this episode, the job loss seemed concentrated in the larger firms," said Prakken. "But in the last several months, they've spread quite aggressively to medium- and small-sized outfits. That leaves no doubt the recession has been spread beyond the epicenter of housing and mortgage-related finance out into the mainstream economy."
Government employment, which has held up relatively well, is also beginning to be hit by the widening budgets gaps faced by state and local governments. Though the economic stimulus package is expected to help states pay the rising cost of Medicaid and jobless benefits, there is little it can do to offset the decline in tax revenues lost to slower consumer spending, lower employment levels and declining property values.
Halfway through their fiscal year budgets, 42 states and Washington, D.C., face deficits of more than $46 billion – on top of $48 billion cuts already made to close budget gaps, according to the Center on Budget and Policy Priorities. Forty-one states are projecting shortfalls of another $88 billion. In all, combined budget gaps for the remainder of the current fiscal year and the next two years are estimated to total more than $350 billion, said the CBPP. Because they can’t borrow to make up for those deficits, states have to close shortfalls by cutting spending or raising taxes.
That means states now have few options left except cutting their payrolls. In California, state agencies were scrambling to implement the first employee furloughs in California history, ordered by Gov. Arnold Schwarzenegger to save money in the face of a massive budget crisis. The furloughs, involving some 90 percent of the state's 238,000 employees, come after months of negotiations to try to solve the state's budget shortfall, which is projected to reach $42 billion by June 2010.
Local governments also face the prospect of job cuts as falling housing values cut deeply into local property taxes, the main source of funding for many municipalities. Until the housing market finds a bottom, those revenue losses will continue to pressure city and town budgets. The increased tax burden on homeowners will also act as a drag on consumer spending, further postponing the economy's recovery.
One bright spot in the economic data this week came with a big gain in productivity for the fourth quarter of 2008. But there was a cloud around that silver lining: The gains were the result of a steep drop in employment and hours worked that outpaced the 3.8 percent drop in economic output. Much of that output represented a build-up in inventories that will create a drag on the economy in the current quarter.
That has left the economy “on the verge of a massive inventory cycle the likes of which has not been seen since the early 1980s,” Merrill Lynch economist David Rosenberg wrote in a note to clients. “Businesses are swamped with excess inventories, blindsided as they were by the abruptness of the downturn in both global and domestic demand.”
In some ways the job market is even weaker than the official data suggest. Many companies are trimming payroll costs by cutting back hours, a change that may not show up in the unemployment rate reported by the Labor Department. The so-called “headline” jobless rate also doesn’t include workers who have become so discouraged they given up looking for a job; or students who have gone back to school to sit out the recession.
With those groups are taken into account, the level of “underemployment” is approaching 14 percent, according to Jared Bernstein, a top economic adviser to Vice President Joe Biden.
"Over 20 million people are either unemployed or can't find the hours they want," said Bernstein. "That means almost everyone we're talking to knows somebody who is experiencing that downturn firsthand."
All of which adds to the urgency of the stimulus package working its way through Congress, which could be worth more than $900 billion.
Most mainstream economists believe the boost from the stimulus package — along with aggressive moves by the Federal Reserve to get credit flowing again — will stop the economic slide this year. But the growth rates seen earlier this decade, funded by trillions of dollars of unsustainable borrowing, are not expected to return for years.
Part of the reason is that, while the early effects of the stimulus may be felt quickly, it could take several years for the full economic impact to kick in from from longer-term infrastructure spending. Even "shovel-ready" projects like rebuilding roads and bridges will take years to complete.
Meanwhile, the labor force continues to grow about 1.2 percent a year, meaning that there will be that many more job seekers when the recovery kicks in. Without a new source of growth, the recovery won't be able to create enough jobs to go around.
“It may well be 2010 before you make a dent at the unemployment rate — meaning jobs as measured by the household measure — growing fast enough to absorb currently unemployed as well as newly entered workers and those who re-enter the work force," said Stuart Hoffman, chief economist at PNC Financial.
That means that even when economic output and consumer spending begins growing again, the economy will continue to feel like it’s in recession for the millions still looking for a job.
Labels: Republican Obstructionists
Republican Obstructionists: Making It Up As They Go Along.
Republican Obstructionists? No More.
Republican Philosophy Has Created This Economic Mess.. Yet They Want A Say In How To Fix It? Fuck Them Says I.
Bob Cesca: Operation Zero Cred
You've probably noticed that the debate swirling around the president's recovery bill has reached new levels of mortal terror and chaos. Even a casual excursion around the liberal tubes and you'll find posts that read like the worst parts of the Bible. There's a palpable vibe in many progressive circles that the president is on the brink of an epic fail.
After all, this is one of those do-or-die moments in American history and the panic level is rightly proportional.
But while urgency is appropriate, we're losing the initiative.
We all have our own ideas about what the recovery bill is supposed to look like. The Republicans are threatening to filibuster, and we can't trust Harry Reid to stop them. Rush Limbaugh, the very serious leader of the Republican Party and alleged sex tourist, has ordered his dittoheads to blitz the Democrats with angry phone calls. Concurrently, Democrats, liberals and progressives, for all we've learned in the last eight years, are losing the framing battle -- "stimulus package" sounds like a weird service offered at a porn store and, in that context, a trillion dollar "stimulus package" sounds, you know, painful. Meanwhile, centrist Democrats like Ben Nelson appear to be ransacking the bill. Other Democrats have bugged out of Washington entirely.
We're looking at fire and brimstone coming down from the skies. Forty years of darkness. The dead rising from the grave! Dogs and cats living together! Mass hysteria!
Come to think of it, some of that Ghostbusters stuff might actually come true if a beefy and expensive recovery bill isn't passed, and right soon.
So how do we get there?
The first step in getting a handle on all of this mayhem is to understand that this is unprecedented in terms of size, scope and strategy -- only rivaled by the New Deal. Then again, for all of the obstacles he faced, FDR didn't have to negotiate his way through cable news, a hostile press, far-right talk radio, the blogotubes and an army of dittoheads taking their orders from an impotent burnout whose stated goal is the failure of the economy. In other words, while there are very smart economic solutions being pitched by Paul Krugman and others, the price tag, politics, optics, media and discourse are all brand new.
This is massive, this is complicated, this is unlike anything we've ever seen.
Nevertheless, the president hasn't faded, which is good considering the Herculean enormity of what's confronting him. President Obama, as we witnessed throughout the campaign, has a narrative build and a cadence in his speech-making that's almost perfectly duplicated in how he leads and how he manages a crisis. And based on his public appearances this week, he's actually gaining strength -- amplifying his voice and fortifying his position.
The second step is the big one. The progressive netroots have yet to seriously blitz Congress on this thing. The central reason for this lack of activism was summarized by Chris Bowers and Atrios who are asking: If we blitz Congress, what the hell do we support exactly? There are so many ideas in terms of what the recovery bill should look like, which iteration do we get behind?
There are obviously no easy answers. But regardless of the differing ideas about the details of the recovery bill, there's one thing that most of us can agree about: the Republicans can't be trusted on the economy and they can't be trusted to meddle with the recovery bill.
The president wrote in the Washington Post today:
In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis... I reject those theories...
In addition to being a clear message to Congress, this sounds like a mission statement -- for the administration and for us. Reject the Republican economic theories.
To that point, there's no debating the Republican record on the economy. Their allegiance to Reaganomics and free market deregulation have led us to the brink of, well, dogs and cats living together and mass hysteria.
Nevertheless, there they are on cable news and the Sunday shows acting as if they know something. At the same time, they've proved themselves to be dishonest, bad-fath actors in this thing. They've spread lies about fake CBO reports, while also ignoring an actual CBO report on the Senate bill indicating that it would, in fact, succeed in stimulating economic growth. They've spread lies about nonexistent ACORN line items in the bill -- line items that only exist inside of Michelle Malkin's twisted dome. I mean, they met with Joe the Plumber on the Hill this week to discuss the economy. Joe the Plumber. About the economy. Because they're very serious people who ought to be taken very seriously.
And so they should be summarily shut out of this process -- whether or not the president wants them out.
The Republicans have zero cred.
And that's the message we can unify around: ZERO CRED.
Operation Zero Cred.
From there, considering the unprecedented dollar amount of the recovery bill, it might be impossible to herd every cat. But perhaps, in the process, we'll at least marginalize the Republicans just a little more. And that will surely mean a larger, more robust recovery bill.
So as the saying goes: We are the ones we've been waiting for, and all that.
Don't write or send e-mails. Written screeds can be conveniently lost, deleted or shredded. Telephones, on the other hand, make loud beeping and ringing noises and you'll know right away that there's a real life human being on the other end of the line who has to listen to what you have to say.
"The Republicans have zero credibility on the economy."
Paraphrase President Obama:
"Please reject the Republican theories that got us into this mess in the first place."
Feel free to toss in the following:
"Make the Republicans stand and filibuster if they want to filibuster. No cloture votes!
Don't get into specific details of the bill. Our message needs to be consistent and unified: Zero Cred. The Republicans have zero credibility. We reject their ideas and we reject their theories.
Let's do this.
Republicans Continue To Oppose Government Spending To Help The Economy. Here's Why They Are Wrong.
Sen Jeff Merkley (D-Oregon)
Creating Jobs Is Not "Wasteful"
This week the Senate is debating whether to pass the American Recovery and Reinvestment Act of 2009, a bill we absolutely need to help arrest our economic freefall. Economic policies championed by the Bush Administration largely focused on tax cuts for the big corporations and the wealthiest among us. Not only did these policies fail, they helped create the crisis we now find ourselves in. Yet many in Congress believe we should go down that road yet again in hopes that this time it will be different. Even worse, they are obstructing a recovery package focused on creating jobs, investing in our future economic competitiveness, and providing middle-class tax relief. Indeed, provisions aimed at working Americans are now characterized as "wasteful spending."
It is as if the Bush team set a house on fire and then blocked the fire trucks trying to put that fire out.
On Monday, Republican leaders in the House put out a list of items in the American Recovery and Reinvestment Act they deemed to be "wasteful spending." Many of the projects they demonize create jobs, invest in our children and protect our citizens.
One project they're attacking hit close to home. They're calling funding to restore forest health and prevent wildfires in National Forests wasteful. Coming from Southern Oregon, I can tell you firsthand they are dead wrong.
I grew up in Southern Oregon. My father was a sawmill worker and a logger and his job put food on the table. Right now Douglas County, where I was born, has an unemployment rate of 12.8 percent. That's the highest it's been in decades and well above the current national average. Douglas County is home to many of Oregon's timber workers and they need the stability of a good paying job. The money that would be allocated to counties like Douglas to restore forest health and prevent forest fires would put these folks back to work.
Let me explain. Due to federal mismanagement, there are millions of acres of choked and overgrown second-growth forests. These forests are a complete menace. They are diseased and are very little use for strong ecosystems. Moreover, they are a huge fire hazard. Thinning these neglected forests is essential for restoring forest health and generating thousands of rural jobs.
Let me emphasize this: this provision will create thousands of rural jobs. This is a win-win for our rural economies and our ecosystems.
Preventing wildfires is something that desperately needs to be done in any economic condition and now has the added benefit of providing jobs in areas that need them most. How Republicans can call job creation for hardworking millworkers like my dad "wasteful spending" is a mystery to me. To the contrary, like school or bridge repairs or broadband internet access, thinning overgrown forests is the best kind of economic recovery investment: it creates jobs in the short-term while addressing a critical and long-neglected priority. The funding would improve the health of dangerously overgrown second-growth forests, helping protect our forests from disease and preventing wildfires that are devastating to rural communities and enormous sources of greenhouse gas emissions.
Funding the protection of our forests isn't the only thing critics are calling wasteful spending. They are attacking funding for Amtrak, which is underfunded, has recently increased ridership, and is a major economic engine of the East Coast in particular. They are attacking funding for public computer centers at community colleges, programs which create jobs now and provide workers with the skills they need to compete in a technology-driven economy. They are even attacking funding for flood reduction projects off of the Mississippi River - just three and a half years after Hurricane Katrina and inadequate levees led to devastation in New Orleans.
Whether motivated by a knee-jerk opposition to anything the government does or a desire to play politics and try to give the new Obama Administration a black eye, the opponents of this bill are opposing job creation and repeating the mistakes that led to the Great Depression. Economists across the political spectrum recognize that government spending is vital to create economic activity in a recession, and many even say the price tag is too low. Whether it's logging to reduce wildfire hazards, teaching children, laying new light rail tracks, or preventing floods along the Mississippi, people will be paid to do these jobs - that's not wasteful spending, that's the whole point.
For eight years, we weren't investing in our economy. We were running up record debt but we weren't creating jobs or bringing families into the middle class. Some in Congress see the past eight years and think we were on the right track, all current evidence to the contrary. I vehemently disagree.I believe the key to putting our economy back on track is to put Americans back to work by investing in infrastructure and green energy jobs and building a pathway for our children and economy to compete and innovate through education. We can address the short-term crisis and re-build our economic foundation for the future. America voted for a change of direction last November, not more of the same. Republicans should listen to the American people and work in a bi-partisan fashion to help get our country on the road to recovery.
Rebulican Hypocrisy 101
The GOP'S PHONEY HONOR
Maybe the most absurd rant coming from the sore Republican losers following the November election is that somehow President Obama is disrespecting office of the president by not enforcing a coat and tie dress code in the Oval Office.
Yes, the same clan who brought us such hits as torture, the Iraq war, Katrina, Guantanamo, Abu Ghraib, the outing of a covert CIA agent, the U.S. Attorneys scandal, Jack Abramoff, this wonderful economy, the assault on the middle class, and the defecation on the Constitution and civil rights, is now concerned that not wearing a jacket is disrespectful of the presidency. Got that?
Says former Bush chief of staff Andy Card:
"The Oval Office symbolizes...the Constitution, the hopes and dreams, and I'm going to say democracy. And when you have a dress code in the Supreme Court and a dress code on the floor of the Senate, floor of the House, I think it's appropriate to have an expectation that there will be a dress code that respects the office of the President."
This absurdity perfectly parallels the GOP's idiotic rant that Obama was being unpatriotic during the campaign by failing to wear an American flag lapel pin at the very time that their presidential nominee John McCain never wore one...even once.
But now comes word that the GOP's phony attempt at defining honor is yet again, like the shameless flag pin effort, another example of false honor wrapped in a blanket of hypocrisy, as the Huffington Post discovered yesterday:
And as Media Matters notes:
Leave it up to Republicans to spend time focusing on their hypocritical symbolic side show to mask their abysmal efforts when they actually occupied the Oval Office.
What next, a lecture from Karl Rove about obeying the law? Or maybe one from Dick Cheney about following the Geneva Convention.
Republicans Continue To Play Chicken With Economy. Continue to Claim Tax Cuts Are The Only Way To Save Us. Tax Cuts? Seriously? Bigger Deficits?
A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.
It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated.
Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again.
It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.
Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.
Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.
It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”
Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap.
We’re already closer to outright deflation than at any point since the Great Depression. In particular, the private sector is experiencing widespread wage cuts for the first time since the 1930s, and there will be much more of that if the economy continues to weaken.
As the great American economist Irving Fisher pointed out almost 80 years ago, deflation, once started, tends to feed on itself. As dollar incomes fall in the face of a depressed economy, the burden of debt becomes harder to bear, while the expectation of further price declines discourages investment spending. These effects of deflation depress the economy further, which leads to more deflation, and so on.
And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?
Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive.
So what should Mr. Obama do? Count me among those who think that the president made a big mistake in his initial approach, that his attempts to transcend partisanship ended up empowering politicians who take their marching orders from Rush Limbaugh. What matters now, however, is what he does next.It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.
Republican Philosophy... Business doesn't need Government Intervention... except when we Bailout the Banks. Are they Fucking High?
Wall Street bankers, with their $18 billion in bonuses, private jets and gaudy conferences, are causing headaches for the GOP.
President Obama has proposed capping compensation for executives at banks that take taxpayer bailout money at $500,000. Republicans hate the idea -- a position that puts them uncomfortably on the side of people currently about as popular as armed burglars and subprime mortgage brokers.
Senate Minority Leader Jon Kyl (R-AZ) blamed the "tone deaf" bankers for creating the political environment that allowed Obama to call for a cap.
"Because of their excesses, very bad things begin to happen, like the United States government telling a company what it can pay its employees. That's not a good thing in America," Kyl told the Huffington Post.
"What executives have done is troubling, but it's equally troubling to have government telling shareholders how much they can pay the executives," said Sen. Mel Martinez (R-FL).
Sen. James Inhofe (R-OK) said that he is "one of the chief defenders of Obama on the Republican side," but "as I was listening to him make those statements [about executive pay], I thought, is this still America? Do we really tell people how to run [a business], and who to pay and how much to pay?"
Democrats argue that banks that take government money must accept any rules the government decides to send with it. Sen. John Kerry (D-Mass.) and Rep. Barney Frank (D-Mass.) are both working on legislation that would complement Obama's attempt to get a handle on executive compensation.
It's not a novel concept, and it's one that the GOP supports -- at least when applied to welfare recipients. "We demand that welfare recipients do an honest day's work for their checks. And now, since President Obama laid down the law Wednesday, we demand that the guys who ran our banking system into the ground abide by our pay scales in return for our bailing them out," writes Harold Meyerson in a column Friday.
"After all, what's the moral distinction between welfare recipients and the wizards of Wall Street, other than that the welfare recipients aren't the ones responsible for tanking the global economy?"
Welfare reform that passed in the 1990s created the program called Temporary Assistance for Needy Families (TANF). The government intervenes intimately into the lives of TANF recipients, requiring drug testing, time spent doing government approved activities and near-constant documentation of continuing compliance. The intervention is justified by reference to the payments being made.
One House Democratic aide quipped that bankers should be required to jump through some of the same hoops that welfare recipients are, beyond a simple salary cap. He suggested making bankers fulfill a strict work requirement and submit a time sheet, signed by a supervisor -- perhaps the Board of Directors -- in 15-minute intervals, proving that they worked 40 hours each week. Only certain activities would count, as is the case with TANF recipients.
"That three hour jet ride to get to the meeting in Chicago doesn't count. Reading the Wall Street Journal is also not a countable activity. If they fail to do this once, you cut them off of TARP funds. If they fudge the time sheet, you charge them with TARP fraud and make them pay back any government money they've received," the aide joked. "I'm sensing a legislative opportunity."
Sen. Sam Brownback (R-KS), though, said the underlying reasoning has merit. What applies to welfare recipients ought to also apply to corporate welfare recipients, he said.
"I think it does apply to that," he said. "People are livid about these big bonuses and if the groups want to take government money it seems they should be able to have some limits on these bonuses."
"If they don't need it, don't want it, fine. Don't take it," the Kansas Republican added.
Other Republicans disagreed. "It's still government running business," Inhofe said.
"It's a leap, because the executive at the bank is a free agent who can leave the bank and go to work someplace else," argued Sen. Bob Bennett (R-UT) of the welfare comparison. "You run the risk of having a brain drain at the bank of their top talent."
Bennett said, "Some of the things some of these bank executives have been doing demonstrates they have a tin ear. At the same time, I'm generally troubled by wage and price control, no matter how logical it may appear."
The objection to the government intervention in salaries is rooted in the Republican belief that government is inherently ineffective. "If Congress can run a financial institution, it belies everything I've seen in this body. Government does not do a good job running private institutions," said Sen. Kit Bond (R-MO).
Sen. Tom Coburn (R-OK) agreed: "If we do such a good job of running the federal government, what business do we have telling them how to run the banks?"
The GOP is also concerned that compensation limits could put the country on the road to serfdom. "This is just a symptom of what happens when the government intervenes and we start controlling all aspects of the economy. This is just the first piece," said Sen. Jim DeMint (R-SC). "If you accept the fact that the government should be setting pay scales in America, then it's hard not to go after these exorbitant salaries. But I think it's a sad day in America when the government starts setting pay, no matter how outlandish they are."
"What are we going to do next?" wondered Martinez. "Tell a company if they get TARP money where there offices should be? They should be renting maybe from an abandoned federal building?"
Minority Leader Mitch McConnell (R-KY) and and Sen. John McCain (R-AZ) may have had the savviest responses to the tricky political question. McConnell didn't acknowledge that he'd been asked the query; he walked on to the Senate floor instead of answering. McCain declined to comment.
Opposition isn't uniform. Beyond Brownback, other Republican senators spoken to for this article, including Sens. Coburn, Richard Lugar (R-IN) and Orrin Hatch (R-UT), expressed some support for a government effort to control the salaries of executives of banks that take bailout money.
At least one Republican has thought about the plan and come around to it. "In theory, I don't like it. I just don't like the government telling private industry how to run their businesses," said Sen. John Thune (R-SD) when first asked about it.
About fifteen minutes later, Thune had changed his mind. "You know what? I think I'm for that," he said of Obama's plan. "I don't disagree with what he's doing."