Progressive Breakfast: More Stimulus, Please

Calls For Additional Stimulus

Krugman warns: "...Mr. Obama’s promise that his plan will create or save 3.5 million jobs by the end of 2010 looks underwhelming, to say the least. It’s a credible promise — his economists used solidly mainstream estimates of the impacts of tax and spending policies. But 3.5 million jobs almost two years from now isn’t enough in the face of an economy that has already lost 4.4 million jobs ... economic policy is falling behind the curve, and there’s a real, growing danger that it will never catch up. "

Talking Points Memo adds: "In Washington over the last two months, the debate was over whether the Stimulus Bill was too large. But the math -- that is to say, expected fall in aggregate demand compared with offsetting stimulus spending -- suggested a completely different problem. Namely, that it was too small, probably offsetting a half or less than half of the demand sucked out of the economy by the collapse of the housing bubble. And as the Post reports ... the verdict seems to be in: yep, it was too small ... Joining the chorus, Martin Feldstein says we're likely to need a second Stimulus Bill."

Media Matters: "Despite warnings from many economists that stimulus may be too small, network news rarely raised the issue."

Obama economic adviser Larry Summers calls for global "universal demand agenda" in FT (via Calculated Risk):

His comments, ahead of next month’s crunch G20 summit in London, make it clear that the US administration wants industrialised nations to share responsibility for engineering a global demand-led recovery and does not believe this burden should fall on China alone.

“The old global imbalances agenda was more demand in China, less demand in America. Nobody thinks that is the right agenda now,” said Mr Summers. “There’s no place that should be reducing its contribution to global demand right now. It is really the universal demand agenda.”

While the US and other western nations should return to living within their means in the medium term, everyone should raise spending sharply now. “The right macro-economic focus for the G20 is on global demand and the world needs more global demand,” said Mr Summers.

Matthew Yglesias: "...we seem to have cycles from a dot-com bubble to a U.S. real estate bubble to a brief commodities bubble and now to a U.S. Treasuries bubble. Which all seems a little perverse. But it also bolsters the case for additional stimulus or a massively expensive bank nationalization scheme. We’re well-below full employment, and under the circumstances the way you know you’re doing too much stimulating is that the borrowing is pushing interest rates up. At the moment, that’s not happening."

W. Post looks at various fights over stimulus money brewing at the state level.

AIG Bailout Counterparties Revealed

Wall Street Journal and Fortune publish lists of financial "counterparties which were the end recipient of AIG bailout money. Fortune adds some context:

What is the significance of the rank order of the list? Since it is not alphabetical, one possible interpretation is that the banks are listed in order of the amount of CDOs they insured with AIG.

Goldman Sachs' No. 2 position fits several press reports that it was an important counterparty, perhaps having insured $20 billion of CDOs with AIG. Goldman has never confirmed that figure, but it has said that its "net" exposure to AIG - after collateral it received and hedging it did - was minimal.

If indeed France's Société Générale ranks No. 1 by exposure, it's a distinction the bank certainly didn't need. Early last year, the company was staggered by the news that a rogue trader had lost $7.5 billion. Had a domino effect ensued from AIG's collapse, Société Générale would have been in an especially vulnerable position.

[Federal Reserve Vice Chairman Donald] Kohn admitted in the Senate hearings that paying off these counterparties in the course of the AIG rescue "will reduce their incentive to be careful in the future," which helps explain why the names have become such sought-after information in the political debate over "moral hazard."

Economic Populist's Robert Oak: "Bloomberg has a most interesting story on how AIG got the latest bail out ... What's interesting about this confidential presentation is the numbers don't add up to the amount of taxpayer money given. In other words, AIG is stressing global economic collapse yet their projected numbers of collapse, at least by this Bloomberg report, do not come anywhere near what the United States or other governments have already doled out or even the latest $30 billion to AIG."

LA Times looks at why people say AIG is too big to fail: "Many analysts think that Lehman's failure set off the severe financial crisis and credit crunch now plaguing the global economy. After seeing that effect, government officials didn't feel like taking a chance with AIG and Citigroup."

AMERICAblog's Chris in Paris is incredulous at GOP Senate leaders pushing bank failures: "The banks the Senator Shelby is suggesting to fail are the mega banks that are well known around the world. Those banks are in fact, too big to fail. (Year to date the US has closed at least 17 banks, so plenty have failed.) At this point in time it's only going to make matters worse if the US was to allow a Bank of America or Citi-like bank to fail. Shelby ignores the issue from Japan in the '90s which many are already talking about resolving in the US. The Japanese spoon fed just enough money to the banks to keep them alive, but not much more. The term 'zombie banks' referred to such banks and that's why many are calling for nationalizing the US banks, cleaning them up and privatizing them. Shelby's interpretation of the Japanese model is failed, but how often is he right? And McCain? My goodness. Can you imagine how bad things would have become with him in charge?"

While Barry Ritholtz approves: "...the strangely inverted world of bank bailouts continues. Republicans who started the entire lurch towards Socialism under George W. Bush at least understand what a a mistake it is to prop up the zombie banks. The newly elected Democrats haven’t quite found their footing on this issue. The Treasury Secretary remains a creature of the banks, and has yet to figure out that there can be no sacred cows in this environment."

Rep. Kucinich opens new avenue of bailout criticism. W. Post: "A report by a House oversight panel, which was described to The Washington Post in advance of its release this week, raises questions about a $8 billion financing deal for Dubai by Citigroup (recipient of at least $45 billion in bailout funds); a $1 billion investment in India by J.P. Morgan (which got $25 billion from the government rescue); and a $7 billion investment in China by Bank of America (which got $45 billion from the bailout). 'When the American people find that their tax dollars, which were supposed to be used to get us out of this financial crisis, instead are being used to ship jobs and investments overseas, there will be outrage,' said Rep. Dennis J. Kucinich (D-Ohio), chairman of the domestic policy subcommittee for the House Oversight and Government Reform Committee. The report is a memo by that panel's Democratic staff."

2009 Appropriations Bill Expected To Pass Tuesday

The Hill reports even opponents admit bill will pass, despite grandstanding: "A senior White House official and a leading Democratic opponent of the $410 billion omnibus say the massive spending package will finally pass this week ... The Senate will vote to end debate and pass the omnibus on Tuesday."

The Hill notes chief grandstander against earmarks, Sen. Evan Bayh, actually "sponsored or co-sponsored 17 earmarks in the omnibus worth nearly $15 million. "

On NBC's Meet The Press, Sen. Lindsey Graham also busted for earmark hypocrisy:

DAVID GREGORY: ...number six on [Sen. John McCain's] list of pork- barrel spending, $950,000 for a Convention Center in Myrtle Beach, South Carolina.

GRAHAM: Yeah. Yeah.

GREGORY: You want him to -- you want the president to veto this spending bill?

GRAHAM: I voted to take all earmarks out, but I will come back in the new process and put that back in. Myrtle Beach, South Carolina, we’re trying to build an international airport, an international convention center and open up a new interstate highway to diversify Myrtle Beach’s economy.

GREGORY: Yeah.

GRAHAM: This came through the Small Business Administration.

GREGORY: You’ve got 37 earmarks, and you think they’re more important than other people’s projects around the country?

GRAHAM: I think I should have the ability, as a United States senator, to direct money back to my state as long as it’s transparent and it makes sense, yes.

Stan Collender reminds: "Saying That Cutting Earmarks Will Reduce Spending Is A Lie"

LA Times reviews the bill's priorities:

Taking aim at one of Bush's signature foreign policy programs, the bill slashes spending by more than 40% for the Millennium Challenge program, which Bush started to help promote democracy and development in poor nations.

It also loosens some of the strict limits the Bush administration imposed on travel and trade to Cuba.

And the bill provides no funding for a Bush proposal to develop a new generation of nuclear weapons.

On the domestic front, the bill would terminate a reading program, once funded at $1 billion a year, which had been a key part of Bush's education plan. And it lays the groundwork for killing a Bush-era experiment with school vouchers in the District of Columbia.

On the other hand, Democrats poured in money for social programs they think got short shrift under Bush -- including some that were already given big increases in the economic stimulus bill. Big winners are education, health and scientific research.

Health Care Update

OurFuture.org's Roger Hickey reports on his participation in the WH health care summit: "In his concluding remarks at the Health Summit, in what may have been a feint to confuse everyone, President Obama declared 'I'm talking to you liberal bleeding hearts out there. (Laughter.) Don't think that we can solve this problem without tackling costs.' Well, it turns out that it is the liberals who have been promoting the most effective strategy for tackling costs that has so far been proposed: giving everyone the option of enrolling in a public health insurance plan, like Medicare for the non-elderly."

The Treatment: "...here's Ron Brownstein at the Atlantic suggesting insurers (among others) are more open to reform than their reputation and history suggest. And here's Michael Hiltzik of the Los Angeles Times suggesting insurers really haven't changed at all."

Crooks and Liars' Susie Madrak: "Are Boomers Being Targeted in Layoffs to Cut Health Care Costs? ... this is exactly why it would be such a good idea to lower the Medicare age to 55 - because otherwise, industry paints a target on every Boomer back."

Joe Conason: "...it is difficult to imagine how the United States can afford to provide quality healthcare for all of its citizens in an era of diminished resources -- unless we look to the example of other democratic states around the world. Long ago, they realized that if healthcare is a public good and a human right, the domination of private interests must be curtailed."

Auto Task Force in Detroit

WSJ on today's auto task force field trip: "President Barack Obama's auto team will spend Monday at the Detroit home of the Big Three as the administration begins to narrow its options for helping the reeling auto sector ... Top Treasury Department advisers Steven Rattner and Ron Bloom, who are leading the auto task force, plan to use the day in Detroit to clarify an array of lingering questions surrounding the companies' rescue plans, which many analysts have criticized as overly optimistic. The team will also meet with the United Auto Workers union to discuss its willingness for deep compromises over wages, staff cutbacks and funding for its retiree health plan."

EFCA Battle Is Fully Joined This Week

Politico's Glenn Thrush reports EFCA may be formally introduced this week: "As Big Labor and Big Business gird for a free-for-all on the Employee Free Choice Act, the bill’s fate increasingly hinges on Sens. Blanche L. Lincoln (D-Ark.) and Mary L. Landrieu (D-La.) — two wavering moderates who would love to dodge the controversy. The fight over the so-called card check begins in earnest this week, with thousands of union members and business representatives descending on Capitol Hill to pressure fence-sitters and make their arguments to the public. A top union official says there’s a '50-50' chance that House Education and Labor Committee Chairman George Miller (D-Calif.) will introduce the bill this week, perhaps as early as Monday or Tuesday."

Politico's Ben Smith reviews the myriad of anti-EFCA operations keeping conservatives employed: "Both business and labor are dispatching hordes of supporters to lobby Congress this week. And already, the battle has provided a welcome stimulus to a seriously depressed industry: Republican political operatives. 'There are groups springing up almost every week,' said Rhonda Betz of Navigators Global, a consulting firm that started the first anti-EFCA group out of the gate, Coalition for a Democratic Workplace, in 2006. 'Some of it is a reflection of them identifying this as a fundraising opportunity, and some of it is a reflection of real stuff going on.'"

Crooks and Liars' David Niewert: "The newest talking point is the notion that unions stifle job creation, which got the full endorsement of CNBC's Lawrence Kudlow and Michelle Caruso-Cabrera (who, we're reminded, graduated from Wellesley with a degree in history!) ... Fortunately, Jonathan Tasini of the Labor Research Association was able to point out the basic falsity of the claim..."

OurFuture.org's Isaiah Poole fact-checks the source of the false talking point: "The latest entry in this fusillade of propaganda comes from something called the Alliance to Save Main Street Jobs—an alliance that happens to include that bastion of 'Main Street,' the U.S. Chamber of Commerce. The author, Anne Layne-Farrar of the consulting firm LECG, writes that 'if EFCA passed today and resulted in an increase in unionization from the current rate of about 12% to 15% ... unemployment a year from now would rise by 1.5 million, to 10.4 million.' The report relies on conservative zero-sum logic. If you pay workers higher wages, as Layne-Farrar concedes will happen as unionization increases, employers will respond by displacing workers from the labor force. The author concludes this even though, on page 13 of her report, she also writes, 'the literature offers conflicting results with respect to the impact of union density on inflation, employment and unemployment.'"

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