OurFuture.org Blogs: Robert Borosage

Jobs, Jobs, Jobs -- Finally

Robert Borosage — Wed, 18 Nov 2009 07:56:33 -0800

House Speaker Nancy Pelosi gets it. No wonder she drives the wingnuts batty.

With the Senate befuddled by the antics of Joe Lieberman and Max Baucus on health care and the White House Clintonistas lobbying President Obama to devote his January State of the Union address to deficit reduction, Pelosi ladled up a portion of common sense. Unemployment is over 10 percent and rising. It is time to focus on jobs. Senate Majority Leader Harry Reid added his support. The President announced a job summit for December. Democrats finally got the subject right.

The need is clear. One in six workers is unemployed, has given up looking or is forced to work part-time. For young workers aged 16 to 24, unemployment is 19 percent. For young African Americans, unemployment is at 30 percent. And as Federal Reserve Chair Ben Bernanke testified yesterday, we're likely to see—at best—a slow recovery with no new job growth. That exacts a devastating toll in hopes crushed, families stressed, young people stalled, and poverty and hunger spreading.

And even if we avoid another downturn, the job picture will get worse. Crippling state deficits—over $260 billion over two years—will force layoffs that cost an estimated 900,000 jobs next year if nothing is done.

How do we produce jobs?

Republicans, of course, voted unanimously against Obama's first recovery plan, and have gleefully trumpeted its failure ever since (although many don't hesitate to take credit for local projects that are putting people to work).

What's their plan? It can't be found on the national party's web page. But the perpetually tanned House Minority Leader John Boehner trumpets an October letter that House Republicans dispatched to the president as the essence of their plan.

Turns out it's the same ideas they offered at the beginning of the year—reality has made no impression on these folks. Three of the five suggestions are ways to help small businesses afford health care for their workers—"legal reform and incentivizing wellness" (tort reform), allowing small business to purchase health care collectively (already in the president's plan), and more health savings accounts (a bow to a leading Republican contributor). At a time when small businesses are closing, when customers are drying up, foreclosures rising, and states and localities are laying off teachers, these seem, as the lawyers say, de minimus.

And then of course, the Republicans recycle their panacea for anything that ails you—more tax cuts. One of these, letting businesses write off losses against profits over an extended period of time, has just been signed into law. The other is Bush lite: small tax cuts for everyone but low-wage workers.

Now, despite all the posturing about Obama's red ink, these Republican ideas will create larger deficits and more debt. Is this the best way to spend money we borrow?

Well, we tried the same thing under Bush at the beginning of the Great Recession and it didn't work very well. The reason is pretty simple. Americans have lost some $13 trillion in assets from the housing crash and the stock market decline. They no longer can spend more than they earn, and use their homes as an ATM machine. So they are tightening their belts, paying down debts and rebuilding their savings. Provide them with small tax cuts and they will sensibly save most of the money—and not provide the demand need to get reluctant companies to rehire workers.

What are the Democratic ideas? The current debate is still pretty fluid. Democrats, intimidated by deficits, initially hoped to do a stealth plan piecemeal—$250 for seniors here, extend unemployment there, pump up infrastructure spending in the transport and clean water bill over there.

But Pelosi's call for a jobs agenda and Obama's summit invite more coherent responses, ones that might get closer to the scale needed to deal with the challenge we face.

AFL-CIO President Rich Trumka released a program this week—joining with leaders of the NAACP, the National Council of La Raza, and the Center for Community Change and the Leadership Conference on Civil Rights—that will frame the discussion.

Trumka's agenda features five initiatives:

1. Extend the lifeline to jobless workers, continuing unemployment benefits, food assistance and health care subsidies.

2. Rebuild schools, roads and energy systems. This is the very area that got slashed in the first recovery plan by so called Republican moderates and Blue Dog Democrats. Repairs— to schools, sewers and bridges—can begin rapidly. More ambitious projects—fast trains and a modernized electric grid—take longer, but as Bernanke says, unemployment will be with us a long time.

3. Aid to state and local governments to maintain vital services. This is the least popular but most effective program. It forestalls deep layoffs in basic services, from teachers to police.

4. Direct public service jobs in communities. Congress could dramatically expand the Youth Corps, AmericaCorps and Vista to put young people to work. New initiatives—a Green Corps to rebuild parks, an Urban Corps to build low-cost housing—could be targeted for areas with the greatest job loss.

5. Use Wall Street bailout funds for Main Street. Use the billions still in the TARP to enable community banks to lend money to small and medium sized businesses. Even Republicans might sign onto increasing low-interest-rate loans to small businesses with expansion plans. This surely is a better idea than job tax credits to businesses, almost of all which will reward companies for jobs they would have created anyway.

Obama would be well advised to go even bigger. His most compelling argument has been the simple truth that we can't go back to the old boom-and-bust economy and should not want to. We've got to build a new economy on a strong foundation of basic investment in education and training, in 21st-century infrastructure, in research and development—all of which have got the short end of the stick in the era of tax cut, squander and plunder conservatism. And we've got to insure that the US is a leader in the new green industrial revolution that will be the growth industry of the future.

So devote the State of the Union to lay out the bold agenda on jobs. Make the commitment now to make the investments needed for the new economy, and to drive the green industrial revolution. These will involve large-scale public investments, deficit-financed in the next couple of years while the economy recovers and paid for over time, in part by growth and rising employment and in part by progressive taxes. The latter begins with a securities transactions tax that will curb the Wall Street casino while insuring that Wall Street helps pay for the cleaning up the mess that it made. And the president should be clear: These investments will be linked to procurement policies designed to insure that the plants, supply chains and jobs are built here, not shipped abroad.

Let Republicans ante up their arguments on more tax cuts and tort reform. People can choose. Do we go back to the policies that drove us over the cliff, and didn't work for most Americans even when the economy was growing? Or do we go forward boldly to build a new economy that puts people to work through investments vital to our future? That's an argument that would serve the nation well—and could also give Republican leader Boehner even more time to work on his tan.

Tripping in China: Barack Obama's Challenge

Robert Borosage — Thu, 12 Nov 2009 08:23:53 -0800

This week, Barack Obama trips to China as part of an eight-day trip to Asia. The White House paints a full agenda: Afghanistan, human rights, North Korean nukes, climate change, trade relations, and the economy. But it's really just the economy, stupid.

For decades during the Cold War, the U.S. gave security concerns priority over economic issues. Now the economy is our central security concern. It will simply be another measure of the administration's gathering calamity in Afghanistan if that is allowed to distract from the essential discussions about the economy.

On economic issues, Asian leaders, particularly the Chinese, are in the mood to deliver lectures, not receive them. It was the excesses of Wall Street that brought the world to its knees. And Asian nations, not burdened zombie banks or purblind conservative politicians, are enjoying a rapid recovery, after boosting demand with large-scale government spending.

But the president has a vital message to deliver. We can't go back to the old bubble-bust economy. That requires more than just financial reform. Central to that old economy was our relationship to the mercantilist nations of Asia, particularly China. For years, the U.S. consumed more than it made, running up record trade deficits. The Asian nations, particularly China, financed our consumption to increase their exports and market share. The Chinese kept their currency undervalued, hoarded dollars and bought up treasury bills, enabling the U.S. to borrow more and more without suffering rising interest rates. That helped inflate the housing bubble that finally blew up in our faces.

Correcting this imbalance—even as we move to meet the challenge of catastrophic climate change—is essential. Thus far, President Obama has forwarded this discussion carefully. He got the G-20 nations (including China) to establish a mandate for more balanced growth as part of the global economic reconstruction. The IMF has been tasked with monitoring— and pressuring—surplus as well as deficit nations to change their ways.

And the president has shown some teeth. He signed off on slapping temporary tariffs on cheap tires flooding in from China. Punitive tariffs have just been imposed on steel pipe dumped on the market by the Chinese. Serendipitously, the World Trade Organization ruled in August that Chinese restrictions on foreign publications, film and music imports are illegal.

The Chinese haven't gotten the message yet. They did a far better job than the administration in boosting their economy with a bold stimulus package, but much of the spending went to new infrastructure designed to boost exports. They continue to manipulate their currency while denying it. They decry protectionism while practicing it. They've now made a commitment to new energy, but significantly as an export industry, while continuing to open a coal-fired energy plant every week.

So what should the president do when he talks to our bankers in China? In public, for this president particularly, we can expect vision, not fireworks. We can hope for more candid discussions in private, with Secretary of State Hillary Clinton there to provide the needed grit. Here's what we should look for from Obama in public.

1. Forcefully State the New Reality

The President should forcefully state the new reality. We can't go back to the old imbalances. As recovery gains force, there must be adjustments in both surplus nations and deficit nations. This can be difficult and antagonistic or cooperative and mutually beneficial—but one way or the other, it must occur.

The U.S. has already begun. American consumers are tightening their belts, and have begun to save more and to pay down debts. The American government will invest more, and once the economy recovers, lower its deficits. The U.S. will export more and buy less from abroad. We will move to a more balanced trade posture.

Thus the surplus nations—whether Germany in Europe or China and Japan in Asia—must rely less on America as the source of demand. They should be consuming more of what they make. This can be immensely beneficial to their people. Workers should be empowered to gain better wages, and their societies can afford social supports from pensions to paid vacations. Service industries can expand. In emerging from the crisis, regional trade has already expanded faster than exports to the U.S.

2. Invoke the Vision of a New Age

The president should emphasize that the new economy will be built amid a new green industrial revolution. Catastrophic climate change, accelerating beyond scientific estimates, brooks no alternative. This, too, requires wrenching, massive transformation—but it also can be the source for growth and jobs as we balance the global economy.

Addressing catastrophic climate change will generate enormous demand—for new energy, for rebuilding old buildings, for new transportation systems. We will change the way we live, the way we travel, the way we work. This transition will generate new jobs, new inventions and new industries.

This transition can disintegrate into bitter disputes about who is to blame and who is to pay. Instead the president should focus on the challenges and the opportunities it presents. Mandating this transition can also help in the move to a more balanced global economy, fostering decentralized production closer to markets, just as the movement for slow food encourages local farming. Yes, we will need to assist poorer countries and poorer people within each country in the transition. Companies must not be allowed to undermine progress by playing off countries with weak environmental standards against those with stronger ones. But we should not let the costs and the disputes blind us to the opportunity.

3. Make Human Rights the Measure of Progress

The president should publicly reaffirm our commitment to human rights. The Declaration of Human Rights forged after World War II made protection of basic human rights, from freedom of speech to the right to organize to the right to a good job, the central charge of the peace. In the Cold War years, rivalry turned human rights into ideological weapons, with the U.S. championing free speech and property rights and the Soviet Union celebrating economic rights.

Now the president should reassert the reality that basic human rights are indivisible. And increasingly, we understand that they are also economic imperatives. A vibrant market cannot function without the rule of law. Free speech is essential to freedom of contract. To sustain growing economies over time, workers must have the right to organize so the blessings of growth can be widely shared. Basic protections like health care, education and old-age security make it possible for consumer societies to flourish.

4. Show Some Grit in Private

The private discussions will be and should be more contentious. The president needs to make it clear that the old days are over. The U.S. will move to more balanced trade. That means that we'll invest to make our own economy more productive. We'll slowly bring our budget deficits down as the economy recovers.

And we will enforce our trade laws. American states and localities will pass Buy America provisions. China should not be misled by corporate lobbies. It will find more and more resistance if it continues to play by a different set of rules.

The president should be clear about reality. China's currency is undervalued. This feeds the trade imbalances. It threatens China too, as investors will increasingly move to China, assuming that the currency must go up. The Chinese will risk a growing bubble in assets—housing, commercial property, stock markets—that could well expand and burst with destructive consequence. Abrupt unilateral moves could destabilize the dollar. We have a mutual interest in agreeing on currency adjustment.

The Chinese want the U.S. to recognize it as a market economy, to make it more difficult to penalize its trade malpractices. The president should be brutally candid about this. A mercantilist nation that doesn't play by the global rules will not be so recognized. A nation that doesn't enforce labor rights will get special scrutiny. A country that undervalues its currency for trade advantage doesn't qualify. Concessions on this will follow changes in practice, not promises of future reform.

Finally, the president should be frank about his human rights commitments. The U.S. will not seek to embarrass the Chinese generically. But the U.S. will remain an advocate of basic human rights. We will continue to report on violations, and condemn them when they are egregious. The president will meet with human rights champions, including the Dalai Lama.

Moreover, he should indicate that his administration will place increased emphasis on worker rights and decent work, as well as women's rights, both at home and abroad. We will seek to help countries move to empowering workers, to guaranteeing basic rights. We surely will reward those countries that are democracies that respect human rights over those that are not.

China and the U.S. have been in a long, intense relationship that is no longer functional. Renegotiating the terms won't be easy. Neither partner can afford a divorce. Both will find it difficult to change their own ways. Neither has exactly been straight with the other in the past. At best, this trip will lead both to agree that something must be done.

Obama's First Year: It Ain't No Crystal Staircase

Robert Borosage — Thu, 05 Nov 2009 08:08:10 -0800

Well, son, I'll tell you:
Life for me ain't been no crystal stair.
It's had tacks in it,
And splinters,
And boards torn up,
And places with no carpet on the floor --
Bare.
But all the time
I'se been a-climbin' on,
And reachin' landin's,
And turnin' corners...
—Langston Hughes

Barack Obama is a leader of great capacities and great contradictions. Perhaps the measure of his capacities is the magnitude of his contractions. He is a man of exceptional grace. But the grace misleads; this is a politician of intense ambition, discipline and grit. He understands and wields the power of the word. But his soaring oratory misleads, for his temperament is moderate; his predilection is for compromise. He rouses a new generation to politics, but prefers to cut the deals in the backrooms. He calls us to a new direction, then staffs his administration's team with the acolytes of the old ideas he scorns.

One year is too soon to measure a president or assess an administration. Hell, this administration has fewer than half of its political appointees in place. But here in brief are six propositions on Barack Obama's first year:

1. This is the most progressive president since Lyndon Johnson.

His election ushered in what could be the greatest era for progressive reform since the 1960s. After fighting for years simply to stave off further horrors, we're now fighting over how to get to comprehensive health care, how to address global warming, how to move the world towards nuclear disarmament. It is a big difference and should not be ignored.

Obama leads this wave. Listen to the music of the administration. Time and time again, on the economy, on civil rights, on disarmament, Barack Obama sounds a transformative call. His soaring words show us that another world is possible. The hard slog of his first months reveals just how hard it will be to get there. This ain't no crystal staircase.

2. This president seeks to do big things.

This isn't Bill Clinton running on school uniforms and TV monitors. Defying conventional wisdom, in his first year, Obama summoned the country and the Congress to address challenges that can no longer be ignored: a recovery act to stave of potential depression, comprehensive health care reform, progress on climate change, financial reform, new engagement with the world, and, yet to come, immigration reform, empowering workers, and more. Powerful interests are challenged. The arguments are brutal. But the stakes are at least worth the game.

3. He is a man of the establishment, not the left.

Barack Obama is an establishment reformer, not, despite the ravings of Rush and Beck, a radical in any way. To a remarkable degree, Obama has chosen not to include leading progressives in his administration. Foreign policy is transformed, but only from the lunacy of the neocons to the "realism" of the national security mandarins. Economic policy is rescued from conservative supply-side quackery, but entrusted to the dubious aegis of Bob Rubin and Goldman Sachs protégés. Not surprisingly, the populist outrage of Americans at the arrogance of Wall Street barons profiting from the taxpayers' bailout caught this administration by surprise.

4. He is weakened by his moderation, not his boldness.

The president is chided for having tried to do too much. Progressives are told that our disappointments come from exaggerated expectations. In fact, the reality is somewhat different. His accomplishments far exceed the expectations of the Beltway chattering classes but fail to meet the needs of the moment.

His accomplishments in one year are impressive. A recovery package that helped stave off a depression, a bold first budget with new priorities; the largest aid to the poor since the 1960s built into the stimulus, a transformation of our relations abroad, and much more. Yet the successes are outstripped by the country's needs, dictated by grim reality. The stimulus was too small; unemployment continues to rise. The banking bailout left Wall Street more concentrated and less accountable. The energy bill will not catch America up with the allies on global warming, much less seize the opportunity of leading the green industrial revolution.

The health care bill may generate a storm of protest not because it costs too much to government, but it isn't affordable to those families and individuals required to buy insurance. He personally calls a halt to the march into Afghanistan, but a moderate response, giving the generals more troops but fewer than they want, won't keep us from wading ever deeper into the muck.

5. He deserves a progressive movement that is more independent, and less obedient.

Obama's remarkable leadership inspired millions. New activists, new resources, new energy—all roused by the hope he has engendered. The administration, not surprisingly, has sought to discipline this energy, to channel it into support for its agenda. But with his agenda delayed by entrenched lobbyists and diluted by compromised Democrats, the president would have been better served by independent movements demanding far bolder change from the White House, challenging those in both parties standing in the way, exposing and confronting the lobbyists and the clubbable legislators, mobilizing outside populist anger to counter inside establishment dealing.

The mobilization around the "public option" on health care, when Sen. Max Baucus, the insurance lobby and the White House were ready to discard it, shows the potential. The populist challenge to this administration should not be abandoned to the crackpot right. Roosevelt had a disputatious left and an aroused labor movement; Johnson had the Civil Rights movement. Obama deserves a movement that will march on him, not just with him.

6. It ain't over; it's only just begun.

The crisis that the president inherited continues. The administration is still finding its legs. Democrats haven't adjusted to the power that they now wield. Progressives are only beginning to challenge the limits of the current debate. The gulf between the president's vision and his administration's reality continues to grow. Will that gulf be deepened by Washington's potent, permanent status quo—the corporate lobbies, the establishment's convention, the national security apparatus, exerting ever greater power, with the president's enemies emboldened; his supporters discouraged; the public dismayed? Or will it be overcome by renewed purpose, greater mobilization, the democracy overwhelming the interests?

Obama will increasingly have to choose whether to hold to his vision and raise the stakes, or compromise his vision to cut the deal. And those of us whom he has inspired also have to choose—whether to sit back and hope he does the right thing against the odds, growing cynical when he fails our expectations, or to stand up, mobilize, challenge the Congress and the President to get on with the change we need. The first year is but the opening scene. We should still have the audacity to hope, and the commitment to act.

The New Red-Ink Scare

Robert Borosage — Tue, 27 Oct 2009 23:27:52 -0700

We've got a new red scare. Forget Glenn Beck; the fear isn't that America is going red, it's that it is in the red. Conservatives in both parties are raising alarms about deficits and government spending. Well, get over it. If we are going to generate growth and shared prosperity out of the mess we are in, expanded public investment must be a centerpiece of the new economy.

In today's Washington, this verges on heresy. The chattering classes are raising a clamor about Obama's deficits. The growing fixation, fanned by conservatives in both parties, may well cripple any short-term recovery. Worse, the wrong-headed debate could well undermine the reforms vital to the new economy we need to build out of the ruins of the old.

Key progressive leaders participating in the October 29, 2009 "Building the New Economy" conference in Washington address what it will take to ensure that the new economy that emerges from the wreckage of the old will provide Americans with good jobs.

Both parties still pay tribute to false idols that should have been discarded in the recent economic collapse. Republicans rail against everything Obama, chanting, "Where are the jobs?" while calling for rolling back the stimulus, abandoning health care reform, cutting spending and, no surprise, more tax cuts. They seem to have learned nothing from the crisis. Sure, they claim that they have put aside their fiscally wastrel ways, blaming it all on Bush, and have become born-again fiscal conservatives.

But this leaves them in the bizarre posture of arguing that "deficits don't matter" when the economy is growing, but are unacceptable when the economy is sinking. Step on the gas when the economy is already racing and on the brake when it is sputtering. The perpetually tanned leader of House Republicans, John Boehner, clearly believes that Americans have neither memory nor common sense. The continued high disregard that most Americans have for Republican legislators suggests otherwise.

But conservative Democrats of various ilk—the corporate New Dems, the old-boy Blue Dogs—echo the Republican fears, using the recession-driven deficits to revive their efforts to force cuts in "entitlements" (read: Social Security and Medicare). This is both bad policy and bad politics.

In reality, the world has changed. In the old economy, Americans took on more and more personal debt, and America ran up more and more global indebtedness, as we served as the world's consumer. That era was based on growing household debt and stagnant incomes, Gilded Age inequality, and inflating asset bubbles—first the dot-coms and then housing. It's over. Sure the banks, bolstered by literally trillions in subsidies from the Federal Reserve and Treasury, are setting up the casino again. But Americans, sobered by trillions lost in the value of their homes and savings, aren't binging anymore.

In the short term, as consumers cut back, businesses are laying off workers, foreclosures are continuing, bankruptcies are up. States and localities are cutting services and workers, and face staggering deficits again next year. Fifteen million Americans are unemployed—and the number keeps rising. Only federal deficit spending and the unprecedented monetary policies of the Fed have staved off a deeper depression.

The problem with Obama's stimulus is that it is too small, not too big. We'd be wise to spend more to forestall layoffs at the state and local level, to put people directly to work in urban corps and green corps, to add to public construction projects, to extend unemployment benefits, food stamps and other income supports.

Instead the deficit mania seems likely to force a stealth stimulus at best, done piecemeal and half-assed. The Congress will hopefully extend unemployment compensation in the hardest hit states. Some spending will be boosted in annual appropriations. To quiet conservative yapping, various tax breaks are increasingly bruited about—$250 for every Social Security recipient, the unproductive tax credit for first-time home buyers, and worst of all, the goofy jobs tax credit for businesses (two-thirds of which will subsidize businesses for jobs that would have been created anyway and most of the rest will go to those who game the system).

But the most destructive effect of the red-ink scare could be on our long-term growth strategy. With consumers cutting back and businesses understandably reluctant to invest without increasing demand, expanded public investment is vital to generate demand, growth and jobs. (For a more detailed version of this argument, see economist Thomas Palley here.)

We need to rebuild America. For too long, we've starved investment in the areas vital to our future -- in 21st-century infrastructure, in research and development, and in education and training. Vastly expanded investment in modernizing the electric grid, extending and accelerating broadband, building fast trains, replacing collapsing water systems, doing just the basics in education from pre-K to sophisticated worker training would generate jobs, fuel growth and produce a far more productive private economy. The American Society of Engineers tallies up over $2 trillion in investment needed just to bring our core infrastructure up to passable levels. That says nothing of building the next generation base essential to a high-wage society in a global economy.

Moreover, public investment is central to moving from a policy unleashing Wall Street speculation to one rebuilding Main Street manufacturing. Less of public investment tends to leak abroad. We can use our purchasing power to encourage companies to bring the best technology here, and help bring the supply chains with them. With the energy and environmental costs of transport rising, buying and supplying locally already has momentum. And with a concerted investment agenda in new energy, we can insure that America is a leader in the new green industrial revolution. All of this in turn can help us move to a more balanced trade policy, even as we engage China and the other mercantilist nations in multilateral efforts to re-balance the global economy.

Much of this investment sensibly should be financed, whether through public investment banks or by deficit funding. The investments will bring returns over time and the benefits will be enjoyed by rising generations, so it is sensible they share the costs. Just as there's a difference between borrowing for a good education and running up credit card debts on Caribbean vacations, there's a difference between investing in areas vital to our future and running up deficits with top end tax cuts, military adventures and obscene drug company subsidies.

Obama's record deficit this year is the product of the economic collapse. Once the economy starts growing and people go back to work, the deficit will come down. And that need not get in the way of committing to the investments we need, so long as we're willing to pay for them over the long run.

But what of the staggering long-term deficits—running publicly held debt up to nearly three times the size of our gross domestic product by 2050, as decried by the Peterson Institute and others? There is one core reality of these fantastic projections. The great bulk of the deteriorating long-term projections come from out-of-control costs of health care. Hold health care costs down to sensible levels and there is no problem. Fail to solve soaring health care costs and there is no solution. We can neither tax enough nor cut enough spending to pay for the projected costs of health care.

This isn't exactly radical stuff. This week in Washington, the Campaign for America's Future, which I co-direct, will host a conference featuring Ohio Senator Sherrod Brown and Pennsylvania Governor Ed Rendell from America's battered manufacturing heartlands, the CEO of US Steel and Rich Trumka, the new president of the AFL-CIO, leading economists and legislators to make this case, and lay out an agenda for action. (To follow the conference go to here.)

But Democrats are now said to be worried that the red-ink scare will take its toll in the 2010 elections. Take another look. A recent poll for the Economic Policy Institute by Hart Research shows most Americans are more sensible than ideological. Over half of Americans think unemployment is the largest problem facing the country, as opposed to less than one fourth who say the federal budget deficit is. Even a majority of Republicans agrees on that. Two-thirds of the country say the recovery plan has helped, but 81 percent believe Obama needs to do more to address the jobs problem.

Over 60 percent of those polled think the focus should be on creating jobs and investing, while only 36 percent would focus on cutting federal spending. Now Americans don't like taxes, and think, sensibly enough, that government wastes their money. But they are looking for policies that will generate jobs and growth and make sense. That's why public investment in new energy consistently polls off the charts.

In 2010, candidates will be running with unemployment over 10 percent and deficits near record levels. Surely the election will turn on who is fighting the hardest to put people to work and get the economy going, not who is best at cutting the deficit.

Eventually, if we are going to have a strategy that works, we've got to make and win the case for expanded public investment over the long term, financed in part and in part paid for, once people start going back to work again, by top-end tax hikes and new priorities.

We've done the whole small government, low taxes, deregulation number. We got top-end tax cuts, declining wages, collapsing sewers and gridlock, a ruinous financial casino and global indebtedness through corporate trade policies. The result was growing inequality, a sinking middle class, over a fourth of America's children in poverty, increasingly destructive climate change, and a harsh financial collapse and recession. It is time to go another way.

Financial Reform Clears House: Good First Step, Far More To Go

Robert Borosage — Fri, 23 Oct 2009 06:53:18 -0700

Campaign for America's Future co-director Robert Borosage praised the House Financial Services Committee for taking steps to protect consumers from predatory financial practices by approving the creation of a new Consumer Financial Protection Agency, in an official statement. In praising the legislation, Borosage noted that the bill should be strengthened as it moves through Congress to prevent another economic crisis.

Although the legislation has far to go, the committee created a much-needed independent agency to protect consumers from predatory lending and deceptive practices. Now the House and Senate must strengthen and pass the bill.

Chairman Frank should be complimented for fending off a fierce effort against the legislation by the big banking lobby. They couldn’t kill it, but they did weaken it significantly.

The Committee limited enforcement authority for 98 percent of the nation’s banks, which control 20 percent of assets; exempted auto loan and insurance products; and omitted provisions to enforce important community lending standards. Most damaging, it replaced President Obama's proposed independent oversight board with an advisory committee of financial regulators who failed to protect the American public from Wall Street in the first place.

The House bill is a good first step. It should be strengthened on the floor of the House. It will take a major mobilization to protect it against obstruction in the Senate.

Where Will the Jobs Come From?

Robert Borosage — Tue, 20 Oct 2009 23:35:35 -0700

They are popping the bubbly on Wall Street. Million-dollar bonuses, the Dow at 10,000, the casino is open again. Forget President Obama, who says we can't go back to an economy where finance pockets 40 percent of the profits. We're already headed there.

The current-account deficit is down as Americans have cut back spending. But the deficit with China is hitting new records; companies are still shipping manufacturing jobs over there. The dollar is down, but not against the Chinese currency. Forget about Federal Reserve Chair Ben Bernanke, who warns against going back to the unsustainable trade imbalances that led us over the cliff. The old patterns are coming back.

Bernanke has announced that the recession is over, the recovery has begun. But to date, we are looking at a reversion, not a recovery. We've stopped the free fall, but we haven't changed direction. There can be no recovery to the old economy that crashed when the housing bubble burst. That economy depended on Americans spending more then they earned, borrowing ever greater amounts, treating their homes like at ATM machine, while the Chinese lent us the money to keep interest rates down so we could buy the goods our companies made with the jobs they shipped over there.

Now that old economy didn't work very well when it was growing. We lost high-wage manufacturing jobs during the supposed "recovery" under President Bush. Most Americans lost ground even while the economy was expanding. Household debts reached new highs. Inequality soared to Gilded Age extremes.

But now we can't even get back to that performance. Americans have lost some $13 trillion in assets. They are tightening belts and trying to pay down debts, terrified as jobs are lost, hours are cut and benefits are slashed. Consumers won't drive the U.S. economy, much less the world's. And businesses aren't investing because consumers are cutting back. They are increasing profits by laying off workers and cutting back expenses. States and localities are headed into severe layoffs of teachers and police. The economy isn't going to be buoyed by soaring exports to a world in recession. The only thing holding the economy up now is the deficit-financed stimulus plan and the automatic stabilizers like food stamps and unemployment benefits.

Where will the jobs come from? Wall Street can produce another bubble, but that won't put the 15 million without jobs to work, one-third of which have been out of work for at least six months.

Recovery requires fundamental reform of America's economic strategy. The old shibboleths of the conservative era—shrink government, cut top-end taxes, free multinationals to move jobs abroad, deregulate finance, wage war on labor unions, declare that trade deficits don't matter —have failed ignominiously. They must be discarded, like yesterday's rotted fruit.

Fundamental changes are needed. Trickle-down should be supplanted by public investment-led growth—large-scale public investments in areas vital to our future such as infrastructure, research and development, education and training. These investments should be deficit-funded until the economy actually starts putting people back to work, and then sustained and paid for through progressive tax reform. Tax speculative security transactions, generating $100 billion a year in revenue to invest in a 21st-century infrastructure that would put people to work and make the economy more productive. Raise top-end taxes, reduce inequality, and invest in making college affordable and exploring the green technologies of the future.

We've pursued tax cuts, promising private investments would flourish. But much of the productive investment and lavish consumption went abroad. In reality, public investment would be far more effective. We have a staggering public investment deficit that must be met for a world-efficient economy. Public investment is more likely to be invested, more likely to be spent here, more likely to create good jobs here, and far more likely to generate new technologies and productive private investments.

We need to complement this with a bold manufacturing strategy to make certain that we help lead the inevitable green industrial revolution, so the new technologies will be created and made in America. Shed the notion that we'll benefit by exporting windmills and solar cells and electric cars subsidized by China so that they are cheaper to us. We can't exchange dependence on foreign oil with dependence on foreign-made windmills. Make the public commitment to transition, and then use our purchasing power to invite the companies with the best technology to bid on contracts so long as they make it here in America. Not simply a timid-buy America policy satisfied with the final assembly of parts and technologies made elsewhere, but moving entire supply chains so that our workers and engineers and entrepreneurs are familiar with cutting-edge technologies that our inventors can soon surpass.

Complement this with a new global trade strategy. We can't go back to current account deficits over 6 percent of gross domestic product, financed by borrowing from abroad. China, now some three-quarters of our manufactured goods deficit, is by far the hub of the problem. The president has wisely called on the international community to adjust cooperatively, challenging the Chinese and other mercantilist nations to expand domestic demand and reduce their reliance on exports, while the U.S. exports more and buys less. But that isn't going to happen so long as the Chinese are free to manipulate their currency, subsidize their exports, savage their workers and environment, and mandate global corporations transfer jobs and technology to them. So we'll need to show some bite. A bold manufacturing policy around new energy will encourage companies, including Chinese companies, to make things here. But we should be debating putting a lid on our deficits, and announcing that we will move slowly to balance our trade. If all adjust, we can have more trade, not less, but we can't go back to the old imbalances no matter what they do.

These must be complemented by financial reform that curbs the gambling and forces banks to make loans to Main Street again, and by a high-wage policy—empowering workers, lifting the minimum wage, extending the public social contract. Finally, our economic policy, both monetary and fiscal, must be targeted at sustaining full employment as a priority, without letting inflation get completely out of control.

These ideas—heresies in the old conservative times—are but the beginning towards defining a new course. They will face fierce resistance from entrenched interests. But perhaps the biggest obstacle is the encrusted hold of old, bad ideas that should already have been discarded. You can see that in the calls for balancing the budget and cutting spending while unemployment is reaching new heights. Or the Republican chorus about cutting taxes, as if they had learned nothing. Or conservative Democrats railing against limited buy-American policies. Or the administration proclaiming its opposition to industrial policy. Or conservatives railing against excessive regulation.

Inertia and interest drive us to revert, not reform. Only it won't work. The old standards don't play anymore. Sure, Wall Street can generate another bubble or two. But there is no recovery on that old path—only stagnation, crushing long-term unemployment, growing inequality, a devastated middle class and a social tinderbox increasingly ready to explode. Eventually, we'll have to change our course; the only question is how much pain we have to endure before we actually learn our lessons.

Will We Curb Wall Street's Casino?

Robert Borosage — Wed, 14 Oct 2009 08:31:48 -0700

Even as the health insurance companies draw down on health care reform, another showdown is just beginning in Washington. On Wednesday, the House Financial Services Committee will begin marking up the first legislation to try to curb Wall Street's casino. And if you think the health insurance companies are packing heat, wait till you see the firepower the banks will unleash to frustrate reform.

The Committee will focus on two core reform measures. The first, the regulation of derivatives, goes to the heart of the current collapse. Derivatives are the exotic instruments that Warren Buffett warned were "weapons of financial mass destruction." Derivatives have been traded with little regulation, over the counter, in private deals. This allowed companies like AIG essentially to open a casino on top of an insurance company, and take bets without the prudence required of a Las Vegas bookie. When AIG went belly up and threatened to bring down the entire financial house of cards, taxpayers ended up with a bill totaling over $180 billion and counting.

The reforms call for standardizing derivatives, trading them on a public exchange, with transparency, so prices can be compared and holdings regulated. Common sense, one would think. (for a good summary, see the estimable Harold Meyerson's piece)

But the five largest American banks -- in rough order of declining solvency: Goldman Sachs, Morgan Stanley, JP Morgan Chase, Bank of America and Citigroup -- hold fully 95% of derivatives -- with a notional value of over $290 trillion. In the first six months of the year, they made about $15 billion trading in these things. Not surprisingly, they have leveled their guns at the very notion of a public exchange. They enlisted companies that use derivatives to hedge against foreign exchange risks and the like, arguing that the reforms would raise costs all around. They have largely succeeded in the congressional cloakrooms.

So the bill that the House will consider on Wednesday creates a clearinghouse, not a publicly managed exchange. It also allows banks to decide that a deal is so unique that it needn't be posted on the clearinghouse. The best experts in the field -- like Michael Greenberger of the University of Maryland -- warn that the legislation might end up WEAKENING current law. That is no small achievement, because, as we saw in the collapse of AIG, current law is toothless.

The second basic reform to be considered is a Consumer Protection Finance Agency to protect consumers from getting gouged or defrauded by lenders on the whole range of consumer loans -- mortgages, car loans, payday lending, credit cards. The regulators who currently have some police power failed to use it before the crash -- as exemplified by the systematic fraud practiced in peddling complex subprime mortgages to people who could not hope to pay them back. And after claiming to be born again cops on the beat, the same regulators have failed to do much since the crash -- as exemplified by the record fees banks are exacting from depositors, or by hiking interest rates on credit card holders. The reasons for their failure are both ideological -- the abiding conservative belief that markets are self-regulating and regulation is costly, and institutional -- the regulators' first duty is to insure the health of the banks. If the banks are getting healthy by gouging their customers, the regulators turn their heads.

So the CPFA is designed to create an independent cop on the beat to protect consumers and police the banks and credit card companies. Needless to say, the banks don't like this idea. Already they've succeeded in delaying and diluting the administration's proposal. The current draft strips out the mandate that banks offer customers "plain vanilla" alternatives -- a clean 30 year, fixed rate mortgage, for example, when peddling exotic ARMS with balloon payments. Worse, it now suggests vesting enforcement power in a council of the very same regulators that have failed so miserably in the past and present.

But that's not all. The banking lobby is nothing if not shameless. They hope to use the reforms to WEAKEN current law. They are pushing to make the federal standard the ceiling on reform, stripping the power of states to have higher standards. Basically, they are hoping to find a way to shut down the independent investigations of state attorneys general like New York's Eliot Spitzer and Andrew Cuomo or Illinois' Lisa Madigan. (for a good summary of this see Dave Johnson's blog here)

How do the banks fend off needed reform? Follow the money. A recent report by Paul Blumenthal of the Sunlight Foundation shows that the 27 members of the House Financial Services Committee have received over one-fourth of their contributions from the FIRE (Finance, insurance and real estate sector). Ranking Republican Spencer Baucus from Alabama opposes the CFPA, arguing that we don't need "more regulation," we just need "smart regulation." He received a staggering 71% of his contributions from the finance sector over the first six months of this year (and 45% of his total contributions over his career). Democrat Melissa Bean who leads the effort to gut state regulatory authority over the banks has received fully 42% of her contributions for the first six months from the banking sector. Not surprisingly, the champions of reform like Rep. Alan Grayson, Maxine Waters, Keith Ellison, Adam Putman, and Carolyn McCarthy all pull in the lowest percentage from the sector.

Historically, the banks, as Senator Dick Durbin decried in disgust, "own the place." And they've succeeded thus far in frustrating reform, even while pocketing literally hundreds of billions in support from taxpayers.

Terrific documentation made available by researchers at the Service Employees International Union (SEIU) provides the details. Citigroup received about $341 billion from taxpayers in the bailout, and dispensed $4.9 million for lobbyists in the nine months after the bailout and $5.6 million in campaign contributions in 2008. (Talk about return on investment). Bank of America got $199 billion from the bailout and paid lobbyists $3.6 million in the nine months thereafter, while making campaign contributions of $7.2 million in 2008. Goldman Sachs pocketed a nifty $63.6 billion in bailout fund while setting aside $11.4 billion for bonuses and compensation for the first six months of 2009. (Lobbying fees $1.8 million; 2008 campaign contributions $7.1 million)

But this time it could be different. Backroom deals are no longer safe. Americans have been fleeced of trillions in the value of their homes and their savings because of Wall Street's reckless excesses. Then as taxpayers, they were extorted to ante up literally trillions more to forestall economic collapse by bailing out the banking sector. Insult was added to that injury when the Federal Reserve refused to tell the Congress who got the money and on what terms.

Legislators would be well advised to understand the cozy old ways of doing business are no longer acceptable. Americans are livid and paying attention. Legislators who rely on Wall Street to finance their campaigns and then lead the effort to block or dilute reforms will discover that their constituents know what they have been up to. Organizations like my own Campaign for America's Future, the Sunlight Foundation, Americans for Financial Reform, Huffington Post bloggers will make certain the word gets out. Legislators may discover that Wall Street's money is a burden, not a blessing.

The House committee's markup is the beginning of a long process that will make health care reform look like a summer's picnic. Legislators will have to decide what side they are on. It is up to us to make certain that they understand we will hold them accountable for the choice they make.

A Recipe For Another Financial Debacle

Robert Borosage — Tue, 13 Oct 2009 08:54:09 -0700

As the House Financial Services Committee begins markup on Wednesday of key financial reform legislation, the stakes are clear. Without strong regulation of the banks and the shadow banking system, large banks will feel free to gamble with the assumption that taxpayers will cover their losses. This is a recipe for another financial debacle.

Yet, even as the committee begins its work, the banking lobby has worked the backrooms to weaken the reforms proposed by the administration.

The central administration proposal—the creation of a new Consumer Financial Protection Agency to protect consumers from financial frauds and rip-offs—has already been critically compromised. No longer are financial institutions required to offer consumers simple and plain basic mortgages and other loans. The enforcement of the Community Reinvestment Act has been stripped from the CFPA. And even worse, the oversight authority of the new agency is placed in a council of the very same regulators that failed consumers completely in the run-up to the financial collapse. Rewarding their failure is simply indefensible.

The committee also seems intent on weakening rather than strengthening the current inadequate laws relating to derivatives, the exotic financial instruments that Warren Buffett termed “weapons of financial mass destruction.” This is simply abandoning the public interest to serve the private interests of the banks.

When Senate Majority Whip Richard Durbin declared that the “banks own the place,” he clearly wasn’t kidding. But legislators should beware. The banking lobby got its way when few were looking and even fewer could understand the arcane battles over deregulation. Those days are gone. Americans have lost literally trillions of dollars in savings and assets due the irresponsibility of a financial industry that turned itself into a casino, taking bets without even the prudence that a Las Vegas bookie exercises. Then they demanded hundreds of billions of taxpayers’ dollars to bail them out or they would bring down the entire global economy.

Americans are livid and paying attention. Voters will hold accountable legislators who undermine the reforms we need in order to serve their Wall Street contributors.

The Campaign for America’s Future will join with dozens of other organizations to insure that the backroom deals are brought into the light of day. Those standing in the way of reform will discover voters are not likely to forgive or forget.

Moyers Tonight: Why Wall Street Always Wins

Robert Borosage — Fri, 09 Oct 2009 09:12:19 -0700

Don't miss the Bill Moyers show tonight. He's got Simon Johnson, the former IMF economist and Rep. Marcy Kaptur looking at how Wall Street dominates Washington -- from the White House to Congress.
Eyeopening stuff:

Arianna Huffington published an excerpt from the transcript:

BILL MOYERS: Let -- let's look at this story that just-- I just read from the Associated Press this week about how Treasury Secretary Geithner is on the phone several times a day with a select group of very powerful Wall Street bankers, especially Citigroup, J.P. Morgan, Goldman Sachs. He will talk to them when Members of Congress have to leave a message on the answering machine. And these are the bankers who helped bring on this calamity and who are now benefiting from it. What does that say to you?

MARCY KAPTUR: That says to me that-- Wall Street and Washington is a circuit. And because Mr. Geithner headed the New York Fed that that historic relationship, unfortunately, continues. And it gives them special access and special power to influence policy.

SIMON JOHNSON: Well, I think it really tells you how the-- the system works. The system is based on access and is based on-- on what-- on Wall Street shaping Washington's view of what's important. It's the people who are very close to Mr. Geithner before-- when he was the head of the New York Fed. Before he became Treasury Secretary. These people have unparalleled access. And in a crisis, when everything is up for grabs, you don't know what's going on, the people who-- who will take your phone calls, right, in government-- and people who are gonna be standing in the oval office, making the key decisions. That-- that's the-- that's the heart of the system. That's the-- the heart of how-- you get your agenda through, by changing their worldview.

MARCY KAPTUR: And they also move people. In other words, Mr. Geithner came from the New York Fed, he came from Wall Street, and he becomes Secretary of the Treasury. His-- his-- predecessor, Mr. Paulson, came from Goldman Sachs, and he becomes Secretary of Treasury. You can go back decades, and you will see that there's this-- revolving door between Wall Street and Washington. And I recently asked Chairman Bernanke of the Federal Reserve, "Let me ask you a question. Would you be willing to consider a reform where the Cleveland Fed would have equal power to the New York Fed, in terms of how the Fed is run?" And his answer was, "No."

BILL MOYERS: And why did you ask that question?

MARCY KAPTUR: Because I think we need to democratize the Fed. I think that my region of the country, which is suffering so heavily from these decisions that were made by Wall Street and Washington, we need to have voice. And our bankers, who didn't do the bad things. Our community bankers, who are having to pay higher fees-- shouldn't be treated this way. Why should the people who did it right be penalized for those that did it wrong?

Glenn Beck Isn't Blocking Health Care Reform

Robert Borosage — Wed, 07 Oct 2009 22:03:36 -0700

Glenn Beck has captured national attention with his caustic poison. The aging right-wing troubadours -- Rush Limbaugh and Bill O'Reilly—still rouse the wingnuts and enforce discipline among Republican legislators. They've peddled the fantasies about ACORN and the all-powerful poverty lobby, and launched a search-and-destroy hunt for targets of opportunity in the Obama administration. Progressives have sensibly organized to question Beck's advertisers, and even the president has called him out.

But it is worth remembering—Glenn Beck is not blocking the passage of a good health care bill. The old and new carny acts of the right aren't undermining the energy legislation or frustrating financial reform. To focus on who and what is standing in the way, follow the money.

On health care, the lockstep opposition of Republicans in Congress is deplorable, but Republicans don't have the votes to block progress. The president is forced to negotiate with Democrats who have 60 votes in the Senate and a large majority in the House and could pass a good bill tomorrow if they unified.

The angry teabag activists shouting slogans in town meetings in August provided drama, but the true opposition is writing checks, not waiving signs. They are wearing pinstripes, not jeans and T-shirts. They represent wealthy insurance company CEOs, not angry workers or small business owners.

In the Pocket

Conservative Democrats on the Senate Finance Committee have received nearly $4.7 million in campaign contributions in the 2005-2010 campaign cycle from insurance, pharmaceutical and medical companies leading the charge against health care reform. Here's the breakdown.

Max Baucus: $1,933,879

Insurance, $558,075
Pharmaceuticals, $507,313
Health Professionals, $504,641
Health Services/HMOs, $363,850

Kent Conrad: $742,873

Heath Professionals, $239,533
Insurance, $233,625
Pharmaceuticals, $157,700
Health Services/HMOs, $112,015

Ben Nelson: $844,655

Insurance, $441,586
Health Professionals, $225,776
Pharmaceuticals, $177,293

Blanche Lincoln: $669,904

Health Professionals, $298,700
Pharmaceuticals, $153,304
Insurance, $131,850
Health Services/HMOs, $86,050

Thomas R. Carper: $469,016

Insurance, $238,680
Pharmaceuticals, $139,520
Health Professionals, $90,816

Source: OpenSecrets.org

The Washington media likes to paint the divisions as ideological. Republicans and Blue Dog Democrats are said to be opposed to "big government," cautious about spending, more concerned about deficits, reflecting more conservative districts and voters. Sure, there are ideological differences between the parties. And legislators do cater to the major interests in their districts. And no doubt, the Democratic Party is a big tent, with a broad range of political opinion.

But the president didn't cut a deal with Big Pharma to sustain the ban that prohibits Medicare from negotiating lower prices on drugs because of ideology or a policy debate. He did it to neutralize one of the powerful lobbies standing in the way of reform. The deals with utilities and coal companies in the energy bill aren't about ideology; they are about special interests and political clout. Republicans don't mind government spending when pouring hundreds of millions into subsidizing insurance companies to compete with Medicare. Blue Dogs aren't worried about costs when they oppose a public option that would help keep insurance companies honest.

The reborn McCarthy-like conspiratorial fantasies of Glenn Beck should not go unanswered. His effort to discredit the administration by searching for appointees to target should be resisted and scorned.

But everyone should be clear. The president has called on the Congress to act on fundamental reforms that cannot be avoided. Our broken health care system is unaffordable and must be fixed. Moving to new energy is a national security, economic and environmental imperative, not a choice. Fundamental financial reform is necessary if we are to avoid a worse crisis in the near future.

Glenn Beck and Rush Limbaugh and the Republicans in Congress oppose these reforms. They want, as Limbaugh proclaimed, the president to fail. But they aren't the major roadblocks to the change we need. What stands in the way is the organized power of the entrenched lobbies that have a direct stake in limiting change, and are willing to spend hundreds of millions to obstruct it. Their legions are less angry citizens, than sophisticated lobbyists, increasingly Democrats, many of them retired legislators. They deliver campaign contributions, not votes. They threaten negative campaign ads, not authentic citizen uprisings.

With literally billions at stake, progressives will never be able to match the money of the industries fighting off change. Our only chance is to make their money toxic—to expose the contributions, the lobbyists, the inside deals—and to make legislators understand the president was right when he said we can't let the permanent lobbies define what is possible in the nation's capital.

The struggle over health care reform is now reaching its climax. The backroom struggle over energy and financial reform is already fierce. It is time for Democrats to unite to get these done. It is time for the two or three Senate Republicans with any iota of independence to put country over party and be part of the solution. But most of all, it is time for us to follow the money, to track the contributions, expose the lobbyists,and challenge the legislators in both parties who hope to benefit by serving special interests rather than representing their constituents.

Check out opensecrets.org, where the Center for Responsive Politics tracks contributions. Take a look at their study with the Sunlight Foundation on the lobbyists undermining health care reform. Get angry, not cynical. Let your legislators hear from you—and join with your neighbors to demand that they represent you and not the interests that are writing campaign checks.

The president has called on the Congress to deal with fundamental national challenges that can not be ignored (although his predecessors were happy to do so). We'll not have a better chance to get vital reforms done. But to succeed, legislators in both parties will have to learn that voters aren't going to put up with the cozy Beltway business as usual.