Articles By This Author
Liberal criticism of Obama is out of tough-love
The Boston Globe
August 13, 2010
ON TUESDAY, White House Press Secretary Robert Gibbs railed against what he called “the professional left.’’
“They will be satisfied when we have Canadian health care and we’ve eliminated the Pentagon,’’ he told The Hill, a Washington publication. “That’s not reality.’’
Later, Gibbs apologized for losing his cool. “I watch too much cable, I admit,’’ he wrote. “Day after day it gets frustrating.’’
Who got under Gibbs’s skin? The White House expects liberals to be Obama allies. Yet left-of-center cable TV commentators like MSNBC’s Rachel Maddow or Keith Olbermann, and contributors to the Huffington Post among others, have been scathingly critical on issues from Afghanistan and civil liberties to the economy.
As co-editor of a liberal magazine whose stance has ranged from polite pleading to occasional exasperation, I have to say that Gibbs misses the point entirely. Few liberals are critical of this president out of ideological purity. Even fewer want to eliminate the Pentagon.
Most progressives fervently supported Obama. Many of us imagined a rendezvous between a brilliant outsider politician and a practical crisis rooted in failed conservative ideology — a Roosevelt moment.
The George W. Bush view that the private sector can do nothing wrong and government nothing right crashed the economy. In repairing the damage, Obama had an opportunity to restore a more balanced form of capitalism and to make it a governing philosophy shared by a majority of Americans, just as FDR did.
Liberals have criticized Obama mainly because he is bungling this opportunity, not because he isn’t as leftwing as some might like.
If his governing style and legislative achievements were producing either an economic recovery, or a sense on the part of distressed voters that he is their champion even if Republicans block his efforts, we would be cheering, never mind the details of his health reform.
Politics is the art of the possible, but also the art of leadership. President Roosevelt’s Democratic Party gained seats in Congress in 1934, the first mid-term election after Roosevelt took office, despite unemployment exceeding 15 percent. Ordinary Americans knew Roosevelt was on their side.
And rather than seeking illusory common ground with Republicans or with Wall Street, Roosevelt was eloquent in naming and shaming his opposition.
By contrast, Obama has not convinced regular citizens that his primary goal is an economic recovery for Main Street. His economic team is far too close to Wall Street.
He has sent mixed messages on whether his top priority is restoring jobs or reassuring financial markets about reducing deficits.
With his temporizing, Obama has left independent voters perplexed and the Democratic base dispirited. Democrats are now at risk of an epic legislative defeat this November, leaving Obama with even less running room to provide the recovery program that the country needs.
Obama’s failure to rise to the moment seems more characterological than ideological. He has the temperament of a conciliator, at a time when his opposition wants mainly to destroy him.
Why isn’t Obama behaving more like Harry Truman in 1948? Truman pulled off one of the great upsets of American political history, winning his own election and flipping 75 House seats from Republican to Democrat.
Even though Republicans, who controlled Congress in 1948, were certain to block his program, Truman sent Congress the legislation he wanted and dared Republicans to vote it down — rather than starting with half a loaf, ending with crumbs, and blurring differences.
Rather than turning obstructionism around on the Republicans, Obama seems to fear looking weak. But that reticence isn’t working.
So for the most part, liberals are criticizing our president out of tough love. We dearly want him to succeed. For if he fails, we fail.
And if Robert Gibbs, and the rest of Obama’s too-small insider circle mistake this benign exasperation for ideological purity, they are passing up a chance to rekindle the groundswell of enthusiasm that elected this president. It wouldn’t take all that much.
Read the whole article here.
Who Are You Going To Believe - Tim Geithner or Your Own Lying Eyes?
The Huffington Post
August 9, 2010
The jobs situation stinks, even as corporate profits keep rising. Another 131,000 jobs were lost to the economy in July, according to the Labor Department's latest report released Friday. The measured unemployment rate stayed stuck at 9.5 percent.
The only reason it wasn't worse was because more workers gave up looking for nonexistent jobs, leaving a smaller labor force to measure against the meager supply of work. Small comfort.
Meanwhile, another important government report, by the Social Security Trustees, showed only a trivial improvement in the gap between what Social Security owes the next generation of retirees and the tax receipts that it can expect.
There is, of course, a direct connection between rising unemployment, declining wages, and the condition of Social Security. That's because Social Security is funded by payroll taxes.
If wages had continued to rise with the growth of the economy's productivity, instead of profits and bonuses taking an ever larger share, Social Security would be enjoying an endless surplus.
Based on recent trends and a dismally pessimistic projection of our economic future, Social Security's Trustees assume wage growth of just 1.2 percent a year. But that can be changed by better policies.
According to Monique Morrissey of the Economic Policy Institute, if wage growth were 2.3 percent, which is the actual long-term trend in the growth of labor productivity, then Social Security would be in clover. Here is EPI's most recent full report on this, from 2005. (Since then, the screwing of workers has only intensified. An update is coming.)
The story is even more dramatic if you imagine a different history of the past two decades. If wages had risen with productivity, instead of nearly all the gains going to the top, Social Security's surplus would be huge and we'd be talking about lowering the retirement age, not raising it.
Note the outrageous injustice of the current debate. The Wall Street crowd, led by Peter G. Peterson and his billion-dollar foundation, is clamoring for deep cuts in workers' Social Security.
This crowd is the same people who have been making off with the lions' share of the economy's productivity gains for the past three decades instead of allowing ordinary people their traditional share; the same crowd that opposes a more progressive distribution of taxes and decent social spending.
Now this gang wants to whack workers a second time. You didn't get your fair share of wages, goes the story, so there isn't quite enough money in the Social Security accounts. And now you must take less money in retirement.
The alternative, obviously, is to get unemployment down and wages back up. And speaking of Wall Street and policy alternatives, what is the Obama Administration doing to alter this perverse trend? We need to look no further than the recent op-ed piece in the New York Times by Treasury Secretary Tim Geithner.
Now, you can be sure that this op-ed piece did not spring full grown from the pen of Secretary Geithner. It must have gone through the White House messaging machine several times. That makes it even more appalling.
The piece is titled, with no intended irony, "Welcome to the Recovery."
Geithner's story is essentially this: Don't believe what you experience in your own life; believe us. The economy is really a lot better than it looks (true on Wall Street, but not on Main Street.) Geithner had the bad timing to write this just before the economy lost another 131,000 jobs.
This is Geithner's variation on Marxist economics -- in this case Groucho, who famously said in the movie Duck Soup, "Who are you going to believe, me or your own eyes?"
Here are choice extracts from Geithner's op-ed:
• "Private job growth has returned -- not as fast as we would like, but at an earlier stage of this recovery than in the last two recoveries. Manufacturing has generated 136,000 new jobs in the past six months."
• "Businesses have repaired their balance sheets and are now in a strong financial position to reinvest and grow."
• "American families are saving more, paying down their debt and borrowing more responsibly. This has been a necessary adjustment because the borrow-and-spend path we were on wasn't sustainable."
• "The auto industry is coming back, and the Big Three -- Chrysler, Ford and General Motors -- are now leaner, generating profits despite lower annual sales."
• "Major banks, forced by the stress tests to raise capital and open their books, are stronger and more competitive. Now, as businesses expand again, our banks are better positioned to finance growth."
But take these one at a time:
Private sector job growth, in fact, is stuck. And without a massive stimulus of the economy, it will stay stuck.
Business may be "in a strong position to grow," but without growth of jobs and wages, nobody will buy their products.
Yes, American families are saving more -- because they are scared stiff that they economy will get even worse. That private savings behavior, in a recession, deepens the deflationary spiral unless it is offset by more public spending.
The auto industry has added something like 50,000 jobs after recently losing several hundred thousand; Detroit's market-share remains basically stuck compared to imports; and GM's "Volt" is about to get its clock cleaned by better Japanese electric cars.
Banks are still in precarious shape. That's why small businesses are having such a hard time getting credit.
Geithner concludes thus:
"These are considerable challenges, but we are in a much stronger position to face them today than when President Obama took office. By taking aggressive action to fix the financial system, reduce growth in health care costs and improve education, we have put the American economy on a firmer foundation for future growth.
And as the president said last week, no one should bet against the American worker, American business and American ingenuity.
We suffered a terrible blow, but we are coming back."
Sorry, but this issue is not whether anybody is betting "against the American worker," which is a lame metaphor. The issue is whether the Obama administration and Geithner have credibility as instruments of economic recovery going into a midterm election.
For Geithner to insist that things are actually better than working Americans experience their own lives is both insulting and guaranteed to backfire as politics. If the administration wants to bet on the American worker, both as a much abused contributor to the economy and as a voter, Geithner and his president need to do more to bring back jobs and wages.
Robert Kuttner's new book is A Presidency in Peril. He is co-editor of The American Prospect and a senior fellow at Demos.
Read the whole article here.
Obama, Forget the Deficit and Take a Stand for Job Creation
August 2, 2010
This fall, Congress will either follow the conventional wisdom and prematurely cut government outlay before an economic recovery arrives, or it will increase public spending, put jobless Americans back to work, and reduce the deficit in a less painful fashion thanks to increasing economic tailwinds. The road that Congress takes depends on presidential leadership.
Until very recently, deficit hawks were hogging every available megaphone, claiming that deficits and debts were more ominous than protracted joblessness and recession. But you know that this foolish consensus is beginning to crack when political moderates such as columnist Matt Miller, budget guru Robert Greenstein, and Yale economist Robert Shiller take a different view.
Greenstein, who heads the influential Center on Budget and Policy Priorities (CBPP), bows to nobody in his longstanding concern about unsustainably large deficits. CBPP's latest paper, by Greenstein's close colleague Paul Van de Water, takes issue with the premise articulated by Erskine Bowles, chair of Obama's own commission on budget reform, that the federal budget should be balanced at about 21 percent of GDP, roughly the postwar average.
But as Van de Water points out in his paper, released July 28:
Such recommendations, however, fail to take account of fundamental changes in society and government -- the aging of the population, substantial increases in health care costs, and new federal responsibilities in areas such as homeland security, education, and prescription drug coverage for seniors. These factors make the expenditure levels of several decades ago inapplicable today. A careful analysis of these factors indicates that it will not be possible to maintain federal expenditures at their average level for decades back to 1970 without making draconian cuts in Social Security, Medicare, and an array of other vital federal activities.
Matt Miller, a longtime budgetary moderate, made a similar argument in Wednesday's Washington Post, noting that spending was well above 21% of GDP under Reagan.
Reagan ran government at this size at a time when 76 million baby boomers weren't about to hit their rocking chairs. In 1988, 32 million retirees received Social Security and 33 million were on Medicare, our two biggest domestic programs. By 2020, about 48 million elderly Americans will receive Social Security, and 62 million Americans will be on Medicare (then the numbers really soar).... Health costs in the Reagan era were around 10 percent of GDP, while they're now 17 percent, headed toward 20. Obviously we need a national crusade to make health-care delivery more efficient. But until there's progress on this front, the 21 percent goal would be tantamount to Democrats agreeing that Uncle Sam should handle health care, pensions, defense and little else.
Obviously, government needs to spend more money, both to get the economy out of the deep jobs recession, and then to meet other commitments valued by citizens. The only way to accomplish these goals is not to get hung up on deficits in the short run -- to spend what it takes to put Americans back to work and then raise taxes on the wealthy so that we can have a more balanced fiscal picture -- but that could be social outlay of 25 percent or even 30 percent of GDP.
Another mainstream economist, Yale's Robert Shiller, author of the book that warned of the financial collapse, Irrational Exuberance, recently wrote in the New York Times that government needed to spend more money putting people back to work directly -- breaking an Obama administration taboo. Obama economic policy chief Larry Summers opposes Roosevelt-style direct jobs programs, and stimulus spending has been carefully directed to the states and the private sector. But Shiller wrote:
Why not use government policy to directly create jobs -- labor-intensive service jobs in fields like education, public health and safety, urban infrastructure maintenance, youth programs, elder care, conservation, arts and letters, and scientific research?
Would this be an effective use of resources? From the standpoint of economic theory, government expenditures in such areas often provide benefits that are not being produced by the market economy. Take New York subway stations, for example. Cleaning and painting them in a period of severe austerity can easily be neglected. Yet the long-term benefit to businesses from an appealing mass transit system is enormous.
Meanwhile, senior Republican economists as orthodox as former Fed Chairman Alan Greenspan and former Reagan budget director David Stockman are excoriating the Republican Party and leaders like Senator Mitch McConnell for wanting to extend the Bush tax cuts at a time when a long-term path to fiscal discipline needs to be a combined recovery program.
So here is the state of play:
Republicans are setting themselves up as the wildly irresponsible party by arguing that we can have both tax cutting and effective fiscal and economic policies, too. Sensible moderates are breaking with the orthodox view that we need smaller government.
This is another of those teachable moments.
But where is the high-profile Obama speech making clear that the top priority for now is putting America back to work, that deficit reduction will come when the economy is back on track -- and that the budget will not be balanced on the backs of those who depend on Social Security, Medicare, and other key social outlays?
The misguided Erskine Bowles, with his austerity program, did not drop into the budget debate from Mars. He was appointed by Barack Obama.
The New York Times reported Sunday that Obama has been meeting with vulnerable Democratic members of Congress, offering to do anything to help them -- including staying out of their districts. The front-page piece, by political reporter Jeff Zeleny, was headlined, "To Help Democrats in the Fall, Obama May Stay Away."
Uh, why does this not sound like a winning political strategy? Maybe if Obama got serious about putting Americans back to work and explaining the real connection between an economic recovery and deficit politics, incumbent Democrats -- and voters -- might welcome the president into their districts.
Robert Kuttner is the author of A Presidency in Peril: The Inside Story of Obama’s Promise, Wall Street’s Power, and the Struggle to Control our Economic Future, recently published by Chelsea Green Publishing Company. Kuttner also authored Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency and several other books on politics and the economy. He is coeditor of The American Prospect magazine and a Distinguished Senior Fellow at the progressive think tank Demos. He is a regular commentator on TV and radio, and a contributor to The Huffington Post and The Boston Globe, and a former longtime columnist for BusinessWeek. Previously, he was chief investigator of the U.S. Senate Banking Committee and a national staff writer on The Washington Post.
Read the whole article here.
A 20-Year Odyssey
The American Prospect
August 2, 2010
In the two decades since Paul Starr, Robert Reich, and I founded The American Prospect, there have been surprising gains and losses to the liberal project. After the ascendancy of Reaganism, our purpose was to articulate a muscular liberalism, defined as a more effective democracy, an enlarged civic space, and a more just form of capitalism -- a liberalism that could once again animate a majority politics.
As it happened, many people associated with the Prospect soon got involved with the Clinton presidency. In our pages, Stan Greenberg helped define the message that got Bill Clinton elected. Two of our three founders served with distinction in the administration. (I got to mind the store.)
Since we began publication as a quarterly with a circulation of 2,700, the Prospect, now a monthly with a lively Web magazine, has been a forum for inspired argument, both with the right and within the liberal family. We've been hospitable to a wide expanse of the liberal spectrum without sacrificing our core belief in effective government, robust progressive politics, and broad economic opportunity. The magazine has rejected facile contrarianism in favor of extensive reporting and evidence. Our friend and colleague Sandy Jencks describes the Prospect's signature as "policy as narrative."
At the time of our founding, "interest-group liberalism" was described by many commentators as an alarming blight. Supposedly, gay rights, feminism, disability rights, and expansion of opportunities for minorities were making liberalism a fragmented collection of narrow interests at the expense of the broad collectivity. Many of these same neo-liberal voices also called for markets to displace government responses to collective problems, but their marquee quarrel was with identity politics. But then a funny thing happened.
A 20-year liberal scorecard easily shows that the era's greatest liberal gains have been in the politics of inclusion -- setting the stage for an African American president. Barack Hussein Obama was no affirmative-action baby. He won based on pure merit because he was the most effective politician of any stripe. There have been similar gains in the normalization and growing acceptance of sexual minorities, the chipping away of the glass ceiling constraining women's opportunities, and the greater accommodation of people with disabilities.
Minorities have now transcended radical identity politics and joined the mainstream. Just look at the Republican Party, with a black chairman and rainbow candidates for Congress and state offices. Women who are former corporate CEOs are running as Republican candidates for governor and senator in California. Indeed, thanks to the success of a radical women's movement banging on the doors, Sarah Palin and several other faux-feminist conservative women have emerged as crackpot notables. Such are the fruits of liberal success.
Yet the alarms about "interest -- group liberalism" were not entirely wrong. For liberalism is a persuasive ideology when it offers broad benefits to all citizens, not just to aggrieved groups. Since 1990, particular movements demanding inclusion made great gains, but the general movement to harness capitalism and broaden prosperity has suffered terrible losses.
The economy today is more unequal, more precarious, and more prone to catastrophe than it was in 1990 -- or for that matter in 1960. The counterweights to raw capitalism -- a strong labor movement, effective economic regulation, valued public institutions -- are on the defensive. Though a Democratic president has won partial reforms to restore public investment, revive economic regulation, and repair an unjust and inefficient private health-insurance system, the very idea of government as a needed counterweight to laissez-faire capitalism remains a hard sell.
President Obama took office at a moment when free-market ideology, Wall Street hegemony, and conservative incumbency were thoroughly disgraced by recent events. But Obama has not yet been able to translate that failure into a durable progressive counterrevolution.
I draw three conclusions from the big wins in the struggle for inclusion and the severe losses on the economic front. First, the out-groups that won major gains did so as genuine and im-polite social movements, not as supplicants. The Tea Party today has a movement, but on the progressive side, the movement for economic justice is far too weak.
Second, liberals in and out of government need to think bigger, not smaller. Large, expansive projects such as Social Security, the GI Bill, the Tennessee Valley Authority, and Medicare persuaded majorities that government could be a source of genuine help. At a time of big crisis, small incremental efforts neither restore government as a force for broad economic inclusion nor rebuild a majority politics.
Third, whether on the liberal left or the conservative right, the gains and losses of the era from Reagan to Obama began as battles of ideas. Magazines like this one matter because ideas matter.
Read the whole article here.
Muddling the message on economy
July 15, 2010
Democratic factional infighting and White House dithering are undermining the economic strategy that President Barack Obama needs to rally his party — and the country.
With a clear strategy and message, Democrats could minimize their congressional losses this fall. Otherwise, the widely predicted Republican blowout could paralyze Obama’s presidency.
Obama needs to make a compelling case that government outlays are required to make up for the vicious circle of high unemployment, depressed consumer purchasing power, businesses’ reluctance to invest and bankers’ hesitancy to lend. Even if some of his proposed measures are blocked, he needs to keep fighting.
But the White House isn’t saying clearly what happened and what should happen — largely because of disabling divisions between deficit hawks and liberals.
For some — like departing Office of Management and Budget chief Peter Orszag, Treasury Secretary Timothy Geithner, chief of staff Rahm Emanuel and Erskine Bowles, the Democratic co-chairman of Obama’s deficit commission — the economics and politics require deficit reduction. Jack Lew, Orszag’s designated successor, is also a deficit hawk.
Supposedly, reducing the deficit would reassure money markets and demonstrate responsible stewardship to voters.
But Obama’s economic chief, Larry Summers, considers austerity in a severe recession perverse. He scoffs at the idea that money markets need the reassurance of lower deficits, since the U.S. government is financing its long-term debt at record-low interest rates.
Most of Obama’s economic experts counsel more spending in the short run, to produce more jobs and consumer purchasing power. Reduction of the structural deficit would be far less brutal after a recovery.
These White House divisions are mirrored in a divided Democratic Party in Congress. The Blue Dogs side with the White House deficit hawks. They want to escape the tax-and-spend label and fiercely oppose new anti-recession outlays.
The liberals, a majority of congressional Democrats, want more spending for unemployment insurance, public works and emergency aid to states and localities.
The two factions are increasingly furious at each other — and frustrated with the White House.
Obama, fatally, has pursued a course of splitting the difference, denying himself a compelling narrative. Because the White House believes that only modest measures can pass Congress, its message signals “think small” during a big, continuing crisis.
Obama spoke last Thursday at an electric car plant that received stimulus funding. He boasted that this factory now employs 50 workers. Swell — that leaves only about 14,999,950 jobs to go.
Fiscal Frankenstein. The appointment of prominent fiscal conservatives to Obama’s own deficit commission gives ammunition to his opponents. “They thought they’d appease the deficit hawks with the commission,” said a senior congressional staffer, “but they’ve created a Frankenstein monster.” Republicans and Blue Dogs refuse to support even an extension of unemployment insurance, much less aid to the states, unless these outlays are “paid for” by other cuts. But they are only echoing Obama’s own anti-deficit rhetoric.
Misreading the polls. Supposedly, Americans are demanding action to cut the deficit. In fact, jobs and the economy outpoll deficits as the top voter concern in poll after poll, according to political scientists Ben Page and Larry Jacobs in a review of recent polls for the Roosevelt Institute.
Deferring to the Dogs. The majority of vulnerable Democratic seats are held by Blue Dogs. Obama could dismantle much of the Democratic Party’s postwar program, and it still wouldn’t save marginal Blue Dog seats. But a strong commitment to economic recovery could keep the House in Democratic hands.
By allowing the Blue Dogs to hold hostage presidential messaging, as well as key legislation, Obama denies himself a robust narrative of how to fix the economy.
It’s impossible to appease both the Blue Dogs and the liberals. They have antithetical views of how to achieve a recovery. Splitting the difference only muddles the message.
Debasing the base. To survive a Republican wave, Democrats need renewed enthusiasm from their base. But recent administration stances seem almost calculated to enrage it. Energy needed for the election is diverted to infighting.
Labor, for example, should be going all-out to elect Democrats. But the unions’ priority now is to lobby for aid to the states that the administration isn’t pushing — including money to save more than 300,000 teaching jobs slated for elimination.
Industrial unions are furious about NAFTA-style trade deals. And the AFL-CIO, which worked intensely to rally skeptical members to Obama’s side in 2008, is being rebuffed by its own rank and file.
One can tell the same story about the environmental and women’s movements.
Scaring seniors. In its near-death experience on health reform, the administration managed to terrify older Americans, who believed Medicare funds would be spent on the uninsured. Republicans reaped the political gain. Now, Democrats like Bowles and House Majority Leader Steny Hoyer (D-Md.) are engaging in risky talk about cutting Social Security benefits or raising the retirement age.
Republicans managed to oppose “government-run health insurance” and still pose as heroic defenders of Medicare. If White House surrogates continue this loose talk, you can be sure Republicans, the true privatizers, will soon be warning that Democrats want to cut your Social Security.
Missing in action. Obama has been AWOL in battles to pass new jobs legislation. On health reform, the president worked the phones himself. But the White House sat out the House effort to pass major jobs legislation in late 2009 and again earlier this year. Recently, Obama even threatened to veto a House-passed bill that would divert $800 million of Race to the Top money to prevent teacher layoffs.
Republicans will gain some House seats no matter what Democrats do. But whether they take control hinges on whether Obama can fashion a coherent economic message and lead more effectively.
Robert Kuttner, author of “A Presidency in Peril,” is the co-editor of The American Prospect and a senior fellow at Demos.
Read the whole article here.
© 2010 Capitol News Company, LLC
It's The Jobs, Stupid
The Huffington Post
Robert Kuttner, Co-founder and co-editor of The American Prospect
June 27, 2010
The Americans wrapped up their meetings at the Toronto summit in an oddly contradictory posture. With much of the world afflicted with austerity fever, President Obama's team found itself in the awkward position of pushing the Europeans not to abandon economic stimulus -- while Obama himself is unable to get the U.S. Senate to approve even modest sums to extend expiring unemployment insurance for upwards of a million workers, or his $23 billion request for emergency aid to the states to spare 300,000 schoolteacher layoffs.
The British, Germans, and Canadians, meanwhile were giving priority to deep budget cuts in their own countries -- while smaller European nations were being made to extract even more severe cuts in exchange for guarantees of their government debt. Obviously, if every nation is cutting back, then economic recovery falters. But this seems far from obvious to the world's leaders.
In part, this general outbreak of austerity is the price that Obama is paying for giving too much attention to deficit-reduction at home, and not enough to jobs. The administration's own embrace of austerity, in the form of a freeze on domestic spending after this fiscal year, as well as Obama's fiscal commission, not only undercuts his credibility with the G-8. It gives ammunition to Senate Republicans and Democratic deficit hawks who refuse to appropriate another dime for jobs measures that are not "paid for" by tax increases or other spending cuts (which of course undercuts any stimulus effect.)
One good piece of news is the departure of OMB director Peter Orszag, the leading deficit hawk inside the administration. Orszag was the architect of the fiscal commission and the domestic spending freeze, and the foe of even modest increased outlays on jobs.
It's not clear that his successor will be a great deal better, though some of the names leaked to the press -- notably Laura Tyson or Gene Sperling -- are less hawkish.
If the Republicans make massive gains this November, the main reason will be the lingering economic slump, which now belongs to the incumbent Democratic administration.
You could spin recent events to suggest that President Obama finally had a pretty good week. He showed presidential resolve in getting BP to part with $20 billion. He fired the insubordinate General Stanley McCrystal. And he persuaded Congressional Democrats to put aside House and Senate differences and agree to a conference bill on financial reform.
But in all of these cases, the back story doesn't reflect so well on Obama. McCrystal's policy, which will continue, is a fantasy. He should have been fired for insubordination several months ago when he was trying to back the president into a corner with his public pronouncements.
Had the new administration cleaned house at Dick Cheney's Interior Department early on, and not given BP safety waivers, the spill probably would not have occurred.
And Obama hardly participated in the final deliberations on financial reform. For lack of progressive presidential leadership, the banking lobby gained back some of what it had lost on the Senate floor, in weaker provisions on derivatives, big loopholes in banks' ability to continue risky trading activities, and looser limits on banks' ability to invest in risky hedge funds and private equity.
Polls show a continuing erosion in the public's confidence in Obama and the Democrats. And none of the recent cases of presidential leadership touches on the real issue that is killing the Democrats, namely high unemployment.
Speaking of polls, one of the oddities of the Administration's reticence on the jobs issue is the reported counsel of the White House political staff that the public cares more about deficit-reduction than about jobs. In this account, the public sees deficit reduction as a sign that government is out of control and doesn't believe that more government spending will help solve the jobs crisis.
Political advisers who take such results at face value are fools. Yes, you can get poll respondents to say that the deficit is a serious concern, but it's a far less salient one than worries about losing your job, your health insurance, your pension, or the value of your home. If Obama can persuade the American people that he is their champion on these immediate pocketbook issues, the abstract worry of the deficit evaporates.
The political team also reportedly argues that Obama can't get serious jobs measures through the Senate in any case, and therefore a major effort would only make him look ineffectual. But this is also the wrong reading.
As I argued in a recent piece for The American Prospect, adapted from A Presidency in Peril, Obama needs to learn from the example of Harry Truman. In the summer and fall of 1948, when Republicans controlled both houses of Congress, and Truman was widely given up as a goner, Truman responded by deliberately sending "the do-nothing 80th Congress" legislation on housing and jobs that he knew they would defeat -- to dramatize the difference between his own program and the Republican one.
Truman not only won re-election in November 1948 in American history's greatest
electoral upset; his coattails were so attractive that 75 House seats went from Republican to Democrat, and the Democrats took back both houses of Congress.
If today's Republicans are blocking aid to spare 300,000 school teacher pink slips, and over a million unemployed workers who are losing their unemployment insurance and Cobra health coverage, Obama should be hanging that callous behavior around their necks, Truman style.
And in that respect, there is one surprising piece of news on the polling front from a most unlikely quarter -- the Peter G. Peterson Foundation.
The Peterson Foundation, bankrolled at a billion dollars, is spending a small fortune to persuade the American people that the deficit is a more serious menace than economic collapse, and that Social Security and Medicare need to go on the chopping block. I have rebutted this view in a paper for the Scholar's Strategy Network.
One of the Foundation's grantees is a closely linked organization called "America Speaks," which is supposedly a representative sounding of public opinion on the Peterson Foundation's favorite causes.
The "national town meeting" just completed June 26th, involving thousands of Americans by satellite link. You have to read the press release very carefully to find these results, but after extensive deliberations, the America Speaks poll included these findings:
• 85 percent wanted to raise the cap on earnings subject to Social Security taxes--far more than the percent that wanted to reduce benefits or raise the retirement age.
• 85 percent wanted to cut military spending.
• 64 percent wanted a carbon tax.
• 61 percent wanted a financial transactions tax.
• 58 percent favored a new higher tax bracket for millionaires.
And these surprisingly progressive conclusions came, despite the fact that the exercise was heavily funded by the nation's most powerful propaganda organization that works to frighten Americans into believing that Social Security and Medicare are bankrupting the country! See Dean Baker's terrific new analysis of what the public understands and misunderstands about deficits, Social Security, and Medicare.
The people are often ahead of the leaders and the pundits. If the administration paid attention to where public opinion really is, we'd be hearing a lot more about jobs and a lot less about deficits.
Robert Kuttner's new book is A Presidency in Peril. He is co-editor of The American Prospect and a senior Fellow at Demos.
"The President I Voted For"
June 27, 2010
My Fellow Americans,
You and I have been hearing a great deal of advice about the importance of cutting the federal deficit. As part of the challenge of restoring America to a condition of economic soundness, we do need to lower the deficit and bring down the national debt relative to our total economic output.
But a lot of the Cassandra voices have the sequence backwards. Right now, we have more urgent business than cutting the deficit.
Thirteen million Americans are out of work, half of them for six months or more. Twelve million more Americans are working part time but want full time jobs, or have given up even looking because there are so few job openings to be had–five people seeking work for every available job vacancy. Even the official unemployment rate is stuck near ten percent.
The last few months have been disappointing. The private sector has begun generating some jobs, but not nearly enough. In May, there were more than 400,000 jobs created, but nearly all of them were temporary jobs with the U.S. Census Bureau. Just 41,000 were private sector jobs. We are never going to put America back to work at this pace.
The private sector is not generating enough jobs because private business isn’t entirely confident that this recession is fully over. Businesses are not willing to invest enough or to hire enough. And who can blame them? With nearly ten percent of America’s workforce unemployment and anxious, families are watching every penny.
We averted a Great Depression, but this is not good enough. Workers idle, businesses hesitant to invest and hire, consumers deferring spending–that’s a recipe for a Great Stagnation.
If America found itself in an all-out war, we would spend whatever it took to be victorious, as our grandparents did during World War II, and our parents did during the Cold War. In those years, we bought a lot of prosperity as an incidental byproduct of our military buildup. If we can spend what it takes to defeat a foreign enemy, surely we can spend what’s needed to vanquish the risks of permanent recession.
In many ways, our current economic situation is as dire a threat to our way of life as a war. We face the risk of a stunted generation: Young people who feel like failures before their adult lives have really begun, because they were born at the wrong time. Elderly people who have lost much of their home equity, and their 401 k savings, and either have no pensions or face financial threats to the ones they have. People in the prime of life who are losing everything they have struggled for, including their self respect–all through no fault of their own.
In these circumstances, you have to have a heart of stone to be calling for cuts in Social Security and Medicare, or new taxes on the struggling middle class, as the cure for deficits that are mainly the result of the recession itself. But there are billionaires who lead lives of ease who want struggling Americans to tighten their belts as the solution to a deep jobs recession created by excesses on Wall Street.
I reject their values and I reject their counsel, even as I embrace a better strategy to return America to fiscal and economic health.
Today I am sending Congress legislation that will spend an additional $500 billion in this fiscal year and $500 billion next year, to put America back to work; to refinance mortgages at affordable monthly payments so that housing values stabilize; and to stop the hemorrhage in state and local finances that are leading to cuts in services and layoffs of workers. The money will also finance an emergency Reclamation Corps along the Gulf Coast.
Virtually all Republicans, and even some members of my own party, have refused to approve the smaller sums that I have asked Congress to authorize–money to extend unemployment insurance, and emergency COBRA coverage for people who’ve lost their health insurance; and to keep 300,000 schoolteachers from being laid off. They block this urgently needed help, either because they are ideologically opposed to government playing its necessary role in a national emergency, or because of concerns about the deficit–concerns that never bothered Republicans when they were increasing deficits to pay for tax cuts for the wealthiest, or needless wars of choice.
Some of these legislators represent America’s hardest hit communities. If they vote against this bill, let them explain themselves to America’s unemployed workers and their families; and to breadwinners losing their healthcare; and children losing their teachers. I may not succeed in getting Congress to appropriate every nickel of this request, but I am going to fight for this recovery package like I have never fought before.
There are those who say that we need to cut the deficit to reassure financial markets that are worried about inflation. I wonder if these people read the financial pages. Today, the money markets are willing to lend the U.S. government money, by buying government bonds, for thirty years at about four percent. A normal rate of return is around 3 percent. That means markets believe that the next thirty years will be almost inflation-free.
When markets behave like this, it means inflation is the furthest thing from their minds. And, there is not much inflationary pressure when the economy is becalmed. As chief executive, it would be irresponsible of me not to take advantage of this borrowing climate to invest in the jobs America needs at very low borrowing costs to the taxpayer.
Now, what about that deficit? Yes, it is too big. But the best and least painful way to get it under control is to put America back to work, so that more workers and businesses are paying taxes again.
The previous administration dug us quite a hole. And even a full recovery will not quite solve all of the long term deficit and debt problem. But it would be insane and perverse to tackle the deficit before we achieve the recovery. We will need to increase some taxes, but I pledge to you that they will not be taxes on the middle class.
And although we need to run an efficient government as possible, I further pledge to you that we will not balance the budget on the backs of Social Security or Medicare. If my Republican friends think that course necessary policy or smart politics, let’s have that debate.
Now, the fiscal commission that was jointly appointed by the Congressional leadership and by me is charged with recommending a long term plan to get the budget back to near-balance, after we achieve a full economic recovery. I support that goal. And I expect the commission to produce a plan that does not tamper with social security or raise taxes on the middle class. Otherwise, it goes straight into my waste-basket.
I also expect the Commission to recognize that recovery comes first. I will look forward to a report that proposes a plan to fiscal stability built on a strong recovery. I will reject one that is built on austerity.
Recently, people as different as David Walker of the Peter G. Peterson Foundation, and Lawrence Mishel of the Economic Policy Institute have agreed that we need more deficit spending in the short term so that we can create more jobs now and get to eventual budget discipline in the future without further needless economic sacrifice on the part of American working families.
To those who commend belt tightening, I remind you that for three years now, working Americans have been tightening their belts–and worse. Why is it always those with ample waistlines who want others to make sacrifices? Let them lead the way, by stepping aside and not resisting tax reform, or financial reform, or adequate public investment to put America back to work.
We need to be focusing on possibility, not on austerity. That will be the great cause of my presidency.
"Another tax that hits the middle class"
The Boston Globe
June 30, 2010
WITH THE agreement at the Toronto G-20 summit of major nations to cut public deficits at least in half by the year 2013, we will start hearing a lot more about a value added tax . We should keep our hands on our wallets.
The goal of cutting the deficit by a set amount by 2013 is arbitrary and premature. Whether that formula makes sense depends on whether the recession is really over. Until we get a stronger economic recovery, too much deficit reduction reduces purchasing power and slows job creation.
A VAT, which is a kind of national sales tax, is especially perverse because it is a tax directly on consumers, who have already been hit hard by the recession.
But it does raise a lot of money. A VAT of 5 percent, the number usually proposed, would bring in about $250 billion a year.
In the fiscal year that begins tomorrow, the deficit will be $996 billion, according to the bipartisan Congressional Budget Office. The CBO projects that by fiscal year 2013, it will still be $525 billion. If you do the math, that means a normal recovery plus the expiration of the Bush tax cuts will cut the deficit nearly in half by 2013 with no massive new tax increases. But that hasn’t stopped the budget hawks, who want new taxes to cut the deficit even more.
VAT supporters include many members of President Obama’s own fiscal commission, which holds a rare public hearing today; the billion dollar Peter G. Peterson Foundation (which bankrolls a lot of deficit-hawkery); former Democratic Treasury Secretary Robert Rubin; and the outgoing director of the Office of Management and Budget, Peter Orszag.
Senator Kent Conrad, chairman of the Senate Budget Committee, likes a VAT. Ezekiel Emanuel, brother of President Obama’s chief of staff and a White House adviser on health care, has called for a VAT as a way to finance expanded health coverage.
Supporters also believe that a VAT offers a bipartisan grand bargain. Because it taxes consumption, it touches only income that is spent. So wealthy people, who invest rather than spend most of their income, would not pay much VAT. As a sweetener for Wall Street, some enthusiasts would include a cut in the corporate income tax as well. That presumably makes it a tax that even Republicans might like.
Advocates trying to sell Democrats on a VAT point to Europe, where value added taxes as high as 25 percent in Scandinavia raise prodigious sums that in turn support generous social services. And because a VAT typically exempts products that are exported, it would be good for American manufacturing and our trade balance.
But American budget hawks don’t want VAT revenues to go for more and better preschool or health care or job training or other favorites of liberals. They want the proceeds to go for deficit reduction. And most of the Republican leadership in Congress is dead set against new taxes. So a VAT remains a political stretch.
As the European experience shows, a VAT can indeed be an effective revenue raiser. But unless the proceeds go to support valued public services, it is just another tax on the middle class.
It is possible to make a VAT less regressive by using some of the new revenue to reduce income taxes or payroll taxes paid by working families. Some countries with VATs exempt necessities such as food. We can also offset its regressive nature by coupling it with new surtaxes on very high incomes.
So when the president’s fiscal commission raises the idea of a VAT, as is likely, we need to ask three questions:
■ Are basic necessities like food and housing to be exempted?
■ Is it part of a package that makes the tax system fairer and less onerous to the middle class overall?
■ Do some of the proceeds go to finance public services that have been shortchanged for decades and that got further reduced in the current recession?
If not, the VAT should be considered dead on arrival. The last thing we need in a deep slump with persistent unemployment is higher taxes on the middle class.