“It is the responsibility of our elected leaders to create the conditions for our people to aim high, work hard, and realize the full promise of the American life”
- A New Era of Responsibility: Renewing America’s Promise. President Obama’s 2009 Budget document at http://www.budget.gov/
This week the stock market hit a level not seen since 1997 (two bubbles ago). In the same week a confident President Obama stood before the American people to deliver a budget speech in the middle of the worst economic crisis of my generation.
Obama did what all great Presidents have done in a crisis. He called on Americans’ better nature and courage to stand up, pull together and not be afraid. Obama inspired us to look beyond the moment, and be confident that we could continue to master our future. This alone was striking after the waves of gloomy news that have washed over the country since Lehman Brothers was allowed to go bust.
Unlike his predecessor, President Obama used the bully pulpit to inspire, not bully. Unlike Clinton, he set aside small bore triangulation and painted a broad agenda. Not since LBJ and the Great Society has a President pushed his chips out on the table in an “all in” move to use government as a tool to better American’s lives.
How is he planning to redraw America? Take a look at the summary of his proposed budget: A New Era of Responsibility: Renewing America’s Promise found at www.budget.gov or at www.whitehouse.gov. All the bullet points below are taken from that document.
He wants to:
· Reduce the deficit from 10.6% of GDP in 2009, to 8% in 2010, 6.7% in 2011, and 4.6% in 2012.
· Set aside $630 Billion over the next 10 years to finance health care reform. Some funding will come from letting the Bush tax cuts expires , some will come from ending tax breaks for employer based health care insurance.
· Increase pay for men and women in uniform by 2.9%.
· Restore VA Health Benefits for 500,000 veterans. Improve funding for treatment of PTS and traumatic brain injuries.
· Expand Pell Grants to a $5,500 maximum award for the 2010-2011 school year. He also proposes to index Pell Grants to the CPI plus 1% so the maximum grant amount will keep pace with inflation.
· Do away with many of the Federal Subsidized loans for education and support direct lending programs from schools. This will save $4 Billion a year which will he will reinvest in students.
· Modernize the Perkins Loan program, which will make low interest loans more widely available and equitably distributed.
· Expand the size of the Foreign Service.
· Increase AmeriCorps capacity from 75,000 to 250,000 volunteers.
· Redraw asset test for program eligibility. Current tests are contradictory and prevent people from using programs they actually need.
· Establish a National Infrastructure Bank to provide ongoing funding coordination between Federal , State and Local governments as well providing direct Federal investments to needed project.
· Increase funding to fight wildfires – an increasing necessity in the drought stricken areas of the country.
These proposals are in stark contrast to the “Government is the Problem” philosophy that has ruled the country in some form since 1980. The Republicans have divorced the people from their government for the Party’s political gain. In doing so they set country’s agenda on a course that was increasingly small minded, selfish, and backward. Their budgets reflected that attitude.
But Obama’s proposal has rewritten the agenda. Just by the act of proposing broad ranging solutions he demonstrated that we have the will and capability to tackle the big problems facing this nation. He reminds us that we are the Government and that we can use the Government as an extension of ourselves to help our neighbors in distress.
To quote from the conclusion section of the Obama budget proposal:
“Overcoming the problems we have inherited will not be completed in one budget, in one month or in one year. It will take years of ingenuity and innovation, courage and commitment. It will take all Americans, including those in Washington and beyond living up to the responsibilities we have to each other as neighbors and citizens. But if we come together and pull together, there will be little doubt that America will be growing, innovating and creating jobs for generations to come.“
President Obama’s proposals focused the country on the future, but he also gave us confidence in the present.
Friday, February 27, 2009
Sunday, February 22, 2009
Into the Jungle
"I think that the people are sick and tired of politicians fighting. The system is such that you get punished sometimes when you do something that is good for the people."
- Governor Schwarzenegger
On Friday Governor Schwarzenegger signed the 14 or so bills that make up the California budget. There was a sigh of relief, and little celebration. Even though technically the budget caries us through 2010 everyone knows by May, when the budget is legally scheduled for review, we will be locked in another impasse.
As payment for being the final Republican vote, Sen. Abel Maldonado, R-Santa Maria demanded and received among other things, a ballot measure changing California to a non-partisan, open primary system (or “jungle primary”) for State offices. In a “jungle primary” all the candidates regardless of party appear on the same ballot. Unless one candidate wins an outright majority in the primary, the top two vote getters would face off in the general election – regardless of party affiliation.
Both parties hate this idea as it will break the lock they have on State politics. In the current system, the candidate who is most ideological pure wins the nomination. However, the party with the majority registration tends to win the election because more voters are aligned with the majority party’s overall philosophy even if they are presented with an extreme version of it.
The minority party will also nominate an ideological pure candidate. This alienates both moderate voters in their own party who leave, and repulses non-aligned voters who would otherwise join. The minority party starts to shrink, shifting its philosophical spectrum even further towards the extreme. There they will find their next candidate and repeat the cycle putting their party in a death spiral.
In California we vividly see this in our state politics. Moderate independents, liberal Republicans and conservative Democrats all tend to vote for the liberal Democratic candidate, as they turn from the more extreme Republican candidates.
Nate Silver at fivethirtyeight.com ran simulations on what the results of a jungle primary would be in California (http://www.fivethirtyeight.com/2009/02/land-of-thousand-liebermans.html). He confirms that to survive in a jungle environment, candidates will have to move towards the center. Candidates aligned with the Democratic Party would win slightly less often and Republican aligned candidates would do better. Those candidates would be conservative Democrats or liberal Republicans. As Silver describes it, we would be electing thousands of Joe Liebermans.
Is this a bad thing? In all the discussion about post partisanship have we missed the larger question of do we really need political parties at all?
The founding elders of this country had a fear of parties. But inevitably conflicts between individuals like those between Jefferson and Hamilton regarding political and governing philosophy developed. Parties became a way to mobilize voters, and disseminate information in a broad country with poor communication and poor literacy.
Parties weren’t written into the governing statutes, so they could grow and die depending on the political tides and seasons. The Federalist and Whigs are two examples. The two party system is not a given. In recent history, there have been credible third party candidates in 1948, 1968 and 1992. But since 1992 the political system has hardened into two dominant party positions.
With the internet, twitter, talk radio and 24 hour cable news is the political party construct an anachronism? If you look at a definition of a party as a structure to communicate with and mobilize a group with a similar philosophy to finance and elect a candidate of their choice, then Moveon.Org defines as a party and so did the Congressional Club. In 2004 Gov. Dean showed how a candidate can use the internet to marshal partisan forces. In 2008 Obama showed how a candidate can use the internet and the new technologies to reach past the party structures and go directly to the voter regardless of their affiliation.
Obama’s campaign is the way of the future, and national candidates will be even less tied to their political party. This lesson will not be lost on future candidates. The successful ones will be those who are fast studies of the Obama way of doing things. Consequently we will be moving to “jungle primaries” regardless of the law.
Sen. Maldonado,said after casting his vote that he knew he had done the right thing for the State even though he knew he had ended his career in the Republican party. It is sad when breaking party lines and doing the right thing for the community as a whole will kill a political career. In a country whose response to the greatest financial crisis in 76 years has been frozen in its tracks by party politics, if a jungle primary makes it safer for politicians to do what is right, then this can only be a good thing.
- Governor Schwarzenegger
On Friday Governor Schwarzenegger signed the 14 or so bills that make up the California budget. There was a sigh of relief, and little celebration. Even though technically the budget caries us through 2010 everyone knows by May, when the budget is legally scheduled for review, we will be locked in another impasse.
As payment for being the final Republican vote, Sen. Abel Maldonado, R-Santa Maria demanded and received among other things, a ballot measure changing California to a non-partisan, open primary system (or “jungle primary”) for State offices. In a “jungle primary” all the candidates regardless of party appear on the same ballot. Unless one candidate wins an outright majority in the primary, the top two vote getters would face off in the general election – regardless of party affiliation.
Both parties hate this idea as it will break the lock they have on State politics. In the current system, the candidate who is most ideological pure wins the nomination. However, the party with the majority registration tends to win the election because more voters are aligned with the majority party’s overall philosophy even if they are presented with an extreme version of it.
The minority party will also nominate an ideological pure candidate. This alienates both moderate voters in their own party who leave, and repulses non-aligned voters who would otherwise join. The minority party starts to shrink, shifting its philosophical spectrum even further towards the extreme. There they will find their next candidate and repeat the cycle putting their party in a death spiral.
In California we vividly see this in our state politics. Moderate independents, liberal Republicans and conservative Democrats all tend to vote for the liberal Democratic candidate, as they turn from the more extreme Republican candidates.
Nate Silver at fivethirtyeight.com ran simulations on what the results of a jungle primary would be in California (http://www.fivethirtyeight.com/2009/02/land-of-thousand-liebermans.html). He confirms that to survive in a jungle environment, candidates will have to move towards the center. Candidates aligned with the Democratic Party would win slightly less often and Republican aligned candidates would do better. Those candidates would be conservative Democrats or liberal Republicans. As Silver describes it, we would be electing thousands of Joe Liebermans.
Is this a bad thing? In all the discussion about post partisanship have we missed the larger question of do we really need political parties at all?
The founding elders of this country had a fear of parties. But inevitably conflicts between individuals like those between Jefferson and Hamilton regarding political and governing philosophy developed. Parties became a way to mobilize voters, and disseminate information in a broad country with poor communication and poor literacy.
Parties weren’t written into the governing statutes, so they could grow and die depending on the political tides and seasons. The Federalist and Whigs are two examples. The two party system is not a given. In recent history, there have been credible third party candidates in 1948, 1968 and 1992. But since 1992 the political system has hardened into two dominant party positions.
With the internet, twitter, talk radio and 24 hour cable news is the political party construct an anachronism? If you look at a definition of a party as a structure to communicate with and mobilize a group with a similar philosophy to finance and elect a candidate of their choice, then Moveon.Org defines as a party and so did the Congressional Club. In 2004 Gov. Dean showed how a candidate can use the internet to marshal partisan forces. In 2008 Obama showed how a candidate can use the internet and the new technologies to reach past the party structures and go directly to the voter regardless of their affiliation.
Obama’s campaign is the way of the future, and national candidates will be even less tied to their political party. This lesson will not be lost on future candidates. The successful ones will be those who are fast studies of the Obama way of doing things. Consequently we will be moving to “jungle primaries” regardless of the law.
Sen. Maldonado,said after casting his vote that he knew he had done the right thing for the State even though he knew he had ended his career in the Republican party. It is sad when breaking party lines and doing the right thing for the community as a whole will kill a political career. In a country whose response to the greatest financial crisis in 76 years has been frozen in its tracks by party politics, if a jungle primary makes it safer for politicians to do what is right, then this can only be a good thing.
Thursday, February 19, 2009
What's The Matter with California?
“We’re tired of waiting. We’re tired of endless delays.”
California State Senate President Pro Tem, Darrell Steinberg, D-Sacramento
Tuesday night, at about 11pm PST, the Republican delegation in the California State Senate, stomped on the gas, firmly grasped the wheel and steered the State straight for the cliff in front of them. In a move that at best could be called puzzling, at worst political suicide they deposed their caucus leader in the middle of an all night session called to get the one final Republican vote needed to pass the State’s budget.
The Senate Republicans turned Minority Leader Dave Cogdill, R-Modesto out of his leadership post because he had negotiated a budget deal with the Democrats that included tax increases. In his place they elected Dennis Hollingsworth, R-Murieta, a well known hardliner against any tax increase. As Cogdill said after the midnight coup “It’s a shame it had to end this way.”
It sure is. If it were not so tragic it would be funny.
The compromise budget deal that the Assembly has been voting on took three months to negotiate. It includes $16 Billion in program cuts, $14 Billion in tax increases, and $11 Billion in borrowing. The deal passed the State Assembly and is one vote short of the supermajority required to pass in the State Senate. As all the Senate Democrats are voting for it, the budget needs three Republican votes to pass. Two Republicans have pledged to support the deal. So right now the State is being pushed over the brink for the want of one Republican vote.
What does the brink look like?
On Thursday, work on 267 infrastructure projects worth $3.7 Billion will stop - putting 97,000 construction workers out of a job. It will cost at least $400 million to restart these jobs. Layoffs could begin for 20,000 State workers. The State could start paying its bills with IOU’s. This includes payments of unemployment benefits. California’s credit rating is now the worst in the nation, making it difficult to impossible to borrow money.
Along with Nevada, California is leading the rest of the states in this march to the abyss. According to Stateline.org, a non-partisan research group for state government issues, budget shortfalls like California’s are going to increase in number, size and severity from FY09 to FY10. In FY09, 31 States had a budget shortfall that needed to be resolved. By mid FY09 that number had risen 38 with many of those states having to reopen their budget process.
In FY10, 34 states are projecting a budget shortfall, and only 3 – North Carolina, Colorado and Oklahoma - will have shortfalls less than 5% of their General Fund budgets. 4 states will exceed 20% of their General Fund budgets. The remaining 27 states will have shortfalls exceeding 10% of their general fund. (http://www.ncsl.org/programs/pubs/statebudgetgaps.pdf).
The speed and depth of the states’ budgets issue is graphically illustrated in this interactive map: (http://www.ncsl.org/programs/fiscal/StateBudgetUpdate0109.htm)
The stimulus package will at best be a holding action. The $40 Billion from stimulus targeted for state budget stabilization will not be allocated according to need. It will be a drop in the bucket of California’s need, and will at best put off cuts in other states for a year. So it will be up to the states to resolve their own budget issues.
If California is the example of how not to do the process one can look towards Kansas, where a popular Democratic Governor was able to work with a Republican legislature to close a $200 Million budget gap. The Kansas budget “impasse” lasted only two days, but threatened to shut down the state government. In the end Gov. Sibelius and the Republican legislature got past throwing jabs at each other, compromised and approved a budget that will close the current $200 Million shortfall, and get Kansas started on closing the projected $1 Billion shortfall for next year. (Yes that is a quintuple increase in the budget shortfall from the FY09 to FY10). Adults came together, scored their political points and then created a painful but mature solution.
Back in California, we are tired of waiting. We are tired of being held hostage by a bankrupt economic ideology. The State is being ruined by tax zealots who are sure tax increases will hurt the economy more than erasing the State’s good credit rating, defaulting on payments, and throwing people out of work while at the same time making it impossible to pay any benefits.
California politicians are busy trying to make the other side fail in order to prove themselves right. It is more important for the Republicans and the Democrats to prove their point than save the economy. Let’s hope this is not a trend that will get exported to the rest of the nation. If it is, FY 2010 will be even harder than predicted.
California State Senate President Pro Tem, Darrell Steinberg, D-Sacramento
Tuesday night, at about 11pm PST, the Republican delegation in the California State Senate, stomped on the gas, firmly grasped the wheel and steered the State straight for the cliff in front of them. In a move that at best could be called puzzling, at worst political suicide they deposed their caucus leader in the middle of an all night session called to get the one final Republican vote needed to pass the State’s budget.
The Senate Republicans turned Minority Leader Dave Cogdill, R-Modesto out of his leadership post because he had negotiated a budget deal with the Democrats that included tax increases. In his place they elected Dennis Hollingsworth, R-Murieta, a well known hardliner against any tax increase. As Cogdill said after the midnight coup “It’s a shame it had to end this way.”
It sure is. If it were not so tragic it would be funny.
The compromise budget deal that the Assembly has been voting on took three months to negotiate. It includes $16 Billion in program cuts, $14 Billion in tax increases, and $11 Billion in borrowing. The deal passed the State Assembly and is one vote short of the supermajority required to pass in the State Senate. As all the Senate Democrats are voting for it, the budget needs three Republican votes to pass. Two Republicans have pledged to support the deal. So right now the State is being pushed over the brink for the want of one Republican vote.
What does the brink look like?
On Thursday, work on 267 infrastructure projects worth $3.7 Billion will stop - putting 97,000 construction workers out of a job. It will cost at least $400 million to restart these jobs. Layoffs could begin for 20,000 State workers. The State could start paying its bills with IOU’s. This includes payments of unemployment benefits. California’s credit rating is now the worst in the nation, making it difficult to impossible to borrow money.
Along with Nevada, California is leading the rest of the states in this march to the abyss. According to Stateline.org, a non-partisan research group for state government issues, budget shortfalls like California’s are going to increase in number, size and severity from FY09 to FY10. In FY09, 31 States had a budget shortfall that needed to be resolved. By mid FY09 that number had risen 38 with many of those states having to reopen their budget process.
In FY10, 34 states are projecting a budget shortfall, and only 3 – North Carolina, Colorado and Oklahoma - will have shortfalls less than 5% of their General Fund budgets. 4 states will exceed 20% of their General Fund budgets. The remaining 27 states will have shortfalls exceeding 10% of their general fund. (http://www.ncsl.org/programs/pubs/statebudgetgaps.pdf).
The speed and depth of the states’ budgets issue is graphically illustrated in this interactive map: (http://www.ncsl.org/programs/fiscal/StateBudgetUpdate0109.htm)
The stimulus package will at best be a holding action. The $40 Billion from stimulus targeted for state budget stabilization will not be allocated according to need. It will be a drop in the bucket of California’s need, and will at best put off cuts in other states for a year. So it will be up to the states to resolve their own budget issues.
If California is the example of how not to do the process one can look towards Kansas, where a popular Democratic Governor was able to work with a Republican legislature to close a $200 Million budget gap. The Kansas budget “impasse” lasted only two days, but threatened to shut down the state government. In the end Gov. Sibelius and the Republican legislature got past throwing jabs at each other, compromised and approved a budget that will close the current $200 Million shortfall, and get Kansas started on closing the projected $1 Billion shortfall for next year. (Yes that is a quintuple increase in the budget shortfall from the FY09 to FY10). Adults came together, scored their political points and then created a painful but mature solution.
Back in California, we are tired of waiting. We are tired of being held hostage by a bankrupt economic ideology. The State is being ruined by tax zealots who are sure tax increases will hurt the economy more than erasing the State’s good credit rating, defaulting on payments, and throwing people out of work while at the same time making it impossible to pay any benefits.
California politicians are busy trying to make the other side fail in order to prove themselves right. It is more important for the Republicans and the Democrats to prove their point than save the economy. Let’s hope this is not a trend that will get exported to the rest of the nation. If it is, FY 2010 will be even harder than predicted.
Sunday, February 15, 2009
An Inconvenient History
There is a proposal on the table in Raleigh North Carolina, to require one half of one percent of all capital projects to be spent on public art. No sooner had this been proposed than an article appeared in the local paper saying that some of that money should be used to remove the confederate memorial from the grounds of the old capitol building. After all, the writer says, the statue memorializes people who were fighting for the right to own other people and was built in as part of an ugly past at the turn of the last century. The memorial, the reasoning goes, legitimizes and memorializes a dark and hatelfull past.
No doubt future articles on the topic will argue the memorial is historical and to remove it is to erase part of our proud southern history. There is nothing proud about slaves or slavery. It was an odious institution, whose human and cultural cost are still being paid today. The reality is the Southern moonlight and magnolia culture was built on a human chattel foundation.
But if the memorial is taken down we lose an opportunity to shine a searchlight in the moonlight, and wake up from the cloying perfume of the magnolias. With the memorial gone, there will be nothing there to remind the future the awful price paid for failures of the past. The civil war will recede even further in people’s memories and if they do think about it, it will be in the painless bodice-ripper presentation of Gone With The Wind. If this happens we will not learn from our past and we will fall into the same traps in the future.
We all learn from our experience. We sometimes learn the most from our most embarrassing experiences. I don’t think there is a single person who doesn’t have something in their past they would rather forget, but who also understands that that very thing taught them their most valuable lesson.
History is experience – and recent history is full of mistakes we made because we didn’t take time to study and learn. Had congressional leaders studied how the Bush Administration rushed and sold the vote to authorize war with Iraq, they would have recognized the same techniques when the Bush White House was selling the bank bailout in September. Republicans missed the lesson that all of Bush’s tax cuts did little to stimulate the economy and were not a jobs creation engine. The Democrats have not learned that debt must be paid.
The nation is in crisis. Yet this crisis has it predecessors in the panic of 1873 and the Great Depression of the 1930’s. Each of these economic events provides us a guide for what steps are effective and what steps not to take in resolving a crisis of this magnitude. But we will never re-learn these steps if we simply play political football these events and not sit down together and make an honest assessment of what they can teach us. If we don’t learn these lessons from the past people will suffer needlessly as this economic crisis drags on longer than it has to. If we do not make an honest assessment of how we got in this predicament we cannot make a decent plan on how to get out
The confederate memorial, also has lessons for today’s politicians as they search for a way out of the current crisis. That lesson is what the tragic consequences are when political factions are more interested in defending their positions and scoring points off the opposition rather than coming together to resolve a national crisis.
So rather than taking the memorial down, we should build around it. We should build out ways that people can see the awful price paid by both sides in this conflict. People should ask themselves how national leaders could fail so badly that the equivalent of 5 million people from today's population died in four years. Are we making the same mistakes today?
When the Soviet Union fell, it was hard for the Russians to get back on their feet and find their way because every piece of history that did not support the propaganda of the moment was cut from the news and hidden away. Whenever a piece of the past became inconvenient the authorities would simply airbrush the person who represented that piece out of the annual May Day picture of the leaders lined up on Lenin’s tomb. The Russians did not have the lessons of the past to draw on to help them through the transition of from repression to democracy. As they did not have the lessons of the past to call on it was much harder for them to stumble forward.
Let’s not repeat their mistake either.
We have this past - let’s learn from it.
No doubt future articles on the topic will argue the memorial is historical and to remove it is to erase part of our proud southern history. There is nothing proud about slaves or slavery. It was an odious institution, whose human and cultural cost are still being paid today. The reality is the Southern moonlight and magnolia culture was built on a human chattel foundation.
But if the memorial is taken down we lose an opportunity to shine a searchlight in the moonlight, and wake up from the cloying perfume of the magnolias. With the memorial gone, there will be nothing there to remind the future the awful price paid for failures of the past. The civil war will recede even further in people’s memories and if they do think about it, it will be in the painless bodice-ripper presentation of Gone With The Wind. If this happens we will not learn from our past and we will fall into the same traps in the future.
We all learn from our experience. We sometimes learn the most from our most embarrassing experiences. I don’t think there is a single person who doesn’t have something in their past they would rather forget, but who also understands that that very thing taught them their most valuable lesson.
History is experience – and recent history is full of mistakes we made because we didn’t take time to study and learn. Had congressional leaders studied how the Bush Administration rushed and sold the vote to authorize war with Iraq, they would have recognized the same techniques when the Bush White House was selling the bank bailout in September. Republicans missed the lesson that all of Bush’s tax cuts did little to stimulate the economy and were not a jobs creation engine. The Democrats have not learned that debt must be paid.
The nation is in crisis. Yet this crisis has it predecessors in the panic of 1873 and the Great Depression of the 1930’s. Each of these economic events provides us a guide for what steps are effective and what steps not to take in resolving a crisis of this magnitude. But we will never re-learn these steps if we simply play political football these events and not sit down together and make an honest assessment of what they can teach us. If we don’t learn these lessons from the past people will suffer needlessly as this economic crisis drags on longer than it has to. If we do not make an honest assessment of how we got in this predicament we cannot make a decent plan on how to get out
The confederate memorial, also has lessons for today’s politicians as they search for a way out of the current crisis. That lesson is what the tragic consequences are when political factions are more interested in defending their positions and scoring points off the opposition rather than coming together to resolve a national crisis.
So rather than taking the memorial down, we should build around it. We should build out ways that people can see the awful price paid by both sides in this conflict. People should ask themselves how national leaders could fail so badly that the equivalent of 5 million people from today's population died in four years. Are we making the same mistakes today?
When the Soviet Union fell, it was hard for the Russians to get back on their feet and find their way because every piece of history that did not support the propaganda of the moment was cut from the news and hidden away. Whenever a piece of the past became inconvenient the authorities would simply airbrush the person who represented that piece out of the annual May Day picture of the leaders lined up on Lenin’s tomb. The Russians did not have the lessons of the past to draw on to help them through the transition of from repression to democracy. As they did not have the lessons of the past to call on it was much harder for them to stumble forward.
Let’s not repeat their mistake either.
We have this past - let’s learn from it.
Friday, February 6, 2009
So THAT'S the Problem!
"When you really analyze it, if you want to stimulate economic growth, you have to have people investing, creating capital and creating jobs. Basically, a big part of that (stimulus package) went for extending unemployment. It's a nice thing to do, but when you extend unemployment, you take the incentive away from people to go out and get a job. So it almost has a counter negative effect."
- Former Speaker of the House Dennis Hastert , Republican from Illinois.
Well now we know why the employment picture is so bad. All those laid-off workers are loafing around, watching Oprah and cashing their benefit checks. It is clear the way to bring the economy back from the brink is to cut benefits and force people out of their bathrobes and out of the house to fill all those jobs that are going begging.
This quote is a further indication of how the people who work in Washington don’t understand the people who work in Main Street and what they go through every day to make ends meet. And, according to the Government it is only going to get harder for those who do work on Main Street.
The Department of Labor released the latest unemployment report today (Feb. 6, 2009 http://www.bls.gov/news.release/empsit.nr0.htm). Unemployment is now at 7.6% - the highest its been since 1992. 7.6% translates into 11.6 million unemployed. Of those 11.6 million, 2.6 million are considered “long term unemployed” who are defined as being unemployed for over 27 weeks (a touch over six months). This means 9 million workers have recently stepped out of the employment market to ride Hastert’s unemployment benefit gravy train. Even more sobering is the fact that of 3.6 million jobs lost since December of 2007, half of those were lost in the last three months.
People want to work, but how will they find a job?
The stimulus package is being touted as the answer. The Democrats are pushing spending on infrastructure, increasing benefits, aid to the states, and pumping money directly into the economy to put the fellow on the unemployment line back to work. To listen to the Republicans, the fellow on the unemployment line is actually waiting for a capital gains tax cut.
The Republicans do not seem to grasp the speed or size of the problem. At the current rate America is shedding nearly 18,000 jobs a day. That works out to 750 jobs for every hour the Republicans extend the debate and delay a vote. These are 750 workers who are told to pack their desks or their lockers and not come back. They are real people with bills to pay, mortgages to meet and families to support. They are not a statistic.
Mark Zandi, Chief Economist for Moody’s Economy.com website published a report on 1/21/2009 on the economic effect of the proposed stimulus package. His report contains a very interesting “bang for the buck” chart that shows the change in GDP over a year for every stimulus dollar spent , or stimulus dollar tax cut.
(http://www.economy.com/mark-zandi/documents/Economic_Stimulus_House_Plan_012109.pdf)
According to Zandi, the four least effective stimulus options are accelerated depreciation ($0.25 for every dollar); a cut in corporate tax rates ($0.30 for every tax dollar cut), making the Bush tax cuts permanent ($0.31 for every tax cut dollar) and dividend/capital gains tax cuts ($0.38 for every tax cut dollar).
The four most effective options, according to Zandi are general aid to states ($1.38 for every dollar spent), increased infrastructure spending ($1.59 for every dollar spent), extending unemployment ($1.63 for every dollar spent) and a temporary increase in food stamp ($1.73 for every dollar spent).
Zandi shows the effectiveness of the stimulus package is dramatically reduced every time the Democrats agree to replace a spending dollar with a tax cut dollar. His chart clearly shows that there is a reduction of $1.21 of simulative effect for every dollar taken from infrastructure spending , and given to support a cut in capital gains tax.
Yet the Republicans do not seem to understand the size and the scope of the economic problem. They are asking for more time to review the stimulus package to find ways to reduce spending and increase tax cuts. They want to delay the vote on the stimulus bill until Monday, during which time the American economy will shed another 54,000 jobs. This evening they succeeded in cutting over $100 Billion in spending which translates into cutting approximately $156 Billion in economic stimulus.
Whether it is Hastert’s fantasy that the recession is worsened by extending unemployment benefits, or the Congressional Republicans demanding tax cuts, the Republicans continue to prove that they are out of touch with what is happening to Americans in this economy.
But Hastert was right about one thing. It is a nice thing to do to extend unemployment benefits, not only for the recipient but for the rest of the economy as well.
Monday, February 2, 2009
Nine Milky Ways
“There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.”
- Richard Feynman US educator & physicist
"I never saw a tax cut fix a bridge. I never saw a tax cut give us more public transportation.”
- Barney Frank, Chair of the House Banking Committee Regarding the Obama Stimulus Package
“… [The Stimulus plan is ] a spending plan. It's not a stimulus plan. It's temporary, and it's wasteful."
- Jim DeMint, Republican Senator from South Carolina
These quotes from Rep. Frank and Sen. DeMint are cold comfort to the Americans caught in the current economic storm. Both quotes are entrenched in a view of the economic world that has landed us in the middle of the economic storm. It seems each Party seems determined to carry out its pet economic and social policies regardless of the cost to the person who has lost a job, a house, a school loan or is about to.
Here are some sobering facts, just to give an idea on how large the problem is. This is a random sampling - you can go out and find different economic indicators this bad or worse.
- In a week California, the world’s 7th largest economy will be run out of money and may start paying its bills in IOU’s.
- Payroll employment shrank by 524,000 jobs in December of 2008 and 1.9 million jobs in the past four months.
(http://www.bls.gov/news.release/pdf/empsit.pdf). Since December of 2007 the economy has shed 3.7 million jobs. At this rate, it is possible President Obama’s promise to create 4 million new jobs over the “next several years” will only replace these jobs lost in the last year – nothing more.
- The US economy contracted at annual rate of 6% in 2008, close the 1931 contraction of 6.4$ (http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/4339501/Bad-news-were-back-to-1931.-Good-news-its-not-1933-yet.html)
- There are $200 Billion of Option ARM (Option-A) loans outstanding. Between now and the end of 2010 $97 Billion of these loans will reset to a higher rate. The average Option-A will reset up by 63% or $1,052 a month, potentially adding an additional 8 million foreclosures to the chain weighing down the world economy. (Remember these loans were packaged and sold just like the ones that landed us in this pickle to begin with.) (http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_sesit&sid=a8vqJQKnq3iw)
Absent from any discussion on the Obama stimulus package is how it fits in the world economic framework. This isn’t about making sure the Reagan Revolution survives with its Laffer curve, or that the AFL-CIO can put its members back to work, this is about how the American economy will drive a needed world-wide recovery.
- The Euro Stability Pact calls for members to limit deficit spending to 3% of GDP. 16 members of the Euro zone currently surpass this limit with deficit spending at 4% of GDP. In 2010 estimates are that 17 states will EU states will surpass that limit ranging from Germany at 4.2% to Iceland with over 13%. This extra borrowing will drive up interest rates (and the cost of borrowing) and drive smaller countries like Greece out of the credit markets.
http://www.spiegel.de/international/world/0,1518,604523,00.html
- The Government of Iceland has fallen as that country has gone bankrupt. This could be the first in a daisy-chain of governmental and social unrest caused by the crisis
- In Russia there were marches in protest against the Government’s handling of the economy (New York Times 02/01/2009).
- Economic problems are causing social unrest in China. The government has kept a tight lid on news of protests, occupations and clashes with the police. But The London Times Online has put together reports of extensive unrest through the three main exporting provinces in China as unemployment rises. This unrest could get worse as people return from their Chinese New Year’s trips to find they have lost their jobs. (http://business.timesonline.co.uk/tol/business/economics/article5627687.ece). This especially worrisome as the US is dependent on Chinese investors buying us debt to fund the deficit.
Through all of this, the Republicans are worried that there is too much spending and not enough tax cuts. Only of the third of the Bush tax cuts made it back into the economy. Much of it was used to pay off debt or was stashed in a savings account. A good long term fate for the money but it does little to stimulate the economy in the short term. The Democrats are bound and determined to increase spending. But the Democrats stay silent on how the debt created by this extra spending is to be financed. In this they have joined the Republicans in a complicity of silence.
At some point the day of reckoning will come. The President’s stimulus package passed out of the House of Representatives at a cost of close to $900 Billion – or close to 9 times the known stars in the Milky Way. But neither side will enter into a rational, non-doctrine driven discussion on whether this is the right amount, or the right way to spend this amount money, or the long term and international consequences of the package.
Both the Democrats and the Republicans are mired in the old ideas of the past and do not understand the magnitude of the crisis of the present. It feels like it is December 8, 1941, and FDR has just delivered his “Day of Infamy” speech. After listening carefully, Congress, led by Sen. Henry Cabot Lodge has started a debate on whether the US should join the League of Nations.
- Richard Feynman US educator & physicist
"I never saw a tax cut fix a bridge. I never saw a tax cut give us more public transportation.”
- Barney Frank, Chair of the House Banking Committee Regarding the Obama Stimulus Package
“… [The Stimulus plan is ] a spending plan. It's not a stimulus plan. It's temporary, and it's wasteful."
- Jim DeMint, Republican Senator from South Carolina
These quotes from Rep. Frank and Sen. DeMint are cold comfort to the Americans caught in the current economic storm. Both quotes are entrenched in a view of the economic world that has landed us in the middle of the economic storm. It seems each Party seems determined to carry out its pet economic and social policies regardless of the cost to the person who has lost a job, a house, a school loan or is about to.
Here are some sobering facts, just to give an idea on how large the problem is. This is a random sampling - you can go out and find different economic indicators this bad or worse.
- In a week California, the world’s 7th largest economy will be run out of money and may start paying its bills in IOU’s.
- Payroll employment shrank by 524,000 jobs in December of 2008 and 1.9 million jobs in the past four months.
(http://www.bls.gov/news.release/pdf/empsit.pdf). Since December of 2007 the economy has shed 3.7 million jobs. At this rate, it is possible President Obama’s promise to create 4 million new jobs over the “next several years” will only replace these jobs lost in the last year – nothing more.
- The US economy contracted at annual rate of 6% in 2008, close the 1931 contraction of 6.4$ (http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/4339501/Bad-news-were-back-to-1931.-Good-news-its-not-1933-yet.html)
- There are $200 Billion of Option ARM (Option-A) loans outstanding. Between now and the end of 2010 $97 Billion of these loans will reset to a higher rate. The average Option-A will reset up by 63% or $1,052 a month, potentially adding an additional 8 million foreclosures to the chain weighing down the world economy. (Remember these loans were packaged and sold just like the ones that landed us in this pickle to begin with.) (http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_sesit&sid=a8vqJQKnq3iw)
Absent from any discussion on the Obama stimulus package is how it fits in the world economic framework. This isn’t about making sure the Reagan Revolution survives with its Laffer curve, or that the AFL-CIO can put its members back to work, this is about how the American economy will drive a needed world-wide recovery.
- The Euro Stability Pact calls for members to limit deficit spending to 3% of GDP. 16 members of the Euro zone currently surpass this limit with deficit spending at 4% of GDP. In 2010 estimates are that 17 states will EU states will surpass that limit ranging from Germany at 4.2% to Iceland with over 13%. This extra borrowing will drive up interest rates (and the cost of borrowing) and drive smaller countries like Greece out of the credit markets.
http://www.spiegel.de/international/world/0,1518,604523,00.html
- The Government of Iceland has fallen as that country has gone bankrupt. This could be the first in a daisy-chain of governmental and social unrest caused by the crisis
- In Russia there were marches in protest against the Government’s handling of the economy (New York Times 02/01/2009).
- Economic problems are causing social unrest in China. The government has kept a tight lid on news of protests, occupations and clashes with the police. But The London Times Online has put together reports of extensive unrest through the three main exporting provinces in China as unemployment rises. This unrest could get worse as people return from their Chinese New Year’s trips to find they have lost their jobs. (http://business.timesonline.co.uk/tol/business/economics/article5627687.ece). This especially worrisome as the US is dependent on Chinese investors buying us debt to fund the deficit.
Through all of this, the Republicans are worried that there is too much spending and not enough tax cuts. Only of the third of the Bush tax cuts made it back into the economy. Much of it was used to pay off debt or was stashed in a savings account. A good long term fate for the money but it does little to stimulate the economy in the short term. The Democrats are bound and determined to increase spending. But the Democrats stay silent on how the debt created by this extra spending is to be financed. In this they have joined the Republicans in a complicity of silence.
At some point the day of reckoning will come. The President’s stimulus package passed out of the House of Representatives at a cost of close to $900 Billion – or close to 9 times the known stars in the Milky Way. But neither side will enter into a rational, non-doctrine driven discussion on whether this is the right amount, or the right way to spend this amount money, or the long term and international consequences of the package.
Both the Democrats and the Republicans are mired in the old ideas of the past and do not understand the magnitude of the crisis of the present. It feels like it is December 8, 1941, and FDR has just delivered his “Day of Infamy” speech. After listening carefully, Congress, led by Sen. Henry Cabot Lodge has started a debate on whether the US should join the League of Nations.
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