It is time for DEMOCRATS to go POPULIST and focus upon JOBS and TRULY TAKING ON WALL STREET, not just with admonishments and congressional dog and pony shows fraught with softball kabuki, but with
REAL action.
First, two notable pieces from the past 24 hours, from Salon's Andrew Leonard and University of Oregon economist Mark Thoma...
From Salon.com's Andrew Leonard,
The Politics of Anti-Bank Rage...
Please, Obama, pick a fight with the banks
Wall Street whines that the meanie president is being unfair. It's about time.
By Andrew Leonard
Tuesday, Jan 19, 2010 12:04 EST
...If Democrats want to resuscitate their political fortunes, then they really have only one alternative at this point, to, as recommended by Simon Johnson, "run hard now, against the big banks."
If they oppose the administration, this will make their power more blatant -- and just strengthen the case for breaking them up. And if the biggest banks stay quiet, so much the better -- go for even more sensible reform to constrain reckless risk-taking in the financial sector.
Whatever happens today in Massachusetts, finding 60 votes in the Senate for meaningful financial regulatory reform is likely impossible. That means it is now high time to jettison the middle road, and go full bore against the banks. Given Obama's cautious approach so far in his administration, it is difficult to feel any confidence in such a prospect, but really, at this point one has to ask, what's he got to lose?
From University of Oregon economist Mark Thoma, publisher of The Economist's View, "Is It Time for Obama to 'Pick a Fight with the Banks?'"
Is It Time for Obama to "Pick a Fight with the Banks"?
Mark Thoma
Economist's View
Jan 19, 2010
...Whatever happens today in Massachusetts, finding 60 votes in the Senate for meaningful financial regulatory reform is likely impossible. That means it is now high time to jettison the middle road, and go full bore against the banks. Given Obama's cautious approach so far in his administration, it is difficult to feel any confidence in such a prospect, but really, at this point one has to ask, what's he got to lose?
We've got a lot to lose if we don't get meaningful financial reform, so just as with health care, if what we can get through Congress actually improves conditions in financial markets, we need to take what we can get and hope to build upon it later. The question is how to construct a political strategy that will allow us to get as much done as possible. It may be that aggressively going after big banks can create public support for reform, support that would be difficult for politicians of either party to ignore. But there's also a chance that such a strategy will harden the resolve of those now opposed to reform making it harder to get anything done at all.
So a second question is whether the baseline level of reform we could get without an all out, "jettison the middle road" strategy is acceptable, If it is, I'd prefer to protect that and proceed cautiously. My loss function is asymmetric. Getting something, even if it isn't as much as we'd like, is much better than nothing at all.
But my sense is that right now the administration can't get enough support to do anything except fairly cosmetic changes. If that's the case, and I'm not completely sure that it is, but if so, then hammering the big banks relentlessly may be the only chance we have to create the coalition needed to implement more meaningful measures.
IF DEMOCRATS ARE GOING TO PREVAIL IN 2010 IT'S GOING TO TAKE MORE THAN LIP SERVICE
Excerpts from my diary from December 6, 2009...because they apply even moreso, today, than they did just six weeks ago...
# # #
From: "Economic Structural Change: A 'Tragedy Wrapped In A Weird Complacency.'" (12/6/09)
Paul Krugman posted a very short blurb in his blog on Friday, entitled: "Good news is bad news." It was about how even a small bit of good news (in this instance, a monthly drop of two-tenths of a percent in the Bureau of Labor Statistics' U.3 Unemployment Index) about how our nation's worst-since-the-Great-Depression unemploment situation "deflates the sense of urgency" to do something about it. Krugman sees it as "a tragedy, wrapped in a weird complacency."
The fact remains that realistic projections show unemployment staying disastrously high for many years. The chart above (diarist's note: see link in previous paragraph, above this blockquote) is from the minutes of the Fed's Open Market Committee. Unemployment above 8 percent in the fourth quarter of 2011; above 7 percent in the fourth quarter of 2012.
Krugman also noted Goldman Sachs' recent comments about this, and I posted a diary on Thursday, which included Bernanke's projections relating to a prolonged period of unacceptably high joblessness--prior to the release of November's unemployment report--too: "Goldman: 10%+ Jobless In '11; States Short $15bln Benefits Now."
Also, earlier last week, former Clinton Labor Secretary Robert Reich imparted some interesting thoughts to his readers on his way to the White House Jobs Summit last Tuesday, in: "Worrisome Thoughts on the Way to the Jobs Summit."
...The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated...
THE GREAT STRUCTURAL CHANGE: "America Without A Middle Class--It's Not As Far Away As You Might Think"
In "AMERICA WITHOUT A MIDDLE CLASS--IT'S NOT AS FAR AWAY AS YOU MIGHT THINK," congressional Wall Street bailout oversight panel chair Elizabeth Warren, who may very well be this country's foremost expert on the economic plight of the middle class, points out just how close we are to the abyss. After you review her Wiki bio, linked at the beginning of this paragraph; I think you'll agree with my observation regarding her authoritative position on these matters.
--SNIP--
Indeed--much more than any monthly employment report or quarterly Gross Domestic Product statistic--it is all about the great structural change that Reich references in his quote, above. And, IMHO, no individual has focused upon this subject during the Great Recession, over the past 18 months, moreso than Simon Johnson. More from him, down below, but first a quick recap of Warren's commentary, starting with this paragraph...
Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.
In these graphics, Warren explains how this crisis started more than a generation ago, but how, as Reich explains it (see quote above), the Great Recession just "dramatically accelerated" it.
And, via this set of of graphics, Warren explains how, despite millions of families putting a second parent in the workforce, higher costs have outlapped additional income. She notes...
...higher housing and medical costs combined with new expenses for child care, the costs of a second car to get to work and higher taxes combined to squeeze families even harder. Even with two incomes, they tightened their belts. Families today spend less than they did a generation ago on food, clothing, furniture, appliances, and other flexible purchases -- but it hasn't been enough to save them. Today's families have spent all their income, have spent all their savings, and have gone into debt to pay for college, to cover serious medical problems, and just to stay afloat a little while longer.
--SNIP--
...now the crisis has swamped millions of middle class families.
The contrast with the big banks could not be sharper. While the middle class has been caught in an economic vise, the financial industry that was supposed to serve them has prospered at their expense. Consumer banking -- selling debt to middle class families -- has been a gold mine. Boring banking has given way to creative banking, and the industry has generated tens of billions of dollars annually in fees made possible by deceptive and dangerous terms buried in the fine print of opaque, incomprehensible, and largely unregulated contracts.
As Warren concludes, "families are ready for a change." At this point she discusses her proposal for a "Consumer Financial Protection Agency" (CFPA). But, she also notes how the banking lobby has swung, "...into action against the Agency, fighting with all their lobbying might to keep business-as-usual. They are pulling out all the stops to kill the agency before it is born. And if those practices crush millions more families, who cares -- so long as the profits stay high and the bonuses keep coming."
I want to take Warren's comments one step further, into a realm that Simon Johnson has been writing about for quite awhile, starting with his seminal piece in this past May's edition of the Atlantic, "The Quiet Coup." I won't spend any time covering his words there, but I'm providing the link in the previous sentence for background for those reading this diary who haven't yet read Johnson's masterpiece. But, Johnson has continued to touch upon his themes from "The Quite Coup," ever since.
You see, when you get down to it, it's all about the haves versus the have-nots. While others in the status quo refer to it as our "new normal," Simon Johnson comes out and says: It's our "two-track economy." And, frankly IMHO, anyone that argues otherwise is denying the forest exists because the trees are in the way.
More specifically, Johnson covered this in mid-August in: "The Two-Track Economy." And, nine days later, in his post from late August....
More On The Two-Track Economy -- From The WSJ And Others
Simon Johnson
The Baseline Scenario
August 29th, 2009
...The two-track concept overlaps with, and builds on, long-standing issues of inequality in the U.S., but it's also different. Within existing income classes, some people find themselves in relatively good shape and others are completely hammered.
New dimensions of differentiation are also taking hold within occupations and within industries - the WSJ this morning has nice illustrations. The contours of this differentiation begin to shape our recovery or, if you prefer, who recovers and who does not - it's hard to say how this will play out in conventional aggregate statistics, but these are likely to become increasingly misleading.
--SNIP--
So now it's all about whether you are a preferred client of Goldman Sachs or another big finance house.
--SNIP--
This can lead to short-term growth - the speed of recovery in many emerging markets surprises many, from about 12 months after the crisis breaks. But it also leads to repeated crisis, to derailed growth, and to a loss of income, status, and prospects for most of society.
Make no mistake, folks. This is quite REAL.
The day Johnson posted the first part of this series, I posted a diary in a review of it: "A Tale Of Two Economies."
The following weekend, the Wall Street Journal also took note of these newly-emerging, dual economies in the U.S. in the following story: "Halting Recovery Divides America in Two." (NOTE: You'll need a subscription to access the whole story.)
I really don't know how much ignored news--or comments from the likes of folks such as Elizabeth Warren--it's going to take for some to accept certain facts, but the over-arching truth is, at least as far as our economy's concerned, the old rules no longer apply. Accepting these truths starts with the realization that the very statistics that we're receiving from the government--the ones so many in this community, and even in our government, are cheering now--are inaccurate (yeah, I'm being kind) too: "Breaking: BLS, Fed, BEA, et al 'Overstate Strength of Economy.'"
On Friday, when it was pointed (See: "Presto! Unemployed people vanish before your very eyes") out by Kossack gjohnsit that hundreds of thousands of jobless folks in the previous month were simply written off into Bureau of Labor Statistics' hell, many cried foul. They were actually upset with the diarist for pointing out an inconvenient fact--one which I'm sure was quite crucial to the reality of those hundreds of thousands (of voters) that were, indeed, swept under the government statistics' proverbial rug. What was that all about? It was a clear, well-defined presentation of what's happened (and happening), statistically; but, it wasn't in synch with the "good news" headline of the day which so many wanted to promote, which did (and does) little more than obfuscate the suffering of scores of millions of Americans as I write this.
But, as record amounts of our population suffer--including a rapidly deteriorating middle class--even in this informed community we long for good news, no matter whether it's providing a real picture of Main Street's reality...or not? No matter whether it flies in the face of the daily experiences of those voters on Main Street that witness this suffering...or not?
Ask yourself this: What effect will the "things-are-getting-better-very-slowly" meme actually have upon our party's agenda next year if unemployment is still hovering at 8%-11% in 2010? (These are the projections of virtually everyone in our government, as I write this.)
With a known, major negative adjustment in our nation's unemployment rate in the offing in February 2010, even nominal improvements in unemployment in the interim will be erased overnight. So, ask yourself: Is this a winning strategy for the 2010 election cycle?
Above and beyond our country's unemployment nightmare, Nate Silver tells us regulatory reform of Wall Street may turn out to be THE sleeper issue(s) of the 2010 cycle. He refers to it as: "The Issue That Could Fracture Both Right And Left."
As we headed into this weekend, Simon Johnson, again over at his Baseline Scenario blog, posted another over-arching tome, entitled: "Measuring The Fiscal Costs Of Not Fixing The Financial System." In it, he discusses 27 key points, broken down into three sections--"The Problem," "Towards a Solution," and "In The Absence of Real Reform"--which provide clear answers to much of what I've discussed herein. Here are his six key points regarding what we need to do in "The Absence of Real Reform:"
Measuring The Fiscal Costs Of Not Fixing The Financial System
Simon Johnson
Baseline Scenario
December 5, 2009
...In the Absence of Real Reform
1) Real progress towards reducing the risks inherent in the U.S. financial system is unlikely. As long as there are financial institutions that are Too Big To Fail, we face a potential fiscal cost. We should recognize this in our government budget and balance sheet accounting.
2) The overriding principle behind IMF fiscal assessments is the need to capture true total fiscal costs. Best practice for the U.S. needs to reflect this approach.
3) All subsidies and taxation - including the entire cost of supporting the continued existence of large banks - should be reflected transparently in the budget and subjected to the prioritization of the budgetary process.
4) Our current accounting for guarantees and governments' assumption of other contingent liabilities create the impression that government actions to support the banking system are costless. This is a dangerous illusion - as seen in the recent increase in US federal government deficit and debt.
5) If we don't recognize these costs explicitly, we run the risk of taking on ever more contingent liability. If the financial system reaches the point where its failure cannot be offset by fiscal (and monetary) stimulus, then a Second Great Depression threatens.
6) Next time, we cannot be certain that the available size of fiscal stimulus - either in the US or worldwide - will match the negative shock to demand caused by the credit crisis. Either we will already have too much debt or we will be constrained by the consequences of taking on even more debt. Or - just as in 1930 - the financial decelerator will simply be too large to be offset by any feasible fiscal measures.
Maintaining a sense of political pragmatism about all of this, what will significant losses in 2010 do to our Party and to the President's agenda for the remaining two years of his first term?
Are we actually going to sit here allowing the inevitable--see Warren's and Johnson's words, above--to happen, while our country's entire raison d'etre is redefined vis-a-vis even weaker regulatory reform on Wall Street than that which we had prior to entering into this two-plus-year recession? Or, are we going to scream like hell and demand that legislation is enacted, doing our best to make certain that this never happens again?
Time is running out. We're talking days, or, at best weeks, before much of the extremely weakened regulatory reform legislation destined for (or, already in) reconciliation becomes law. (I've posted numerous diaries on this matter, with links to ones here, here, and here, being my most recent.) As Krugman reminds us (at the top of this diary), "Good News Is Bad News," because it encourages a sense of complacency among us while the status quo shuts the regulatory door on any real regulatory reform going forward.
It really is up to us to stop the destruction of the middle class. Either WE are going to own this issue, or we're going to leave it on the table for the GOP'ers to contort.
Yes, these are our choices.
Complacency or action.
I implore you to throw your complacency aside. The time is NOW. (Again, read these links to my diaries--loaded with additional links within them here, here, and here--to learn more about the myriad of legislation that's out there now. Pick your issue--or cover all of them--and start screaming!) It's either going to be a two-track economy--with the haves and the have nots--or an economy that works for everyone. For all political intents and purposes--especially if the status quo has their way, and they will if we don't all scream in unison, right now--we will not have another, better chance.
The Wiki page for the House Financial Services Committee is right HERE, complete with links to each member.
The Wiki page for the Senate Banking, Housing, and Urban Affairs Committee is right HERE, also complete with links to each member.
We know what to do. Hopefully, the administration seizes the moment, as well.
End of 12/6/09 Diary.
# # #
Let's revisit the Bernanke confirmation deliberations occurring on the Hill, now, as well. Supporting the folks who got us into this mess is not a successful way to recapture the hearts and minds of a voting public that's fed-up with a status quo that tells them that high levels of unemployment are something that we'll have to contend with in our "new normal," while Wall Street realizes record bonuses and business as usual...and then some.
As far as "transparency" is concerned, the public sees through the spin and rhetoric as political deals continue being made in the most opaque of stereotypical, smoke-filled rooms. And, that is a recipe for ongoing Democratic Party failure this cycle.
You cannot fool all of the people all of the time. Successful political efforts acknowledge this truth--with more than lip service--and effectively respond to it.
It is time to throw bipartisanship efforts under the bus and genuinely take on the banks while we push for more stimulus for Main Street. If the GOP attempts to block this effort--which they will--then that's somewhat of a successful strategy, in and of itself.
Frustration, angst and suffering on Main Street grows more palpable with every passing day.
Democrats must confront these inconvenient facts now if we truly expect to prevail this year.