Grading the Economy

Nate Silver says we–liberals–are not celebrating the Administration’s economic successes enough.

And yet, the [financial reform] bill has received scant praise, and indeed very little attention, in liberal circles. Some of this is based on legitimate concerns that the bill did not go far enough — although it does do quite a lot. Some of it is based on a not-unreasonable assumption that although the House bill is fairly adequate, it is likely to be significantly watered-down by the Senate.

Even so, there seems to be extreme reluctance among the left, and particularly the online left, to praise any economic successes achieved by the Congressional Democrats and the White House.

Now, here’s how Nate himself judges the Administration’s accomplishments.

Putting out the fire. On the first imperative — that of averting a meltdown — I would give the Democrats high marks. Not only did we avoid Armageddon, but we did so with relatively little contribution — “only” about $42 billion — from future taxpayers. At the time these interventions were undertaken, this would have been regarded as an exceptionally good outcome. And with the advantage of hindsight, objective evaluations of TARP tend to be similarly rosy, including that from the very liberal (and smart) economist Elizabeth Warren, who chaired a Senate panel on the subject.

The recovery. As to the second objective, we have a split between the performance of the labor market, and that of other economic indicators. Back in February, when the stimulus was passed, the Wall Street Journal forecasting panel projected 3Q GDP growth of 0.7 percent; the actual figure, after revision, was 2.9 percent. They predicted 1.9 percent growth in the 4Q; the actual figure is likely to be closer to 4.0. On the other hand, they projected December unemployment to be 8.8 percent; November’s figure was 10.0 and December’s is likely to come in somewhere close to that.

Certainly, I think that the stimulus package ought to have been both larger and more focused on infrastructure-type programs that would have led to more direct creation of jobs. The stimulus, however, passed the Senate with just one extra vote (the tally was 61-37), suggesting that there may have been very little additional wiggle room. I think that is actually somewhat too narrow a reading of the political conditions in place at the time; more persuasion on the part of the White House (which was very popular then) might have moved the needle some, as might have the tactical gambit of throwing out a higher number rather than counting on the Congress to do the heavy lifting. Nevertheless, there probably wasn’t much room for improvement; an extra $100 or $150 billion, perhaps, which if directed toward infrastructure might have led to an unemployment rate that was 0.3 to 0.4 points lower than it is now. Moreover, some of the shortfall has been made up for with post-facto mini-stimuli like cash-for-clunkers and the unemployment benefits extension, and the forthcoming jobs bill.

In any event, such as it was, you have a stimulus that has tended to exceed expectations in terms of GDP growth. It would appear, on the other hand, to have fallen short in terms of jobs growth. But that conclusion is debatable. If the CBO’s estimates are to be believed — that the stimulus has reduced the unemployment rate by 0.4 to 1.1 percent — that would be in line with both the White House’s estimates (which had forecast an 0.7 percent improvement in unemployment through the 3Q as a result of the stimulus) and the CBO’s expectations in March.

Yes, the systemic conditions in the job market have been somewhat worse than most (though not all) private forecasters anticipated, and much worse than the White House seemed to anticipate. Certainly you can fault them for failing to frame the public’s expectations adequately, and also for aiming for too small a stimulus — although, again, it’s not clear that aiming higher would have substantially improved what actually came out of the Congress. But subject to those admonitions, the White House’s efforts at facilitating a recovery would seem to deserve a grade of somewhere between adequate and good, on the basis of the objective evidence.

Financial sector reform. Here, there is no grade that can be given other than incomplete — the Congress has yet to pass any substantial regulatory reform effort, and the systemic risk in the financial sector very much remains and could cascade at any time. Nevertheless, the bill that the House just passed has been a reasonably good start. The White House and the Senate will lay their cards on the table sometime early next year. Perhaps the most robust criticism of the White House is that it should have tackled regulatory reform before health care — a course of action that most liberals would have been very upset about.

Now, unlike me, Nate has a degree in economics, so maybe I’ll be busted for making the following observation, but it seems to me Nate is measuring the Administration’s economic success by measuring a collection of symptoms: Meltdown, B+; GDP, A-; Jobs, D; Financial sector reform, INC.

My thinking on the issue is somewhat different. Our finance system melted down about 15 months ago, bringing down the rest of the economy, and how have we responded to it? As I understand it, we have simply addressed symptoms, while showing a fundamental unwillingness to address the larger imbalance in our economy. So my thinking would go something like this:

Putting out the fire. Yes, the Obama Administration (and the Bush Administration) prevented a meltdown of our financial system. But they did almost nothing to make sure that their efforts to prevent that meltdown at the same time prevented the follow-on effects; they did almost nothing to make sure that–after spending billions–the financial system would still serve the function that was the underlying rationale for saving it for in the first place. That is, we “had” to save the financial system because it provides capital that feeds the productive parts of our economy. But Geithner and Bernanke et al focused largely on whether the system remained intact, and not whether appropriate loans were going to to appropriate borrowers (which is one of several reasons why the auto industry proceeded to meltdown). We saved the financial system as a system, but did nothing to save the financial system as provider of capital.

In fact, I’d say that a key mistake that Geithner and Bernanke made was in reifying the role of the Masters of the Universe, rather than using the rescue to forever deprive the MOTUs of their claim to being MOTUs. AIG was different, Rattner said, because it operated at the “nerve center of our financial system,” and as such, it couldn’t be put through a bankruptcy process that would allow the government–in funding that bankruptcy–to demand concessions from all parties involved. So rather than saying, “AIG is a company offering some valuable insurance products attached to a giant cancer that is not only unnecessary, but which has infected the nervous system of our economy, and therefore we must excise it,” the government said, “AIG is our central nervous system and we can’t do without it.”

The recovery. And once you reinforce the false claim that a bunch of common banksters are MOTUs, then you trap yourself into the problem that Nate describes, in which GDP performs better than expected, but, even with a sizable but too small stimulus, jobs perform far worse. That, to me, is a testament to the fact that our GDP is still measuring all the unproductive foaming that our economy has relied on for the last twenty years, and that as GDP recovers without creating jobs, the focus on that foam will continue to get worse.

We discovered that our emphasis on finance and bubbles was unsustainable. But we did nothing to change that emphasis.

Two policy approaches embody this to me.

First, the Democratic Congress is getting further away from being able to pass cramdown legislation. In March 234 Reps voted to support cramdown; on Friday just 188 did. It seems to me there are two main arguments to vote against letting bankruptcy judges redefine the terms of a mortgage–including lowering interest rates and/or principal. One is the belief that people who bought into these mortgages made poor economic decisions and therefore must pay the price. This suggests, of course, that the moral hazard of bailing out individual homeowners is bigger than the moral hazard of bailing out AIG and Goldman Sachs and Citi. It also pretends that the mortgage industry wasn’t inflating appraisals to allow for increased profits at every level of the mortgage bubble. It pretends, too, that banks didn’t use asymmetrical information to push consumers into products they had no business being in. In other words, this logic assumes all the blame belongs on the homeowner, and none on the mortgage industry, so as a result the homeowners must pay all of the price.

The other argument, though, is that banks–particularly in their still-fragile condition–cannot afford to write down the principal on these mortgages, so the homeowners are just going to have to suck it up. (This ignores, of course, that the banks will lose just as much putting the properties through foreclosure, but whatever.) In other words, one of the reasons to vote against cramdown (aside from the lobbyist cash involved) is because the banking industry–and its current practices–must be protected, because we have to ensure the banking industry remains profitable.

There’s a similar logic to the health care debate. What the Senate bill, especially, has done is craft a way to give health care to a lot more Americans without touching the profitability of the health care industry. There has been no discussion of whether, by tolerating–or even encouraging–exorbitant profits at each stage of the health care delivery process, the legislation will ensure that other productive parts of our economy will suffocate under the much greater health care costs they pay in the US than they would in any other country. Instead, people like Mary Landrieu and Joe Lieberman insist we have to do it this way–we can’t have a public option–to ensure that the health care industry remains one-sixth of our economy, if not becomes a larger share of our total economy.

Congress and the Administration have–at every stage of the game–worked to maintain the balance between FIRE, health care, defense, and the rest of the economy remains what it is if not becomes even more whacked out. The only segment the Democrats have tried to change–with investments far too small to do the job–is in green industries.

So Democrats are not really trying to change the problem that we don’t make anything anymore. Even in an area–pharmaceuticals–where we do export to the rest of the world, they’re sustaining a system in which American consumers pay more of the drug development costs, and to hell with whether that policy will make it much less likely that that American consumer will have a job that pays enough to pay for those drugs.

And the result, it seems to me, is the condition Nate describes, in which on paper, measuring GDP, our economy is turning around. But in which the balance within the economy leaves average American further and further behind those making profits from a resurgent bubble economy.

Financial sector reform. Which all influences the way I look at financial sector reform. Had the financial sector not been treated like “the nerve center” of the economy, it would have had reform forced on it in September 2008, along with taxpayer monies. Now, frankly, the fact that financial service reform is being driven, slowly, by Congress will result in a better outcome than if Hank Paulson had (ha!) imposed reform along with the bailout. Disempowering the Fed by having a group of entities serve as the regulator and by auditing it will slowly begin to change the balance of power within our economy (though the notion that we ought to have banks that are banks and brokers that are brokers and insurers that are insurers is still a quaint old-fashioned idea).

But the fact that reform is discussed in the absence of the larger question about the structure of our economy–about what Americans will make in the future to prevent the country from sinking further and further behind–is one of the reasons I’m not applauding Democrats’ performance.

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56 replies
  1. PJEvans says:

    (This ignores, of course, that the banks will lose just as much putting the properties through foreclosure, but whatever.)

    Actually they might lose more in taking that route. Those houses are more likely to get vandalized; they’re less likely to be in good shape, because the owners probably couldn’t afford to repair them. Banks prefer to do cosmetic work: clean the carpets (but not replace them), put on a new coat of paint (rather than fix the leaking roof).

  2. ezdidit says:

    Obama policies are not addressing human suffering in America.

    A sustained Main Street bailout through massive infrastructure job creation is the solution to all of our ills.

    Put money in the pockets of just a million people and you save millions more lives because employed people can – and do – spend their money.

    We continue to witness the evils of supply-side economics – trickle-down writ large. It achieves the twin long-term goals of reduced fertility and upward narrowing concentration of wealth.

    But it would be worse under Republicans. Politically, Obama can only count on that.

    • emptywheel says:

      Actually, it has to be more than that.

      Yes, investment in infrastructure will help real businesses, in the long run, be able to grow.

      But without fixing the structural problems in our economy right now, those real businesses will continue to operate at a strategic disadvantage both within this country (drug industry gets protectionism but they don’t, finance industry cannot fail but they can) and internationally (having to pay higher base costs for health care).

      So while you need to dump money into creating jobs, you also need to change some of the larger structural issues in this country and–as a country–begin to make at least as much investment in supporting productive industries as we do for finance, defense, and health care.

      • readerOfTeaLeaves says:

        But without fixing the structural problems in our economy right now, those real businesses will continue to operate at a strategic disadvantage both within this country (drug industry gets protectionism but they don’t, finance industry cannot fail but they can) and internationally (having to pay higher base costs for health care).

        Absolutely.

  3. qweryous says:

    Nate starts his in depth analysis of the first of three policy imperatives i.e. ‘putting out the fire’ with the statement:

    “Putting out the fire. On the first imperative — that of averting a meltdown — I would give the Democrats high marks. Not only did we avoid Armageddon, but we did so with relatively little contribution — “only” about $42 billion — from future taxpayers. ”

    That would be nice, but it is not based on facts. Taxpayers will be ‘contributing’ in many other ways due to recent financial engineering events.

    An article titled “Wall Street Plays Hardball” in the Nov 30, 2009 issue of Business Week details how the ‘contribution’ from taxpayers is being extracted on a distributed basis. From the local government body straight to the financial engineers.
    Against that bleak backdrop, Wall Street is squeezing one of America’s weakest cities for every penny it can.

    A Quote from that article:
    “A few years ago, Detroit struck a derivatives deal with UBS (UBS) and other banks that allowed it to save more than $2 million a year in interest on $800 million worth of bonds. But the fine print carried a potentially devastating condition. If the city’s credit rating dropped, the banks could opt out of the deal and demand a sizable breakup fee. That’s precisely what happened in January: After years of fiscal trouble, Detroit saw its credit rating slashed to junk. Suddenly the sputtering Motor City was on the hook for a $400 million tab. ”

    Article link:
    http://www.businessweek.com/magazine/content/09_48/b4157034230199.htm?chan=magazine+channel_top+stories

    The article presents other similar cases, just examples of what has happened all across America.

    Has the (financial) fire actually been put out? Or has it been banked to smolder until it either goes out or is fanned again?

    The recovery is illusionary if the fire is not extinguished before rebuilding begins.

    The most recent FDIC list of problem banks had 552 federally insured banks on it. A short description and discussion may be found here, with a link to the actual FDIC list. LINK: http://blogs.reuters.com/rolfe-winkler/2009/11/24/fdics-problem-bank-list-grows-to-552-dif-now-negative/

    The issues of how the banks value, record on their balance sheets,and dispose of all the bad loans made on both residential and commercial property have not been addressed. The problems with how these loans were made and what was done with these loans after they were made are still present. How this knot will be unraveled is still not clear. The article linked to by HMMM in the “We’re All BCCI Now” thread is one of many similar. “BofA Ocala lawsuit exposes double-sold and ‘missing’ mortgages.”
    Relinked:
    http://www.nytimes.com/2009/12/13/business/13gret.html?_r=1

  4. readerOfTeaLeaves says:

    Talking about ‘Main Street vs Wall Street’ tends to blind us to some things that need to be discussed.

    Sometimes, analogies can be helpful:
    If we realized that our economic regulatory structures are designed for an Economic Paleocene Era, but we’re now in an Economic Post-Cambrian Era. Economic activities have evolved from the reptilian to the mammalian, and we need to discuss and consider what that means.

    For starters, we need to discuss what happens in a society where banks built to take risks (investment banks) are now morphed in with banks where Grannie has her checking account — so that risks are now being built on Grannie’s bank balance (!), which under current laws, Grannie is somehow supposed to pay off if the risks go south.

    Hank Paulson and his crowd have too much invested (emotionally, psychologically, intellectually) in the existing system to produce the level of analysis and creative thinking that will solve our economic problems.

    But as long as secrecy prevails, the drug lords and drug cartels will have a very strong hand, along with whoever wants to fund black ops. We have a system built for ‘plausible deniability’ and self-deception.

    To use another analogy: if an wildcat used our economic rules, the wildcat would place a CDO on the chance that he’d kill a deer today, and then he’d also take out some swaps to persuade other wildcats that he was going to kill a big, fat buck deer. How that’s actually going to nourish the wildcat is a mystery to me. He may get lucky once or twice, but it seems like a very short-term strategy.

  5. qweryous says:

    About Nate’s third imperative Financial Sector Reform he states:

    “Financial sector reform. Here, there is no grade that can be given other than incomplete — the Congress has yet to pass any substantial regulatory reform effort, and Nevertheless, the bill that the House just passed has been a reasonably good start. The White House and the Senate will lay their cards on the table sometime early next year. Perhaps the most robust criticism of the White House is that it should have tackled regulatory reform before health care”

    My robust criticism, the answers to the following questions are ALL unsatisfactory.

    A. Where are the meaningful and competent investigations?

    B. Where are the indictments?

    C. Will those who received massive pay , bonuses and personal enrichment through the activities that caused this financial collapse be subject to “clawback” of their unjust enrichment?

    D. Are these same participants still making regulatory decisions, and operating the same or similar financial entities as before the debacle?

    E. Will the previously mentioned individuals and corporations help to shape whatever reform occurs?

    When citizens lose basic government services in a city such as DETROIT due to the enforcement of a ‘contract’ with such one sided risks as apparently were present in the ‘instrument’ in question…REFORM IS NEEDED.

    $2 million dollars a year in interest savings against the risk(certainty?) that the City of Detroit’s credit rating would decline, triggering a ‘breakup fee’ of $400 million! This on a group of bonds with value of $800 million. Link to story :
    http://www.businessweek.com/magazine/content/09_48/b4157034230199.htm?chan=magazine+channel_top+stories

    Were there inappropriate payoffs to those on the city side of this contract? (Not an accusation..mistakes can be innocently made)

    Were bonuses ‘earned’ for this great deal being sold to Detroit? If so does anyone see a problem?

    Other examples like this are present all over the country.

    Financial reform in congress will be more interesting to watch than health care imho.

  6. earlofhuntingdon says:

    This is a progressive analysis not heard as it needs to be. The tradmed seems to follow the WSJ’s lead on such “economic” stories, leaving out, as did Obama, the underlying issues.

    As you articulately state, the reason why big financial players were “too big to fail” – in the euphemism those players employ to justify their taxpayer subsidies – is not to ensure their profits. It is to ensure their role as market makers for money, to ensure that they make it available on reasonable terms and prices to those qualified to repay them, and to fund more complex, but transparent transactions among sophisticated players, where those transactions do not produce economic costs to society that it cannot or chooses not to pay.

    Gofer Geithner and his elders in the Obama economic team ignored those purposes. It is as if they assumed that those players would fill that role, but with the unspoken caveat – “as they see fit”. Rest assured, those easygoing assumptions are not the terms on which an individual consumer could borrow money to buy a car or loaf of bread. They pay legalized usurious rates and pay stiff fines and fees for the privilege.

    Obama’s no-consequences bail-out ensures the stability that mattered to these ruthlessly selfish players: their own. It is the use of peasant labor, grain and sows to rebuild the local earl’s castle walls, but which keeps the futile feudal system intact.

  7. prostratedragon says:

    In fact, I’d say that a key mistake that Geithner and Bernanke made was in reifying the role of the Masters of the Universe, rather than using the rescue to forever deprive the MOTUs of their claim to being MOTUs.

    Good econ here.

  8. earlofhuntingdon says:

    Nate Silver gives a David Brooks like performance. He observes what anyone standing in the cold for hours at a Kansas City free clinic would observe. Obama bought stability by strengthening the existing system and those who currently profit from it. As he is doing with his health care “reform”.

    As regards the latter, no president lets such major legislation run its course by passively waiting for it to appear on his desk. That’s grade school civics. This is Obama’s legislation as much as it is Harry Reid’s or Joe Lieberman’s. Mr. Silver casually grades him on a comfortable, athletic scholarship curve.

    • Leen says:

      Unable to link over to Eve’s clips of that clinic in Kansas. At Seminal. Remarkable and telling. Giving the uninsured a face, many faces. Too bad our Reps are too cowardly to show up at one of those clinics. Wish the free clinic group would do one in Hartford Conn, invite “Traitor Joe”

      I have been surprised that Obama and team have not focused more on volunteerism at this time. Encouraging folks to reach out, put in some time, lend a hand to those who are having hard times. Obviously they do not really believe in this or Obama and team would have been hammering away on this.

      You know something like “Times are rough, but we will get through this. This is a time to reach out and do something for someone less fortunate. And yes you may think your situation is as bad as it can get. But I will guarantee that if you look just down the street, around the corner someone is having a harder time, Reach out at this time, reach out and do something for someone else. We will get through this”

      Wondering why they do not approach these times like this.

      • qweryous says:

        Because it would be labeled as ‘socialism’ or ‘communism’.

        Because there are many in this country that see the fable of the ant and the grasshopper in a different way : Link:
        http://www.stevemccranie.com/thoughts/2009/9/25/the-ant-and-the-grasshopper-a-modern-aesop-fable.html

        For those that see the suffering of fellow citizens as righteous punishment for a failure to ‘apply themselves’,the suffering caused by hard times is necessary to motivate success in the future.

        • Leen says:

          Jesus was a socialist. Obama could say something like “Who would Jesus help” Throw their supposed Religious beliefs back in their damn faces. But do it softly.

          “Who would Jesus help?” like that

          Really liked that scene in Micheal Moore’s latest. When that old clip of a Hollywood flick where Jesus is leaning over to heal someone and says “I can’t heal you because you have a pre-existing condition” I about choked on some popcorn. Went for the roots of the contraditions

      • earlofhuntingdon says:

        I suspect Obama avoids a call to volunteer arms, despite it being one of JFK’s most inspiring choices, because the Right wouldn’t like it. They would object to it as much as to ACORN or to his “indoctrinating” grade schoolers by talking to them in person.

        Mr. Obama seems incapable of appreciating that there is no avoiding conflict with his political opponents. That’s the nature of his profession and of this GOP. The rudderless, flightless and leaderless GOP is also afraid of him. No compromise, no matter how abject, would be enough to bring them to agreement, because any Obama success is their failure, their ticket to the political wilderness.

        And volunteer for what? A call to arms would require Obama to articulate and champion a problem that needs to be solved at least in part, through volunteer work. It would also require him to allocate federal resources to help fix it, something he seems unwilling to fight for. I think he would look at that as inventing more problems to add to the ones he has. But consider the magnitude of the lost opportunity to put millions of under and unemployed Americans to work rebuilding America.

        • Leen says:

          “and volunteer for what” Free health clinics, taking care of lonely seniors, tutoring, give a mini job to someone who has been layed off, give a single parent a night off, pick up trash, do some time in a homeless shelter, reach out to a Vet, pay a doctor bill for someone. Hell I could fill pages.

          Why would the “right” not like this? Because it would stick their supposed “pro life” contradictions back in their two faces?

          Are you saying that “walking the talk” of their supposed Religious values would just be too much for them to handle.

          • qweryous says:

            Yes.

            Look at my link at 15.

            This is common to the 25% who want a former Alaskan governor to run in 2012.

            It sounds too stupid and crass to be true, but it is true.

            • Leen says:

              that about covers it. Even though you were unable to access health care, a living wage or a quality education…fuck you..you did this to yourselves.

              If god had wanted you to have health care he would have made you rich…thinking.

              Why is it that capitalism does not work for you? Oh could it be that you are unable to access capitol on a minimum wage. Too bad.

          • Mauimom says:

            Actually I’m surprised that Obama hasn’t used this “let’s go volunteer” line, simply because it would further distract people from the real problems and real solutions needed.

            Look, I volunteer in a number of different venues. But all the volunteering you, or I or anyone else can do is NOT going to solve the real problems in this country.

            I can’t renegotiate someone’s mortgage, or find them a job, or get them health care. I can write letters and e-mails and vote, but we see how far that’s gotten us.

            “Visiting lonely seniors” is just a crock. It’s such a small drop in a gigantic bucket that it doesn’t even wet the sides, let alone contribute to a fill-up.

            The real sacrifice people need to make is to turn away from the “all taxes are bad” and “all government is bad” memes and demand a “community” of contribution — some of it “enforced” by higher taxes on the upper crust.

            • Leen says:

              “Visiting lonely seniors” is just a crock. It’s such a small drop in a gigantic bucket that it doesn’t even wet the sides, let alone contribute to a fill-up”

              Bullshit…every little ‘small drop” in that gigantic bucket helps. Every ‘small drop” creates a ripple effect

              One thing I agree with. It would be “distracting” but it would have also kept that ‘enthusiasm” somewhat pumped up

            • Leen says:

              “I can’t renegotiate someone’s mortgage, or find them a job, or get them health care. I can write letters and e-mails and vote, but we see how far that’s gotten us.”

              you did just a bit of spinning

              here is what I said in response to Earl of Huntington

              “and volunteer for what” Free health clinics, taking care of lonely seniors, tutoring, give a mini job to someone who has been layed off, give a single parent a night off, pick up trash, do some time in a homeless shelter, reach out to a Vet, pay a doctor bill for someone. Hell I could fill pages.”

        • Minnesotachuck says:

          Mr. Obama seems incapable of appreciating that there is no avoiding conflict with his political opponents.

          Amen!! And the resulting lack of inspired leadership may cost him the Congress in 2010, and perhaps even his reelection two years later.

          • fatster says:

            Perhaps I’ve become too weary and jaded, but I’n beginning to wonder if he actually considers them political opponents. He does to seem to recognize that progressives are, though.

            • bobschacht says:

              Perhaps I’ve become too weary and jaded, but I’n beginning to wonder if he actually considers them political opponents.
              He does to seem to recognize that progressives are, though.

              I think the answer to both statements is that he doesn’t.
              I think he truly wants to govern from the middle, and is just trying to figure out what that means and how to do it.

              Bob in AZ

              • Leen says:

                The middle shifter big time over the last eight years. Pat Buchanan is the new middle. He seemed like a lamb compared to the warmongers and persisitent liars in the Bush administration

      • qweryous says:

        Aside from the socialism aspect of preventing suffering,the presence of suffering produces a vicarious thrill in those who are avoiding it.

        The absence of suffering at an individual or family level confirms the ‘correctness’ of the personal choices made. It verifies that the past practices (religious, political, economic and social) have led to the current rewards being enjoyed.

      • prostratedragon says:

        Wondering why they do not approach these times like this.

        Didn’t the Obama adminstration start out promoting volunteerism and service at every national holiday? MLK Day, for instance, is only a month away, yet I haven’t noticed any significant push.

        If they’re letting this lapse, are they worried about “labels,” or is someone looking ahead to the possibility of that a successful campaign might be experienced as empowering to those not of teabagger inclinations. It matters which, because those are two really, really different mindsets.

        • Leen says:

          every Pres I am aware of encourages volunteerism on MLK day

          I think they are missing the mark on this one. The boomers were brought up on and excited by Kennedy’s call “ask not what your country can do for you but what you can do for your country”

          Sorenson is still around. He or some other speech writer could artfully re package this message. Come on folks were stirred up during Obama’s campaign. I worked with a bunch of Republicans in Denver just before the convention. The conversations were amazing. Harness that enthusiasm, feed it, don’t let it die down, keep it stirred up.

          Think they missed the boat on this one. Although it is not too late

        • Leen says:

          The Obama team had the boomers stirred up during the campaign as well as a ton of young folks. The boomers were brought up with Kennedy’s call “ask not what your country can do for you ask what you can do for your country” Sorenson is still around or some other master speech writer. They can repackage this concept for Obama. Harness that enthusiasm and build on it. Don’t let it dwindle.

          Hell I worked with a sizable number of what I call the “real” Republicans in Denver before the convention they were as concerned and pissed off by the last eight years of the radical Bush administration as any progressives I know. They were not just going to vote for Obama they were out working for the campaign. They were Pissed off , disgusted.

          Harness this “time to give back” concept.

          Now I really think they have missed the boat on this one. But it is not too late

          • qweryous says:

            “Harness this “time to give back” concept.

            Now I really think they have missed the boat on this one. But it is not too late”

            The question could be restated as ‘Did they miss the boat(quick let them know, it’s not too late!!).. or did they decide that wasn’t their boat to catch, (or that they had tickets for that boat and for some reason changed plans).

            Positive thinkers might analyze it as: ‘do not play this volunteerism card too early, save it until the opponents will not have enough time to effectively counter it’.

            • Leen says:

              Progressives are jumping ship all ready. Could wait way to long to harness that dwindling enthusiasm. “hope” send more troops to Afghanistan “change” Reality putting out the enthusiasm flame. Going to be tough to rekindle at this point

              • qweryous says:

                No question about that.

                The analysis may have been to tolerate dissatisfaction and disengagement and plan on reconnection prior to the 2010,or 2012 election.

        • qweryous says:

          Scary progressive nightmare:

          Rahm calculus produces the ‘solution’ for re-election. With respect to the voting population:

          A. Leave the right most 20% ( rightwing tea partiers) to do what they will.
          B. Leave 20% left most progressives to do what they will ( discuss 11 dimensional chess etc)
          C. Collect the 60% of the votes from those that cannot abide by either the left or the right.

          Oversimplified, but…

          A true ‘bipartisan victory’ could be produced.

          The candidate selection process is unlikely to produce a similar ‘bipartisan’ candidate challenger either from the left, right, Dem or Rep parties. Any third party candidate would also be unlikely to be a centrist.

          So maybe so to what you say.

          • Leen says:

            But when the progressives leave Rep Wilson (came in on the coat tails of Former Congressman Strickland) in the 18th district of Ohio behind. Progressive voters are not happy with Wilson in fact I know folks who donated to his campaign with sizable chunks of change who are really pissed off with him. Talk of putting up a contender.

            When the progressives abandon a few more blue dogs like Con Zack Space (BD/Ohio) and elsewhere Rahm’s plan may feel the squeeze

            • qweryous says:

              I’m not saying that master strategist Rahm has it all figured out, or that the plan (whatever it is) will succeed as it plays out.

              Karl Rove thought he had it all figured out, he didn’t succeed ( not yet).

              Rahm will be either looking to accept all the credit, or to deflect all the blame come 2010.

              Either way he will have a job in politics or lobbying.

  9. earlofhuntingdon says:

    Another leg of the economic stool that has been sawn off by non-reform, in addition to credible bankruptcy reform, is reform of credit card and other consumer lending practices. I suspect for the reasons EW articulates. Regulations are virtually non-existent, interest is at loan shark rates even for good risks, as are fines and fees. The unspoken reason reform is going nowhere, as with cramdown, is that reform would seriously cut back bankster income – in the short term.

    The unifying policy is that banksters, insuresters and pharmsters must be given their pound of flesh, regardless of who else gets taken to the knackers yard because of it. That’s coming from a Democratic Party that no one outside of Washington who considers themselves a Democrat would recognize or support. Not even a mother could love that child.

  10. qweryous says:

    In response to Leen @ 20

    Normal logic and debate will not disabuse someone of notions like this.

    Have you made any converts on the presidential birth certificate issue, the Palin is qualified to be president issue, the global climate change is a lie (or leftist socialist plot), and how about the ACORN plot?

    I’m not arguing against the rightness of your proposals, just pointing out
    that imho the president won’t go there (for various reasons discussed), and that if he did the right wing would go insane.

    Sad, but that is the state of the nation.

  11. abinitio says:

    I think Nate forgets to discuss several important issues:

    Cause of the Financial Meltdown

    – Both Democrats (Clinton, Barney Frank, Rubin, Summers) and Republicans (Gramm, Paulson, Greenspan, Bernanke) were instrumental in a) repealing Glass-Steagal allowing the creation of the TBTF banks b) deregulating OTC derivatives despite the courageous objections of Brooksley Born c) allowing banks to operate with unprecedented leverage – Fannie/Freddie at 80x; Citi, BoA at 20x; Goldman, Lehman, Bear at 30-50x d) easy money policies at the Fed every time to bailout financial players and markets from LTCM to the dotcom bubble e) no supervision of banks by Fed, FDIC, OTS, OCC that allowed speculation, securitization and lax lending standards. And the list goes on.

    So claiming “putting out the fire” is analogous to an arsonist that starts a massive blaze coming to the scene by commandeering all the water trucks in the neighborhood and taking credit for “controlling” the fire.

    Bailout/Stimulus

    The bailout and stimulus is just not the $700 billion but it should also include a) the trillions of dollars of monetization aka money printing by the Fed – $1.25 trillion in Agency/MBS purchases; $300 billion of Treasury purchases; and the rest of the alphabet soup of vehicles – TALF, commercial paper, etc b) FDIC guarantees of debt issued by Goldman, BoA, Citi, etc c) the practical nationalization aka taxpayer on the hook for all Fannie, Freddie, FHA debt and guarantees.

    Recovery

    Considering the tens of trillions of dollars of taxpayer obligations we get a 2.9% GDP growth and lower rate of increase in unemployment but no wage and income growth for the bottom 95% of the working population – was that a good deal or were there other better ways to reduce unemployment and increase wage growth?

    Financial Reform

    Its such a joke with all the loopholes that you could drive tens of semi-trailers through. Where are the DoJ and SEC investigations into the fraud and malfeasance on Wall Street?

    Bottom line – as Rep. Marcy Kaptur said the Congress is a wholly owned subsidiary of the TBTF banks. The Obama Administration in line with the Clinton and Bush administrations are indistinguishable from the managements of the TBTF banks.

    Its only a matter of time that the bill for these massive giveaways to the TBTFs will come home to roost. The average working American has been raked over the coals and will see even further reductions in their standard of living over the next decades.

    • bobschacht says:

      Cause of the Financial Meltdown

      – Both Democrats (Clinton, Barney Frank, Rubin, Summers) and Republicans (Gramm, Paulson, Greenspan, Bernanke) were instrumental in a) repealing Glass-Steagal allowing the creation of the TBTF banks b) deregulating OTC derivatives despite the courageous objections of Brooksley Born c) allowing banks to operate with unprecedented leverage – Fannie/Freddie at 80x; Citi, BoA at 20x; Goldman, Lehman, Bear at 30-50x d) easy money policies at the Fed every time to bailout financial players and markets from LTCM to the dotcom bubble e) no supervision of banks by Fed, FDIC, OTS, OCC that allowed speculation, securitization and lax lending standards.

      It is too easy to forget that the Clinton role was to make it easier for poor folks to buy a home. They took a good idea, and went nuts with it.

      In any case, repealing Glass-Steagall was stupid, and de-regulating credit default swaps was even stupider.

      Bob in AZ

  12. prostratedragon says:

    Wondering why they do not approach these times like this.

    Didn’t the Obama adminstration start out promoting volunteerism and service at every national holiday? MLK Day, for instance, is only a month away, yet I haven’t noticed any significant push.

    If they’re letting this lapse, are they worried about “labels,” or is someone looking ahead to the possibility of that a successful campaign might be experienced as empowering to those not of teabagger inclinations. It matters which, because those are two really, really different mindsets.

    [Must have needed that coffee; I wrote this hours ago and thought I’d hit “submit.”]

  13. TarheelDem says:

    What has not been successfully communicated to the folks running the corporation is that we need a preventative policy of ensuring that too big to fail means too big to exist. Anti-trust laws were the twentieth century progressive era’s answer to that issue. There is some discussion that anti-trust law restoration would be necessary but not sufficient in the current structural system. The “too big to fail” problem is the one that the Obama administration has not dealt with and which Nate misses.

    But it is the issue that “liberal circles” and especially “online liberal circles” see as the major issue to avoid a repeat bubble and bust cycle.

    • bobschacht says:

      The fear with “too big to fail” is that if we don’t have our biggies, but France or China has biggies, we will somehow be at a disadvantage. So Obama doesn’t want to throw our biggies under the bus unless he can persuade the rest of the world to outlaw biggies, too. And that won’t happen.

      The problem with bigness is the same problem that dinosaurs had: When you get too big, it becomes too hard to adapt.

      Bob in AZ

  14. cregan says:

    Empty Wheel, I agree with some basics of your post here. Some elements are missing and need to be addressed. I would look at a few things differently.

    1. I don’t think the economy was ever that bad. (did your blood pressure get raised? hold on first) The economy is not the same as the financial system meltdown. Yes, the financial system was in some danger of meltdown, that is certain. It didn’t actually meltdown though. Yes, some big institutions had trouble and went out of business or nearly did and some others needed bailout, but “the system” didn’t meltdown. The economy, with a shored up financial system, was never that bad. NOT great mind you, but never that bad.

    2. What caused the economy to take a dive was NOT the financial meltdown but the first failure to pass the TARP. Prior to that, the atmosphere was one of anxiety, but the public and business leaders felt Congress had a workable (not perfect) solution in the TARP plan. However, when the House first failed to pass it, the psychology and atmosphere changed completely. The public for the first time thought the TARP might not pass and that no solution for propping up the system would occur. Instead of a potential crisis being solved, the public came face to face with the real possibility of total collapse. The market immediately tanked, people panicked and businesses began planning for the worst. Once that happened, the toothpaste could not be put back in the tube.

    I once had a professor who said to be an economist it would be better to study psychology than math.

    3. Passing the TARP made no difference at that point. (similar to a too-late fess up by Tiger Woods could not stop the landslide in goodwill once it began)

    4. What I see and hear from customers everywhere is no more panic. A more stable situation. Just an opinion, but I do think the economy is coming back. It never was really in that bad shape–nothing like 1973-74 or 1979-1982, so the downturn didn’t really last any longer than the panic.

    5. who gets credit, I’ll let someone else decide. But, it wasn’t that bad, it didn’t last that long and it is on the way to regaining an upward path. Lucky for Democrats, as the better economy will be apparent to the public over the next 3 or 4 months. And, you know I am not a Democrat, so I wouldn’t say that if I didn’t believe it.

    • PJEvans says:

      Tell that to the people who got laid off last year.
      Or the ones whose houses didn’t sell, year before last.

    • emptywheel says:

      Ah, but your “TARP failure” explanation for the collapse doesn’t explain why banks stopped lending. That was driven from the top down.

      Also, I do think the economy was crappy, long before the crash (in a number of the hardest hit foreclosure states, the cause was no bubble, but really bad economy). That said, it got crappy rather gradually, and those for whom it is really crappy don’t socialize much with those who write our nation’s policies. (And how crappy you think it is obviously depends on where you are).

      But that goes to my whole point about structural problems. Our economy will always suck so long as we rely on finance as the lead generator for growth. Kevin Phillips (and others) have written pretty compellingly about how that is a recipe for decline. We’ve been heading in that direction for some time, but the crash ought to be a big wake up call that we’re there.

      • cregan says:

        Again, I do mostly agree with what you say. The economy was not good before the bank problems came to the surface, but I am only saying, it was not as bad as people thought during the panic of last year and early this year.

        Banks not lending is two pronged. One; the bad loans made it a bit more difficult (the meltdown aspect) and, two, when things are made to appear like all is going down the drain, banks get very careful about lending. They don’t want to be the last guy on the line holding the bag. And, in truth, it is your money that would be lost not the “bank’s.”

        Just like consumers pulled back on buying anything since they had been told a big depression was coming, bank’s hold back on lending. If you thought things were going to hell, you would be pretty careful about where you put money.

        And that was it. The only reason people held back on spending, etc. was they were told and convinced that a depression was coming. Not that one was actually coming. It was panic induced and when the panic subsided and people realized the world was not going to fall apart, things began to get better. It was not stimulus, tax cuts or anything else; they just woke up and realized the world would be around tomorrow.

        But, my point was that things weren’t really going to hell. That was the PR at the time, but it wasn’t really. There was a CHANCE of it going to hell, but the TARP program–good or bad–kept that from happening.

        A big chance of a depression, does not make a depression. Or even a big recession. It was a 9 month recession. Relatively short. I also don’t think unemployment will go any higher (maybe a tenth of a point or so, but not above the basic level it is at now).

        There was political bad talk when Bush was President and there is political bad talk about the economy now. It wasn’t as bad as promoted by Democrats then, and it is not as bad as promoted by Republicans now.

        Yeah, that doesn’t help you if you don’t have a job, but it does make your job prospects better.

        This post is a little confusing, but I hope the point gets across.

        • Nell says:

          Psychology and vicious cycles are involved, but your case that the underlying economy just isn’t in that much trouble is being argued purely by assertion.

          What are the figures on employment, industrial capacity, trade deficit that encourage you to think there can be a real, structural, sustainable recovery? Or do you, like the Clinton and Bush administrations and now their imitators in the Obama administration, think it’s all a matter of getting people to focus on and run after the shiny objects to keep the treadmill spinning?

  15. cregan says:

    Every year people get laid off from work. That doesn’t mean the economy is bad every year. Your analogy works for politics and political slogan’s, and I appreciate it, but it doesn’t mean the economy did not go down very long or that it isn’t going up now and many of those people who had a job before will have one again.

    Believe me, being a Republican, it would be easy for me to rip on the economy and how bad it is and the failure to make it better. But, I don’t think that is the case and, as I mentioned, I think the general public will see it in real terms in the next 3 or 4 months.

    I don’t think you are going to hear much “bad economy” talk by next summer.

  16. timbo says:

    I’d be celebrating if I actually saw more than obfuscation and gladhanding coming from Washington and the Democrats who claim to be running the show there. But, alas, nope, the banks continue to prop up the oligarchy at the rest of our expenses. The corporate military-industrial lobbyists continue to get their wars and profits, while we are maimed, while we maim those who are in their way. And they do this claiming that they have a mandate? From whom exactly do they get their pay?

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