OurFuture.org Blogs: Isaiah J. Poole

Office Of Thrift Non-Supervision

Isaiah J. Poole — Tue, 25 Nov 2008 11:06:25 -0500

In the deluge of financial news, one story that is emblematic of the colossal failure of the conservative approach to government has gotten too little attention: The Washington Post's in-depth look Sunday at the Office of Thrift Supervision.

Like so many federal financial regulatory agencies under President Bush, it was viewed not as a guardian of the public interest but a Wall Street party-pooper that had to be reined in itself. So not only did the ideologues who took it over systematically starve it of funds, but they abashedly shifted its focus from being one of several vice cops on the beat to one of proprietors of the bordello. Regulated firms became "customers" that were ardently courted for the fees that they would pay to be regulated. (Yes, that's right; the agency is funded by fees paid by the financial institutions, not by general tax revenues.)

The Post reports:

In the parade of regulators that missed signals or made decisions they came to regret on the road to the current financial crisis, the Office of Thrift Supervision stands out.

OTS is responsible for regulating thrifts, also known as savings and loans, which focus on mortgage lending. As the banks under OTS supervision expanded high-risk lending, the agency failed to rein in their destructive excesses despite clear evidence of mounting problems, according to banking officials and a review of financial documents.

Instead, OTS adopted an aggressively deregulatory stance toward the mortgage lenders it regulated. It allowed the reserves the banks held as a buffer against losses to dwindle to a historic low. When the housing market turned downward, the thrifts were left vulnerable. As borrowers defaulted on loans, the companies were unable to replace the money they had expected to collect.

... The agency championed the thrift industry's growth during the housing boom and called programs that extended mortgages to previously unqualified borrowers as "innovations." In 2004, the year that risky loans called option adjustable-rate mortgages took off, then-OTS director James Gilleran lauded the banks for their role in providing home loans. "Our goal is to allow thrifts to operate with a wide breadth of freedom from regulatory intrusion," he said in a speech.

... Gilleran was an impassioned advocate of deregulation. He cut a quarter of the agency's 1,200 employees between 2001 and 2004, even though the value of loans and other assets of the firms regulated by OTS increased by half over the same period. The result was a mismatch between a short-handed agency and a burgeoning thrift industry.

...He also reduced consumer protections. The other agencies that regulate banks review corporate health and compliance with consumer laws separately, which consumer advocates say helps ensure that each gets proper scrutiny from specialists. Gilleran merged the consumer exam into the financial exam. ... At the time he headed the agency, he defended the consolidation of the exams, saying thrifts would be required to conduct "self-evaluations of their compliance with consumer laws."

One of the firms that the Office of Thrift Supervision courted was Countrywide Financial—a mutually beneficial catch, because the OTS could pull in huge fees from Countrywide (fees from Countrywide would cover 5 percent of the agency's budget) and Countrywide would end up answering to an agency that would be more compliant to its wishes than the Comprtoller of the Currency, which had been overseeing Countrywide's operations before 2006.

Scott Polakoff, deputy director at the Office of Thrift Supervision, said that Countrywide was told that it shouldn't expect that the agency would go easier on them. But, according to The Post,

Critics in government and industry said Countrywide's shift from OCC oversight to that of OTS was evidence of a 'competition in laxity' among regulators eager to attract business. "Institutions should not be able to find a safe haven in one regulator from the reasonable concerns of another regulator," said Karen Shaw Petrou of Federal Financial Analytics, referring to the Countrywide episode.

We're now paying dearly for an ideology that says businesses should be treated as "customers" of a regulatory agency that are owed deference for every financial "innovation" they come up with, no matter how detrimental to the long-term health of the economy they happen to be. And while it may make sense for financial institutions to pay for the costs of having their operations monitored, those fees do not mean they own the agencies getting those fees. We the people do, and the leadership of those agencies have to be committed to work for the public interest, not as servants of Wall Street.

Ultimately, the financial regulatory structure needs to be reworked in accordance with today's marketplace, just as today's financial marketplace needs to be reshaped so that institutions like Countrywide and Washington Mutual can't engage in practices that ultimately hold the American taxpayers hostage in fear of financial collapse. But while we wait for that reshaping, we can at least demand appointees within the existing structure who will not have contempt for the regulatory mission of the agencies they are chosen to lead.

Recovery Realism

Isaiah J. Poole — Mon, 24 Nov 2008 11:48:19 -0500

Today there are new signs that President-elect Obama's economic team and the Democratic leadership in Congress are prepared to commit to an economic recovery plan that is suited to the scale of the problem. But the progressive movement will still have to push the envelope.

One positive signal is in the story in The Washington Post today that reported that "President-elect Barack Obama and other Democrats are rapidly ratcheting up plans for a massive fiscal stimulus program that could total as much as $700 billion over the next two years."

That is beyond the $300 billion a year that many progressive leaders were saying just a few weeks ago was the minimum amount needed to get the economy back on track.

Yet it is a measure of just how badly the economy is collapsing that what was considered to be a left-wing argument in the early fall is now becoming a centrist argument as we head into winter. How centrist? Consider that on CNBC this morning, Hank Greenberg, a former chairman of AIG and a John McCain supporter during the presidential election, said that the government will have to spend up to about $1 trillion on economic recovery. "I think it's deeper than what most people want to believe," he said.

If numbers as high as $1 trillion are beginning to enter the mainstream discourse, we shouldn't shy away from arguing that that a stimulus package just for Main Street needs—infrastructure building, aid to state and local governments, unemployment insurance and other safety-net needs—may need to be at minimum $1 trillion over two years.

What Austan Goolsbee, a senior Obama economic adviser, has been saying publicly is that their thrust right now "is not a numbers-based economic program" but is "to do whatever we need" to meet Obama's stated goal of creating or retaining 2.5 million jobs.

When Obama formally introduced his economic team Monday, he said, “I think the most important thing to recognize is that we have a consensus, which is pretty rare, between conservative economists and liberal economists, that we need a big stimulus package that will jolt the economy back into shape and that is focused on the 2.5 million jobs that I intend to create during the first part of my administration. We have to put people back to work.”

Congressional Quarterly noted that "Obama left key details unfilled, including the size of the package and precisely what tax and spending elements it will contain." That leaves room for Congress to fill in some of the blanks. But Obama did promise that his final proposal "is going to be of a size and scope that is necessary to get this economy back on track.”

Making sure that the focus stays on ensuring that Obama's economic team and Congress deliver whatever is "necessarily to get this economy back on track" is the key reason why Robert Borosage, co-director of the Campaign for America's Future, issued a media statement today that said, "The crisis we face makes Rubinomics irrelevant." Yes, there is widespread concern among progressives that ex-Citicorp chairman Robert Rubin and many of his proteges are in positions to call the economic shots despite Rubin's role in creating the conditions that placed Citicorp and other financial institutions in crisis. But that was then.

Now, to quote Borosage, "it's not the personnel; it's the policy. And on this, Obama has been clear. He's announced a massive recovery plan based on putting people to work with public investment vital to our future." Rather than the focus on reducing the deficit and financial market deregulation that was the hallmark of Rubin's tenure as Treasury secretary under President Clinton, "deficit spending must go up, finance must be reregulated, trade imbalances must be reduced and manufacturing can no longer be outsourced."

On those scores, Obama is setting the right direction, and the consensus around the scale of the solution is blowing in our direction. There are still political leaders who are arguing for the opposite, and mainstream media outlets that parrot their control-the-deficit line without proper context and fact-checking. What Obama will need, and what our economy must have, is a mobilized community prepared with the facts and the political framing that will make it possible for Obama and Congress to move quickly and boldly.

Updated with reporting from President-elect Obama's midday press conference.

Our Demand For Real Investment

Isaiah J. Poole — Tue, 18 Nov 2008 10:18:29 -0500

In a Library of Congress room across the street from the Capitol, about 100 Capitol Hill staffers, activists and experts gathered to build the case for upending the conventional political wisdom that America can't afford right now to invest in itself and its people. The conference message: To save the economy, we have no choice.

Congressional Progressive Caucus co-chair Rep. Barbara Lee, D-Calif., kicked off the "Real Investment in America" conference with a sweeping statement of what an investment agenda should contain. The federal government, she said, has to "step in and act decisively" to address the needs of everyday Americans. That would mean an economic rescue package that would be at least $200 billion to $300 billion a year over two years. But she also said that the components of the rescue package should contain such elements as a moratorium on home foreclosures and bankruptcies. "That's what we need to start," she said.

Aid to states that are facing deficits totaling $48 billion need aid as well in order to ensure that they do not have to cut needed services in order to balance their budgets. Lee called for spending on infrastructure to create jobs, and expanded unemployment compensation while those jobs are being created.

Lee also urged stepped-up efforts to eradicate poverty. She said that she learned during a recent visit to a food bank in her district that the number of people seeking help there had doubled in the past year. She called for reducing the number of people in poverty—now 35 million—in half over the next 10 years. "We have to have a new way to move this country forward in this new environment," she said.

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"America needs a job," said Arlene Holt Baker, executive vice president of the AFL-CIO, lining up behind the agenda Lee had laid out. She added that "we must help the automobile manufacturers," preferably during this week's lame-duck session of Congress but certainly once President-elect Barack Obama takes office. Plus, "we must give workers back the freedom to improving their lives through organizing and collective bargaining." Baker promised "an unprecedented mobilization" to bring about "the change this country so desperately needs."

Eric Lotke, the lead author of the "Real Investment in America" report released at the conference, asked people to look at the magnificence of the Library of Congress building, which was built around 1890. He said the building represents the thinking of leaders who planned for the long term and built lasting public assets. Lotke called for the same kind of long-term planning and willingness to invest in the future. These spending choices yield multiple returns on investment, he pointed out.

Yes, deficits are real, he said, but "we're fretting about deficits while our infrastructure is crumbling and other countries are racing ahead." We need to be sensible about ways to pay for the kind of investments we need in infrastructure, and recognize that investments in such items as well-paid teachers are crucial to maintaining the nation's competitiveness in the 21st century.

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Janet Kavinoky, director of transportation infrastructure at the U.S. Chamber of Commerce, joined Ron Bloom, assistant to the president of the U.S. Steelworkers, in endorsing the need for a strong infrastructure program. Labor and business are on the same page when it comes to the need for an investment commitment, she said, adding, "We're trying to drive infrastructure to the top of the agenda," she said.

She did highlight a point of friction between business and some quarters of the progressive movement when she pointed out that much of the infrastructure that needs to be upgraded is privately owned, and that regulatory and financing barriers need to be re-examined. Some not-in-my-back-yard attitudes need to be addressed, she said.

We need to put every funding option on the table, she said, including increasing user fees for transportation. The Chamber of Commerce has in the past supported an increase in the federal gasoline tax, now 18.4 cents per gallon, to ensure there is adequte funding for highways and public transportation.

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Rep. Rosa DeLauro, D-Conn.,offered a proposal for helping to pay for infrastructure projects.

She has introduced legislation (HR 3897) that would create a National Infrastructure Development Corporation that would select projects based on merit and leverage private funding for the projects. The legislation would assure long-term funding for vital projects and would take project selection out of the politicized and discredited earmark process, she said. Her current proposal would capitalize the bank at $10 billion and authorize the Treasury to issue an additional $90 billion in bonds, for a total $100 billion.

This is not new legislation, she said. She first introduced legislation for this corporation in 1994, and at the time it won support from labor and from other infrastructure advocates from both major political parties. But it also had bipartisan opposition, and leaders shelved it to focus on reducing the budget deficit.

DeLauro said that she was at a meeting last night with Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson and concluded that there was no interest from them in moving a second stimulus package forward during the lame-duck session of Congress. She said, as have news reports, that such a stimulus program would be unlikely in this Congress, but would be a top priority in the next one.

"We should not think small. We should be bold and ambitious," she said.

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John Irons, an economist at the Economic Policy Institute, presented arguments he previously made at a House congressional hearing in October. Here he began by debunking some myths. First, he stressed, as did other speakers, that reducing the deficit should not be the priority in a recession; in fact, thge opposite is necessary to stimulate the economy. To those who say tax cuts are needed to boost the economy, Irons pointed out that infrastructure investments are five times as effective as tax cuts in stimulating the economy.

Sherle R. Schwenninger, director of the economic growth program at the New America Foundation, said that "we have to take this 20-30-year experience with pay-go"—the "pay-as-you-go" policy embraced by Democratic leaders in Congress to try to balance increased spending or tax cuts with spending cuts or tax increases elsewhere in the budget—"and consider it a failure." Congress and the White House needs more flexibility in crafting a response to the economic crisis, he said, notwithstanding the political motivation for pay-go.

Schwenninger also spoke in favor of an infrastructure bank, saying that DeLauro's proposal is vastly improved from her earlier bills and that "we have turned the corner" in terms of the seriousness with which such a proposal is being taken, he said.

He also said that there should be "Buy America" bonds that people at the top income groups would be required to purchase. These bonds would pay about 4 percent to 5 percent interest. He said this should be compulsory because high-wage earners have not contributed adequately to the public infrastructure in the past.

QUESTIONS FOR GALBRAITH

James Galbraith explains why he thinks the auto industry deserves a federal loan and offers some little-discussed ideas to help ordinary people weather the current financial crisis.

RELATED RESOURCES

Conference: "Real Investment in America"
Robert Borosage: "Free Fall"
"Invest in America" website

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James K. Galbraith laid out a four-point program for addressing the current economic crisis:

A mortgage moratorium, which he said would buy time while a Homeowner Loan Corporation is established to rewrite he millions of unsustainable mortgages that need to be rewritten.
Revenue sharing for state and local governments, distributed to states in exchange for a commitment by those states to maintain funding for essential services and to not raise taxes.
The creation of a national infrastructure fund to finance investments in critical projects. He added that to address the immediate crisis facing the auto industry, a federal loan is “an act of minimal prudence” to buy time for an orderly restructuring of the industry and ultimate commercial viability.
An across-the-board increase in Social Security benefits to protect the senior population, who lost billions in purchasing power as a result of the shrunken value of their stock investments. A $180 billion investment would increase benefits 30 percent.

Galbraith also suggested suspending the payroll tax so that the cost of employment would come down and workers would immediately have more money in their pockets.

The total cost of implementing those policies would cost $900 billion, which would be 6 percent of next year’s gross domestic product. While that sounds large, he pointed out that the percentage is significantly smaller than the expansion program announced by China.

“This is not the time to be nervous about big numbers,” he said.

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Rep. Keith Ellison, D-Minn, brought a somber note to the conference when he held up the photo of the collapsed I-35 bridge in Minneapolis and said that the photo "was worth 13 words, because that is the number of people who died on that bridge. It's worth 100 words, because that is the number of people who were injured."

Ellison also has legislation (HR 3401) that would create a national infrastructure bank, as well as a bill (HR 3398) that would create a commission that would ensure that U.S. infrastructure meets current and future demand, facilitates economic growth and is maintained in a manner that ensures public safety.

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Pollster Stan Greenberg reviewed data from his joint post-election poll with the Campaign for America's Future that help demonstrate the mandate for a bold public investment agenda.

"I believe that people are conscious of this as the beginning a new era, not just as a change from one administration to another," he said at the beginning of his presentation.

One notable finding with implications for potential public support for an investment agenda: As far as the public is concerned, reducing the deficit is less a priority today than it was in 1992, the beginning of the Clinton administration.

But Greenberg warned that when voters were asked if they were concerned that Obama as president "will raise taxes and increase government spending," 46 percent said yes. In answer to a similar question about whether Obama would "go too far" on increased spending and taxes, 48 percent said yes.

"The people aren't going to go for investment unless they get accountable government," Greenberg said. "If progressives are going to make a case for investment, they've also got to make the case that progressives are going to give them a different kind of government."

Reducing the deficit is a less priority than it was in 1992

Sinking Economy Shakes Denial

Isaiah J. Poole — Thu, 30 Oct 2008 10:53:11 -0400

Today's news that the economy is sinking further into recession—gross domestic product growth decreased at an annual rate of 0.3 percent in the third quarter—is making it clearer that there is only one correct response to the current economic crisis: A robust government spending program to produce jobs and get money directly into the hands of ordinary Americans.

"Today’s GDP numbers are further evidence that our economy is going in the wrong direction, and provides a sad epitaph for this Administration's failed economic policies" said Sen. Charles Schumer, D-N.Y., who is presiding over a hearing today by the Joint Economic Hearing on the latest economic data. "There can no longer be any debate that we are in a recession, and that we need to create a targeted stimulus program to prime our economic pump, and help American families as they weather this storm.”

Even one of Sen. John McCain's advisors is conceding that today in an op-ed in The Washington Post. Economist Martin Feldstein made the basic case for the kind of stimulus proposal being pushed by labor and progressive organizations.

The only way to prevent a deepening recession will be a temporary program of increased government spending. ... [W]hile past recessions lasted an average of only about 12 months, this downturn is likely to last much longer, providing the scope for successful countercyclical spending.

A fiscal package of $100 billion is not likely to be large enough to revive the economy. The fall in household wealth resulting from the collapse of the stock market and the decline of home prices may cut aggregate spending by $300 billion a year or more.

The president-elect should focus on developing a mechanism for identifying and funding spending initiatives that can occur quickly and that would otherwise not be done. While it would be good if some of the increased spending also contributed to long-term productivity, the key is to stimulate demand.

Feldstein made a gratuitous slap at Sen. Barack Obama's tax proposals (which would increase taxes on people making more than $250,000 a year and restore corporate tax levels to what they were before the 2003 Bush tax cuts, but would also specifically target tax breaks to companies that increase their domestic hiring).

But the evidence of a now-shrinking economy (including today's weekly unemployment claims report that said an average of 475,000 people a week have been filing unemployment claims in the past month) has clearly made it more difficult to argue against using the federal government as a countercyclical force against the coming tide of unemployment and declining consumer spending.

There is a strengthening consensus that the response has to be at least $300 billion a year, with a large portion of that going into infrastructure projects, direct aid to state governments, and into programs that will help homeowners and unemployed workers get through the current crisis.

The only outstanding question is whether the senator who is elected president on Tuesday will walk into a lame-duck session of Congress, eat the words of his campaign, and propose a solution that actually matches the scale of the problem. The answer to that question may depend on what we as activists do immediately after the election to give the president-elect and Congress political backbone.

Tax Cuts An Inefficient Stimulus

Isaiah J. Poole — Mon, 27 Oct 2008 12:04:26 -0400

A federal spending program that only yielded 37 cents of benefit for every dollar spent, or even less, would generate sustained demands from the conservative chattering class that it be shut down. So why does the right keep selling extending President Bush's tax cuts as an economic stimulus tool?

The argument that tax cuts are preferable to federal spending to stimulate the economy is effectively refuted by a new study by the Economic Policy Institute, which lays side by side the various effects of stimulus proposals from both the left and the right. What's clear, as you can see from the chart below, is that as a rule taxpayers get a fair better bang for their dollars through direct federal stimulus spending than they do from the tax proposals proffered by conservatives.

The main components of a stimulus package being formulated by a group of progressive leaders—which would be about $300 billion a year and would include infrastructure spending, extended unemployment benefits, and assistance to state and local governments—all give a positive return to the taxpayer.

Tax proposals promoted by conservatives as the core of their stimulus strategy—making the Bush tax cuts permanent, further cuts in corporate tax rates and accelerated depreciation—all yield a negative return to the taxpayer.

An economic snapshot report by EPI explains that direct spending is also more effective than the tax rebate strategy that was employed earlier in 2008. EPI's Ethan Pollack notes:

As money is spent, it creates beneficial ripples through the entire economy. The evidence is that most of the money from the recent tax rebate was saved rather than spent, thus blunting its stimulative benefit.1 By comparison, other options—such as infrastructure spending, aid to states, food stamps, and unemployment insurance (UI) benefits—are much more cost-effective because they target the needs most likely to channel money back into the economy. Mark Zandi from Moody’s Economy.com estimates that each dollar of refundable tax rebates only boosts GDP by about $1.26, while each dollar of infrastructure spending could provide a $1.59 boost. Not only are many of these stimulus options more effective, but they also have the added benefit of assisting those hardest hit by the downturn and tackling long-standing infrastructure needs that would lower transportation costs, decrease traffic, and increase business productivity.

Zandi’s analysis also shows what doesn’t work as stimulus: a variety of tax breaks for corporations and wealthy individuals, which cost over twice as much as they return to the economy.

EPI economist Jared Bernstein discussed these findings October 24 at a hearing of the House Education and Labor Committee. There, he noted that the past eight years of economic policy—based on the principle that the benefits of tax cuts for corporations and the wealthy would trickle down to working-class people—have been a failure for millions of ordinary Americans:

Much of the current recession/stimulus debate has stressed that recent recessions—the ones in 1990-91 and 2001—were both mild and short-lived, and perhaps the next recession will follow the same pattern. It is critical to recognize that these claims are based solely on real output growth, and not on job market conditions. The allegedly mild 2001 recession, wherein real gross domestic product barely contracted, was followed by the longest “jobless recovery” on record. Though real GDP grew, payrolls shed another net 1.1 million jobs. The unemployment rate rose for another 19 months and for almost two years for African-Americans. The pattern was similar, though not quite as deep, after the early 1990s recession.

This is more confirmation that the tired economic policies of the right don't meet the smell test.

Greenspan's Revisionist History

Isaiah J. Poole — Thu, 23 Oct 2008 12:06:59 -0400

Former Federal Reserve Chairman Alan Greenspan today engaged in an attempt to rewrite history that was so egregious that even CNBC anchor Mark Haines, a free-market cheerleader, was aghast.

The offense was on the first page of Greenspan's written testimony before the House Government Oversight and Reform Committee. "In 2005, I raised concerns that the protracted period of underpricing of risk, if history was any guide, would have dire consequences," he said.

He may be technically correct, but that warning was at best a footnote to his main message, which was that Congress and the White House should more or less leave markets alone, and that the masters of Wall Street will always do what's best.

We now know that Greenspan was devastatingly wrong, and now even Greenspan is forced to concede, as he did before the hearing chaired by Rep. Henry A. Waxman, D-Calif., that the crisis we're facing now "has turned out to be much broader than anything I could have imagined."

Worship before the god of market fundamentalism is blinding indeed.

As a report released Wednesday by the Center for Economic and Policy Research makes clear in its examination of the movie about the nation's fiscal crisis, "IOUSA," Greenspan "allowed for the unchecked growth of a $10 trillion stock bubble in the '90s and an $8 trillion housing bubble in the current decade. ... These bubbles were primarily responsible for the low saving rates decried in the film. Mr. Greenspan also ignored the reckless mortgage lending that led to the subprime meltdown and subsequent credit crisis. In addition, he played an active role in preventing the regulation of credit default swaps, the growth of which played a central role in the financial crisis."

Greenspan repeatedly scorned calls from members of Congress for regulating credit default swaps and derivatives. In a notable speech before the Federal Reserve in 2002 on the emerging shadowy jungle of financial instruments that were starting to be traded with accelerating velocity in world financial markets, Greenspan reduced the regulatory choices to "a trade-off between economic growth with its associated potential instability and a more civil and less stressful way of life with a lower standard of living."

Greenspan, of course, stood squarely on the false choice of growth in a just-trust-them-to-do-right environment.

Now he tells us, as he did at the House committee, "those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief."

Greenspan also admitted under questioning that the economic models he put his faith in were "flawed" and concedes that some of the regulation he opposed should be reconsidered. But Greenspan is still too vested in his own philosophy of how the financial world should work to be a reliable beacon for how we should move forward. For that, we need to rely on the progressive economic experts whose voices were dismissed in the age of Greenspan-worship but who now are showing the way to rebuild our economy.

Bernanke's Stimulus Embrace Isn't Stimulating

Isaiah J. Poole — Mon, 20 Oct 2008 15:34:39 -0400

Federal Reserve Chairman Ben Bernanke's statement before the House Budget Committee that it was "appropriate" for Congress to consider an economic stimulus package when it returns after the elections is welcome in some respects, but far more dangerous in others. Taken too close to heart by Congress, his words could in fact take the nation's economy backwards. We need, as our latest Making Sense alert says, the kind of bold plan to rebuild America that Bernanke would not endorse.

The potential positive effect of Bernanke's comments is already reflected in a comment from White House press secretary Dana Perino that President Bush, who had opposed Congress moving a second stimulus bill, is now rethinking his position. His support now depends on the details, Perino is quoted as saying in The Washington Post. If the fight in Congress moves from whether there should be a stimulus to what the stimulus should consist of, that is a significant step forward.

But it would be a mistake to think in terms of the stimulus package Congress passed earlier this year, which had at best a fleeting effect on consumer spending, quickly overwhelmed by record gasoline prices and the consumer debt that, in the absence of rising middle-class incomes over the past eight years, fueled spending. That was the point made by two other witnesses at the budget committee hearing whose testimony generally went unreported by the major news media.

Martin N. Baily, a senior economics fellow at the Brookings Institution, said that Congress should consider a stimulus package of as much as $300 billion a year. A $150 billion package, roughly the size being considered by Democratic congressional leadership, is based on a too-optimistic economic forecast for the next six months, he said.

Baily endorses the basic principles of progressives who have been trying to shape the stimulus package, including spending for infrastructure projects. The argument against including infrastructure spending in a stimulus package is that the finds for such spending would move through the economy too slowly. But Baily said that issue can be addressed. From his written testimony:

First, there is great need for improved maintenance of the infrastructure, including crumbling roads that need repair and bridges that may age prematurely or even collapse because they have not been looked after. Looking after the existing infrastructure is not as exciting as cutting ribbons on new projects, but it could generate jobs quickly and meet an important need. Second, there are state and local projects that are being canceled because of the short-term budget pressures. Sustaining such projects would avoid layoffs that would otherwise take place.

The case for a robust stimulus package was also made by Iris J. Lav, deputy director of the Center for Budget and Policy Priorities, who pointed out that states face a shortfall in the coming months that could total $100 billion, and closing that gap could require the kind of budget cuts that would deepen a recession unless the federal government acted quickly to provide state aid.

States already have begun cutting their budgets; about half of the states have made cuts in public health programs, services for the elderly and disabled, K-12 education, or universities and colleges. At least 18 states have cut their workforce. And states are on the verge of making far more drastic cuts as they deal with their mid-year deficits and begin to enact fiscal year 2010 budgets.

There is the opportunity to prevent many of these damaging actions through providing fiscal relief. Preventing these pro-cyclical state actions is among the best forms of stimulus you could provide, because it both prevents budget cuts to programs that are needed by people who are losing jobs and incomes in this recession, and prevents state actions from worsening the economy.

Lav recommended $50 billion in state aid. About $30 billion should be used for Medicaid costs now being borne by the states. The remainder could be made available to prevent cuts in education and other critical state programs, as well as to lower the likelihood that states will cut aid to localities.

Bernanke apparently is unwilling to say so plainly, if at all, but the reality is that the scale of our economic crisis requires bold thinking that recognizes that the size of any short-term deficits must take a back seat to getting the real economy—the Main Street economy—back on track. The pundits who are urging Congress to approach this in a centrist or conservative way are losing the argument factually and politically. We should remind members of Congress that if $700 billion for Wall Street was acceptable, $300 billion for Main Street is not too much to ask.

The Voter Fraud Lie: ACORN Fights Back

Isaiah J. Poole — Fri, 10 Oct 2008 11:13:25 -0400

The rabid right has turned up the volume on their insidious accusations that ACORN is engaging in voter fraud. But the executive director of ACORN is fighting back with a detailed response that would silence the critics if they had a shred of integrity.

They are jumping on news stories that voter registration forms filed by ACORN workers in Indiana included fake names and bogus addresses.

ACORN executive director Bertha Lewis said that ACORN's voter registration program includes " the most sophisticated quality-control system in the voter engagement field" and that many of the bogus registrations were uncovered as a result of that process.

Nonetheless, House Minority Leader John Boehner on Thursday turned the outrage meter into overdrive with the salacious statement that "election cycle after election cycle, this organization has been at the forefront of breaking the law in order to promote their left-wing agenda." He says that all federal funding for ACORN-related programs "must be stopped."

Boehner blames ACORN for “making American voters question the fairness and accuracy of the exercise of their most fundamental right under the Constitution." There's no sign that he expressed similar outrage over other disclosures that actions by county election officials in at least seven states could end up unfairly disfranchising tens of thousands of voters.

Here's how ACORN is responding:

Election Day is less than a month away, and our efforts to make sure that low-income and minority voters have a voice and vote on November 4th are in full swing. Unfortunately, just as we've seen in previous election cycles, the more success we have in empowering these voters, the more attacks we have to fend off from partisan forces making unfounded accusations to disparage our work and help maintain the status quo of an unbalanced electorate. We want to take this opportunity to separate the facts of our successes from the falsehoods of our attackers.

On Monday, October 6, as voter registration deadlines passed in most states, ACORN completed the largest, most successful nonpartisan voter registration drive in history. In partnership with the nonpartisan organization Project Vote, we helped register over 1.3 million low-income, minority, and young voters in a total of 21 states.
Highlights of this success include:

We collected over 151,000 registrations in Florida, 153,000 in Pennsylvania, 215,000 in Michigan, and nearly 250,000 in Ohio.

An estimated 60-70 percent of our applicants are people of color.

At least HALF of all are registrations are from young people between 18-29.

We are proud of this unprecedented success, and grateful to everyone who supported us in this massive effort, from our funders and partners to the literally thousands of hardworking individuals across the country who dedicated themselves to the cause and conducted the difficult work of registering 1.3 million Americans, one voter at a time.

And this work is far from over: now begins our effort mobilize these new voters around local and national issues, getting them to the polls and helping to channel their commitment and conviction into an ongoing movement for change in our communities.

As The Nation pointed out recently, ACORN's success in registering millions of low-income and minority voters has made it "something of a right-wing bogeyman." Though ACORN believes that the right to vote is not, and should never be, a partisan issue, attacks from groups threatened by our historic success continue to come, motivated by partisan politics and often perpetuated by the media without full investigation of the facts. As a result, there have been a few recent stories about investigations of former ACORN workers for turning in incomplete, erroneous, or fraudulent voter registration applications.
Predictably, partisan forces have tried to use these isolated incidents to incite fear of the "bogeyman" of "widespread voter fraud." But we want to take this opportunity to set the record straight and tell you a few facts to show how these incidents really exemplify everything that ACORN is doing right:

Fact: ACORN has implemented the most sophisticated quality-control system in the voter engagement field, but in almost every state we are required to turn in ALL completed applications, even the ones we know to be problematic.

Fact: ACORN flags incomplete, problem, or suspicious cards when we turn them in, but these warnings are often ignored by election officials.
Often these same officials then come back weeks or months later and accuse us of deliberately turning in phony cards.

Fact: Our canvassers are paid by the hour, not by the card, so there is NO incentive for them to falsify cards. ACORN has a zero-tolerance policy for deliberately falsifying registrations, and in the relatively rare cases where our internal quality controls have identified this happening we have fired the workers involved and turned them in to election officials and law-enforcement.

Fact: No charges have ever been brought against ACORN itself.
Convictions against individual former ACORN workers have been accomplished with our full cooperation, using the evidence obtained through our quality control and verification processes.

Fact: Voter fraud by individuals is extremely rare, and incredibly difficult. There has never been a single proven case of anyone, anywhere, casting an illegal vote as a result of a phony voter registration. Even if someone wanted to influence the election this way, it would not work.

Fact: Most election officials have recognized ACORN's good work and praised our quality control systems. Even in the cities where election officials have complained about ACORN, the applications in question represent less than 1% of the thousands and thousands of registrations ACORN has collected.

Fact: Our accusers not only fail to provide any evidence, they fail to suggest a motive: there is virtually no chance anyone would be able to vote fraudulently, so there is no reason to deliberately submit phony registrations. ACORN is committed to ensuring that the greatest possible numbers of people are registered and allowed to vote, so there is also NO incentive to "disrupt the system" with phony cards.

Fact: Similar accusations were made, and attacks launched, against ACORN and other voter registration organizations in 2004 and 2006. These attacks were not only groundless, they have since been exposed as part of the U.S. Attorney-gate scandal and revealed to be part of a systematic partisan agenda of voter suppression.

These are the facts, and the truth is that a relatively small group of political operatives are trying to orchestrate hysteria about "voter fraud" and manufacture public outrage that they can use to further suppress the votes of millions of low-income and minority Americans.

These tactics are nothing new, and history has shown that they will come to nothing. We'll continue to weather the storm, as we've done for years, and we'll continue to share the truth about our work and express pride about our accomplishments.

Most importantly, we want to assure you that this good work continues, unabated and undeterred. ACORN will not be intimidated, we will not be provoked, and in this important moment in history we will not allow anyone to distract us from these vital efforts to empower our constituencies and our communities to speak for themselves. If the partisan political machines are afraid of low-income and minority voters, they're going to have to do a lot better than coming after ACORN.

After all, there are now at least 1.3 million more of them, and they will not be silenced. They're taking an interest, and taking a stand, and they'll be taking their concerns to the voting booth in November.

And ACORN will be here, to make sure that the voices of these Americans are heard, on Election Day and for every day to come.

The Obstructionist Gang of 21

Isaiah J. Poole — Thu, 09 Oct 2008 12:13:55 -0400

Our latest report on the block-and-blame game in the 110th Congress identifies 21 senators who voted to filibuster on each of 12 key votes on bills that passed the House and which had significant popular support.

These are the men and women who spearheaded what former Sen. Trent Lott, R-Miss., said was a deliberate strategy of obstruction to keep the new Democratic majority in the Senate from changing the policies of the Bush administration and the previous Republican congressional leadership.

Another eight senators missed one or more of these 12 votes, but they voted to filibuster every time they did vote. That group includes Sen. John McCain of Arizona.

One result, the report shows, is a record-smashing 104 cloture votes, in which bill supporters have to amass 60 votes to break a minority-led filibuster. Filibusters became so routine in this Congress that it has become common for reporters to write that bills in the Senate require 60 votes for passage. Actually, a bill can pass the Senate with a simple majority of senators present. The 60-vote threshold applies to motions to end debate on a bill; without a successful motion to end debate or a move to take a bill off the floor for consideration, a bill can be debated endlessly, or filibustered.

The Gang of 21

These senators were present for all 12 key votes in this report, and voted to filibuster (against cloture) each time.

Bond, Christopher S., Missouri
Bunning, Jim, Kentucky
Burr, Richard, North Carolina
Chambliss, Saxby, Georgia
Cochran, Thad, Mississippi
Cornyn, John, Texas
Craig, Larry E., Idaho
DeMint, James W., South Carolina
Dole, Elizabeth, North Carolina
Domenici, Pete V., New Mexico
Ensign, John, Nevada
Enzi, Michael B., Wyoming
Gregg, Judd, New Hampshire
Inhofe, James M., Oklahoma
Isakson, Johnny, Georgia
Kyl, Jon, Arizona
Martinez, Mel, Florida
McConnell, Mitch, Kentucky
Murkowski, Lisa, Alaska
Shelby, Richard C., Alabama
Vitter, David, Louisiana

The only reason we haven't seen much of what the public normally thinks of as a filibuster during the 110th Congress—the one exception being a July vote on bringing an orderly end to the Iraqi occupation—is that Senate Majority Leader Harry Reid keeps pulling bills off the floor after they hit the obstructionist roadblock. The public doesn't get to hear all-night conservative rants about why the public shouldn't get House-passed legislation that would shift tax subsidies from oil companies to green energy, provide for equal pay for women, offer help for homeowners struggling with subprime mortgages or make it easier for workers to join unions.

It can't be stressed enough that the obstruction game is a political one, designed not to bring consensus but to keep the Democratic leadership in the Senate from building a record of accomplishment that would build build public confidence in progressive governance. Lott last year spoke of obstructionism as a "strategy" that "is working for us." In July conservative columnist Charles Krauthammer predicted that the the obstruction strategy "will give the Republicans the one opening they are going to have in 2008."

Except that it hasn't. CQPolitics.com today projects that Democrats could add five seats to their slim majority (they now have 49, plus two independents who caucus with the Democrats). Among the "gang of 21" in danger of losing their seats are Senate Minority Leader and chief obstructionist Mitch McConnell, Pete V. Domenici of New Mexico and Elizabeth Dole of North Carolina. Two other senators who missed one or more of our key votes, Ted Stevens of Alaska and Wayne Allard of Colorado, are now rated by CQ as being in "leans Democratic" races.

The public appears to have gotten wise to the fact that people who scorn government, and who resist efforts to put government on the side of the people, ought not be given responsibility to lead it. There's still much work to do to make sure that the history of the 110th Congress is written correctly, not as a "do-nothing" legislature but as a victim of a petulant, "block-and-blame" conservative minority.

Depression Conditions That Demand A New Deal Response

Isaiah J. Poole — Tue, 07 Oct 2008 16:54:41 -0400

The economy that conservatives until a few weeks ago were calling "fundamentally sound" is actually, in many respects, in the worst shape it's been in since the Great Depression, according to a report by economist Charles McMillion. While the report primarily focuses on Michigan's "eight-year depression," it also presents a picture of the broader U.S. economy that explains why radically different economic policies are so desperately needed.

Among the findings in the report:

• The total number of U.S. jobs increased by only 4.1 percent from July 2000 to July 2008, the weakest eight-year period of job growth since 1930-1938. The loss of 3.8 million manufacturing jobs, a decline of 21.9 percent, is the worst on record.

• Total U.S. gross domestic product from the second quarter of 2000 to the second quarter of 2008 grew by only 18.8 percent, the weakest eight-year period of economic growth since World War II demobilization from 1945 to 1953, when growth was just 16.4 percent.

• Ratios of federal and household debt to GDP, to disposable incomes, net worth and every other financial indicator, have soared to far above any past levels even during World War II. Total federal debt soared by $4 trillion ($9.7 trillion) while household debt, including mortgages, rocketed by another $7.2 trillion (to $14.6 trillion). This combined $11.2 trillion in new debt stimulated just $4.4 trillion in nominal GDP growth and just 5.1 million in new U.S. jobs—or $2.2 million per job.

• Along with record debt levels, total U.S. household savings from current after-tax income have virtually disappeared. The total savings rate over the past eight years is just 1.3 percent; less than half the 2.9 percent average rate from 1929 to 1937. Over the past four years, the average savings rate is just 0.5 percent, about one-third of the 1.4 percent average rate even during the worst four years of the Great Depression.

These trends are magnified in Michigan, where offshoring in the automotive industry has led to the loss of 489,000 jobs in the state since 2000. Average annual compensation per job in the state has declined 33 percent, as manufacturing jobs have been replaced by lower-paying service jobs. The state has lost $8.6 billion of annual production to China.

McMillion concludes:

"Michigan’s worsening eight-year depression, the weakest overall U.S. economy in 55 years, and the unprecedented mountain of unsustainable debt accumulated in recent years demand forceful and immediate measures on the scale of those undertaken in 1933. Continued failure of political leaders to address these urgent matters with appropriate industry and trade policy actions could have lasting consequences for Michigan, for the U.S. and for the world economy."