Nation editor-at-large and host of MSNBC’s All In with Chris Hayes.
I was in the East Room of the White House last night for the press conference. I was, alas, not one of the 13 journalists given an opportunity to ask the president a question, though I had a real zinger ready (Mr President: don't you think poor people should be doing more to help out Wall Street?).
Anyway, a few scattered thoughts:
1) Not one question about the trillion-dollar toxic asset program. This really stunned me. On the very slim chance I was called on, I had prepared a few questions about the rescue but figured that if I were called on the topic would be pretty exhausted by then, so also prepped a few about the defense budget and incarceration rates. But remarkably, no one asked about it. Why? My sense is that most political reporters (the people who were in the room, and got to ask questions) can't really make heads or tails of it either way. In their defense: it's complicated! I'm struggling to make sense of it, too. But it just seems crazy to me that the day after the White House announces a very complicated, high stakes and possibly expensive plan to remove toxic assets from bank balance sheets, the President is not asked about the details of the plan.
2) Why the president needs authority to take over non-bank financial institutions. I thought the first question, from the AP reporter was pretty good: why should we trust the government to take over big non-financial institutions. I also thought the president's answer was fairly smooth and fluent. But upon close inspection, it didn't make much sense. He praised the FDIC's capability to take over insolvent depository institutions, and their competent management of the process recently. But of course, the five largest banks, the one's many think are insolvent and need to be nationalized are all (thanks to deregulation!) depository institutions. It would seem to me the FDIC can already take the over. As for AIG, he noted, correctly, it's an insurance company and that there was no authority to take it over, which is part of the reason the situation's a mess. But authority or no, we *did* take it over. The Federal Reserve purchased 80% of the equity in the company. So under what authority did they do that? This is not to say I don't think the WH is totally correct to want the authority in advance to be able to take over firms that pose systemic risk. I just thought the explanation last night was a bit muddled.
3) The press' obsession with deficits. Look: deficits are important. You can't always and forever borrow a ton of money at low rates and keep amassing debt. Fine. Stipulated. But I continue to be amazed by how obsessively the press focuses on the deficit and debt. During he campaign, you had debate moderators attempting to browbeat the candidates into embracing totally crazy-ass neo-Hooverism in the face of a massive drop-off in demand. Now you have reporters pressing the White House on deficit projections for the out-years based on very low GDP growth projections. (If growth is as low as the CBO says, we'll have bigger problems than a deficit). Part of the reason for this is that "fiscal conservatism" is a weird Beltway religion (except when defense is the issue). Even though it's meaningless, and, at its core, reactionary (it's a way of saying government is too big), it is just part of the general worldview/frame of political reporters.
Second, there's the problem that we are operating under fairly unique macroeconomic circumstances, what Paul Krugman calls "depression economics." When you're in the midst of this kind of demand collapse, you really /can/ have a free lunch, Milton Friedman's infamous dictum notwithsanding. The press hasn't figured this out yet.
Finally, the complexity of the substance of a $3.6 trillion budget is just staggering. To ask a question about the policy mechanisms and implications on the spending or revenue side of it, you have to have some expertise and facility with policy. Most political reporters don't have a ton of that. (And that's not necessarily a knock. If you're a daily political reporter, you're working pretty hard just following the day's news cycle and producing something for your outlet) What everyone can understand is a simple figure of how much more the government is spending than what it's taking in.
A Democratic politician once said of Arlen Specter that he's "always there when you don't need him." Well, the Employee Free Choice Act, was one place where we did need him. He was the lone Republican co-sponsor and the lone Republican who voted or cloture last time it came up. Today he recanted.
"The problems of a recession make this a particularly bad time to enact Employee's choice legislation," he said. "Employers understandably complain that adding a burden would result in further job losses. If efforts are unsuccessful to give labor sufficient bargaining power through amendments to the [National Labor Relations Act] then I would be willing to reconsider Employees choice legislation when the economy returns to normalcy. I am announcing my decision now because I have consulted with a very large number of interested parties on both sides and I have made up my mind."
The rationale is bullshit, of course. (The NLRA was passed in the depths of the Great Depression, let's recall) What really happened is that he got metaphorically waterboarded by the US Chamber of Commerce. So that's that.
I feel like every day the scales fall further from my eyes in terms of just how much the currently entrenched powers will fight to maintain their advantages. Also: can we please get rid of the filibuster?
Laura Dean attended the local Take Back the Economy protest today and files this dispatch:
Quite a crowd had gathered outside AIG's K street offices despite the dreary weather for today's "Take Back the Economy" rally sponsored by the SEIU, MoveOn and ACORN among others. The action was one of over a hundred scheduled across the country to protest the AIG bonuses and corporate excesses.
There were hoarse chants and lively percussion – everyone shook cans of change chanting, "AIG! You can't hide! We can see your greedy side!"Young organizers in purple union hoodies joined seasoned members who bellowed new chants when energy lagged, inspired passersby, and even Rocky Twyman, founder of Prayer at the Pump.
Anastasia Christman, one of the organizers, expressed outrage over the AIG bonuses while "autoworkers, firemen and policemen are having to break their contracts" and go without – an issue we should perhaps hear more about when AIG complains that their hands are tied due to "binding contracts."
Eventually the group assembled in front of an enormous "reality check," made out to AIG for "billions" signed by "taxpayers." The crowd heard from Joan Nemoth, an SEIU member, who described her 14-year struggle for healthcare, before she joined the union. "But there are others" she said, and that's why we need "to pass the Employee Free Choice Act."
Then came SEIU chairman Andy Stern, who denounced the recent spate of anti-EFCA conference calls hosted by TARP recipients, reserving particularly choice words for Citibank and B of A. "We don't need restitution," he said, "we need prosecution!" And entered the building to dispatch the check. When he emerged the crowd continued down K street to make their sentiments known at several of the other banks around town – their first stop: Citibank.
I think there's a fascinating cultural difference between the way that Democratic politicians view the progressive base (as something to keep distance from, to be triangulated against) and the way Republicans view the conservative base (something to be paid regular tribute)
Lester Feder catches an interesting example of this dynamic in action while talking to Chuck Grassley:
Rush Limbaugh, Fox News, and others recently launched a smear campaign against a provision in the stimulus bill designed to gather research that will help doctors and patients choose the treatments that work the best, and avoid unnecessary spending. This, said Fox, "appear [s]to set the stage for health care rationing for seniors, new limits on medical research, and new rules guiding decisions doctors can make about your health care."
At an event this morning at the Kaiser Family Foundation, I asked Senator Chuck Grassley (R-Iowa)--who, as the ranking minority member of the Senate Finance Committee, arguably has more influence on the fate of health reform than any other member of his party--whether such distortions from the right-wing noise machine will make it harder to get the bipartisan compromise he says he wants. Though the senator endorsed this kind of effectiveness research, he paradoxically also encouraged conservative commentators to keep doing what they're doing:
"I think they ought to hype them right now because people's attention needs to be brought to it, and that's the only way you're going to get their attention. When the dust settles, they won't have a leg to stand on and we will have and we will have a study and a tool that will be useful for doctors to use but not to dictate medicine."
In other words: it's politically beneficial for us to have propogandists who lie and distort the truth because it increases our room to politically maneuver.
As promised here's my comment in this week's issue on the AIG bonus issue. It's behind a sub-wall, but I'm just gonna yank it out and post it here:
The infamous letter from AIG CEO Edward Liddy to Treasury Secretary Tim Geithner--the one in which he informs the good secretary that whatever the administration's preference might be to the contrary, the company will be paying $165 million in bonuses to its financial products division--is destined to be studied years from now as the perfect text for this strange moment in American capitalism. Facially supplicant yet substantively defiant, its rhetorical posture is that of a bank robber who calls the teller "ma'am" before asking her calmly to put the money in the bag. "On the one hand, all of us at AIG recognize the environment in which we operate and the remonstrations of our President for a more restrained system of compensation for executives," Liddy writes. (Nice touch, the use of "remonstrations" to describe the president's attempts to rein in Wall Street with moral suasion.) "On the other hand, we cannot attract and retain the best and brightest talent to lead and staff the AIG businesses--which are now being operated principally on behalf of the American taxpayers--if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury." This is the language of someone who has sized up what an organizer would call "the power relations" and believes they are balanced in his favor.
The question is, Was his calculation correct? At this writing, Liddy is appearing before Congress, sitting in the proverbial hot seat. On Capitol Hill there is unanimous agreement that the proposed bonuses are an intolerable insult to taxpayers. They certainly are. But one learns to mistrust unanimity in Washington. There's something vaguely redolent of the earmark foolishness in the dramatic expressions of anger from elected officials--what might be called the Law of Small Numbers. When it comes to money, trillions of dollars is a statistic, but $165 million is an outrage. Then there's the fact that much of Washington, including, sadly, the Obama administration, was complicit in setting the stage for this drama. Ron Wyden and Olympia Snowe co-sponsored an amendment to the recovery act that would have required TARP recipients to pay back bonuses in excess of $100,000 or face tax penalties. It was mysteriously removed from the final bill just before passage. Geithner and Larry Summers, meanwhile, have both reportedly worked internally to water down statutory limitations on executive compensation for bailed-out firms.
I'd bet against AIG's financial products traders keeping their bonuses: public outrage is running too high. But then what? The power imbalance is the fundamental problem, and it remains. At a Nation-sponsored panel on the financial crisis in New York City on March 6, an audience member asked, "Why aren't people in the streets?" There are a number of answers: the capital-L, to-the-streets Left is withered. The absolute level of privation doesn't begin to approach the mass starvation and immiseration of the Depression. The whole goddamned thing is so complicated, no one's quite sure what to make of it.
Perhaps, though, AIG overplayed its hand. Perhaps it has catalyzed something. A coalition of progressive groups including MoveOn, SEIU and ACORN has announced Take Back the Economy protests at banks and corporate headquarters across the country on March 19. Another group of activists have set up a website, A New Way Forward (anewwayforward.org), to facilitate the organization of grassroots protests in favor of bank nationalization on April 11. Their slogan--Nationalize. Reorganize. Decentralize.--represents the first attempt to distill the intimidating complexity of the financial rescue into a straightforward popular demand. And power, as Frederick Douglass so sagely observed, concedes nothing without a demand.
Like everyone I've been following the AIG brouhaha, though with more than a bit of skepticism at the howls of outrage from the political class. (I have some more extended thoughts in this week's issue, which should be up soon). Now that it seems that voiding the contracts is too difficult legally, congress is proposing to tax the bonuses at 90%Q. I kind of like the politics of this, if only because it will force the GOP to put their money where their mouths are: if they're as outraged as they say, they'll have no problem ignoring Grover Norquist and Rush Limbaugh and voting for the tax.
But Dean Baker also floats what might be a simpler, cleaner solution: just make what's left of the AIG equity-holders pay for it.
Lots, lots lots going on, as the budget begins to wend its way through both houses. Greg Kaufmann has the goods:
This Week on the Hill
The Senate will take yet another shot at a federal lands package leftover from 2008, which has thus far been tied in procedural knots thanks to senator Tom Coburn.
The House will take up the GIVE Act this week. The bill would more than triple the number of AmeriCorps volunteers from 75,000 to 250,000 and increase the education reward to $5,350 for next year. It also would create a summer service program for high school and middle school students with a $500 stipend to go towards college costs.
There are about a gazillion hearings on the Hill this week. According to CongressDaily,House Appropriations subcommittees alone will hold 20 as they work towards a goal of passing the House budget resolution for FY10 the week of March 30.
If you want to see testimony against big defense cuts, a whole bunch of Generals will be appearing before both the House and the Senate -- we're talking the Commands for the following: Southern, Northern, Pacific, Africa, Transportation, Strategic, Republic of Korea/United States Combined Forces, Army Medical, and Joint Forces.
Here are some defense hearings that might get into some arguments for significant defense cuts: the House Budget Committee on Defense Dept.'s FY10 Budget includes the GAO which found cost overruns of at least $300 billion for the top 75 weapons systems in 2008; an Appropriations subcommittee looks at the Nuclear Weapons Complex with progressive Philip Coyle offering counter-arguments to the National Nuclear Safety Administration; advocates for the Future Combat Systems Programs will appear before a House Armed Services Subcommittee which CongressDaily says "has tried every year to trim money from the program's budget"; look for Michael Krepon of the Henry Stimson Center to provide a voice of reason at a hearing on Space and US Security; finally, the House Committee on Foreign Affairs examines the DoD's Expanding Role in Foreign Assistance and one senior committee staffer says it will be "lively."
House and Senate Committees continue to work at health care legislation. The Committee on Energy and Commerce looks tomorrow at "Ensuring Affordable Coverage". Other health care hearings include Military Suicide Prevention and "Closing the Health Gap of Veterans in Rural Areas".
In finance, the hearings that will get a lot of press are on Ponzi Schemes and Offshore Tax Evasion and on AIG's Bailout and Impact on Global Economy. Both the House Financial Services Committee and Senate Banking Committee will look at how to revamp Oversight of Systemic Risk in financial firms. Senate Banking will also look at Current Issues in Deposit Insurance. The House Judiciary will examine the notion of "Too Big to Fail" and the role of antitrust law in government-funded bank consolidation. The House will also look at oversight of both the Stimulus and TARP.
Other notable hearings include House Appropriations on Livable Communities, Transit, and Green Practices; House Education and Labor on Early Childhood Development policy; and House Homeland Security on Human Trafficking Recent Trends.
From Greg Kaufmann:
This week Congress finished -- finally -- some leftover business from the Bush era. After fights over earmarks, automatic pay raises, and anything else Republicans thought they could score points with, the Senate finally approved the $410 billion FY09 omnibus spending package and President Obama signed it. There were indeed more than 8,500 earmarks costing over $7.7 billion -- $4.6B sponsored by Dems and $3.1B by Republicans. Obama said that moving forward earmarks should be disclosed on the web and those for private, for-profit companies should be open to competitive bidding. Sen. Russ Feingold and two Republicans -- Sen. John McCain and Rep. Paul Ryan -- went further than that. They introduced legislation to give Obama a limited line-item veto for a new War on Earmarks.
Sadly, another piece of legislation from the Bush Days remains in limbo. A federal lands package -- combining 166 bills -- would set aside more than 2 million acres as protected wilderness and 100 miles of wild and scenic rivers. Last year Sen. Tom Coburn -- the Grim Reaper of Senate legislation -- stalled it. The Senate approved it this year but in a parliamentary twist this week the House fell just two votes shy of the 2/3 majority it needed (under suspension of rules which allow a vote without amendments). According to CongressDaily, Democratic leaders are now working on a strategy that would allow the bill to pass the House with a simple majority.
The much anticipated Employee Free Choice Act was introduced in the House by Rep. George Miller and in the Senate by Tom Harkin. The Senate doesn't have the 60 votes it needs yet to beat a Republican filibuster, and the House won't take it up until it passes the Senate. Harkin said he would like to see the bill on the floor as early as late April but Sen. Harry Reid has said it won't come up until the summer.
This week was packed with efforts at rebuilding our financial regulatory architecture. Sens. Chuck Schumer and Dick Durbin introduced legislation to create a consumer protection agency for financial products such as predatory loans. The idea was first conceived by Elizabeth Warren, Harvard Professor and Chair of the Congressional Oversight Board for TARP.
A House Financial Services subcommittee instructed the SEC to come up with "new guidance" within three weeks on revising "mark-to-market" accounting rules, which require banks to report the current market value of assets. The banks would like to replace that with fictitious market value.
Frank is very clear on restoring another rule -- the "uptick rule." This regulation was adopted after the market crashed in 1929 and eliminated by the SEC in 2007. It only permitted short-sales when the the last movement of the price of the security was up, thereby eliminating the ability of shorts to single-handedly drive down a stock price. Although Frank was hopeful the change could be made within a month, according to The Boston Globe the SEC said it could be "months away." (In other Frank news, it's worth checking out this fun, intelligent and tough press release he sent out this week.It looks back at the causes of the financial meltdown and defends against recent Republican attacks on him.)
Sen. Bernie Sanders introduced legislation that would cap credit card interest rates at 15 percent. He noted that banks receiving taxpayer money with one hand are slapping consumers with the other -- charging heavy fees and usury rates as high as 30 percent. "What Wall Street and these credit card companies today are doing," he said in a floor statement. "is really not anything different than what gangsters and loan shark artists do who break people's kneecaps when they don't pay back -- except these bankers have three-piece suits…."
The House-approved bill allowing bankruptcy judges to reduce mortgage principals seems to be stalled in the Senate. According to CongressDaily, "11 Democrats have major concerns… and Senate GOP leaders feel confident about stopping the measure." Sens. Durbin and Schumer have moved on from negotiating with the big banks like Citigroup and are now looking for support from the credit unions to gain their colleagues' endorsement.
In other Obama Administration news, the announcement of the new drug czar-nominee -- Seattle Police Chief R. Gil Kerlikowske -- signaled a shift towards treatment rather than incarceration for nonviolent drug offenders. Vice President Biden also spoke of an "emphasis on alternative drug courts," according to the Washington Post. Greg Berman, Director of the Center for Court Innovation, told me: "I think it is another sign that the Obama Administration intends to chart a very different course when it comes to the administration of justice…. All of the signs… seem to point in generally the same direction: that the years ahead will see a renewed investment in innovation and rethinking business as usual."
Another nominee -- Charles Freeman for head of the National Intelligence Council -- withdrew from consideration amidst much controversy. Opponents questioned financial ties to China and Saudi Arabia as well as his positions on Israel-Palestine issues. Freeman himself blamed "the Israel lobby" and its "utter disregard for the truth."
Finally, the EPA proposed a new reporting system for 13,000 facilities that are responsible for 85-90 percent of US greenhouse gas emissions.
Word is official that the Atlantic's Ross Douthat will get the coveted Times Op-Ed slot left vacant by Bill Kristol. Notwithstanding my desire to see more women on Op-Ed pages (and in the pages of the Nation!) I think this fantastic choice. I consider Ross a friend, so you can take this with a grain of salt, but he's genuinely principled and thoughtful. He's a very fine writer, and always interesting to read. He believes in a lot of things I think are misguided or, particularly on social issues, just flat out, irredeemably wrong. But that's the nature of political disagreement, and Ross' particular brand of conservatism really is both difficult to precisely classify and genuinely, deeply, "conservative" in the sense that it carries with a kind of wistful sorrow at the fallenness of the modern world. Here's an excerpt of a review I wrote of his first book:
But what permeates the book is a sense that the Harvard he had expected to be a "scholarly island, a place in the world, but not of it, like the monasteries whose power and dignity universities long ago usurped" is instead a kind of glorified pre-professional school where students are caught in the adult rat-race before they even turn 20. If meritocracy is a parody of democracy, as the Christopher Lasch epigram that opens the book reads, then Harvard, in Douthat's view, mirrors our money- and power-obsessed society: students climb over each other to gain acceptance to exclusive clubs, embezzle student association funds and even engage in campaign finance violations during student elections, followed by a full-out Clinton-style impeachment frenzy. All of this, Douthat argues, is the result of a school culture that, like the culture at large, worships success above all else. Because the entire ethos of Harvard, from its administrators to its students to the author himself, is so caught up in the pursuit of worldly success, Douthat fears the living wage movement was "trying to put a Band-Aid on a machete wound--a wound that wasn't Harvard's bottom-line mentality but an entire system of selfishness in which our university was just a small wheel turning within larger ones."
I think this captures what I like best about Douthat: his conservatism has within it a healthy skepticism for many of the trappings of modern capitalist society.
Simon Johnson, the former IMF economist has become the Lil Wayne of meltdown commentary. He's everywhere: This American Life, Fresh Air, TPM, etc. And I've found him incredibly persuasive and lucid on all things meltdown related. But there's something that's been nagging me. One of Johnson's standard lines about the crisis is that receivership/nationalization would be the standard IMF prescription in this case if it were any other country. But my sense-- and I know this is controversial terrain -- was that the IMF *really* screwed up its management of financial crises around the globe in the 1990s. when Johnson was working there. Which makes me not exactly heartened to hear that nationalization is the IMF prescription in our case. Thoughts?