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George Zornick | The Nation

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George Zornick

George Zornick

Action and dysfunction in the Beltway swamp. E-mail tips to george@thenation.com

Lobbyist Parties at RNC Narrowly Skirt Ethics Rules

The convention stage may have been empty on Monday, thanks to Hurricane Isaac, but the corporate money machine grinded on as special interests with business before Congress put on swanky gatherings for key lawmakers.

It’s actually against Congressional ethics rules for lobbyists to throw parties for lawmakers at the national conventions—thanks to a 2007 reform bill passed in the wake of the Abramoff scandals—but Monday night showed that the system can easily be gamed.

For example, only about a half-mile from the Tampa Bay Times Forum, a collection of big transportation companies threw a party for transportation “leaders” in Congress. Actually, to be technically accurate, a front group called GOP Convention Strategies sponsored the party—and that’s how everyone involved avoided violating ethics rules. Since GOP Convention Strategies is not a registered lobbyist, it was free to throw a party for whomever it wanted. But it was crystal clear to everyone involved who was paying for the party, and what the goal was.

For $20,000, a corporation could “sponsor” the GOP Convention Strategies event, which would get it prominent placement on all advertising and marketing for the party, as well as twenty-five tickets to the party and a chance to address the crowd personally. This presented any interested transportation company (and its lobbyists) the opportunity to meet and glad-hand key lawmakers from the House and Senate—the exact same thing the 2007 law was trying to outlaw. “In reality, lobbyists are behind this party, but the ethics rules are too porous to recognize the reality,” said Craig Holman of Public Citizen.

Outside the event, which was held at Stump’s Supper Club in the Channelside district, there was a prominent sign that said “THANK YOU” above the logos of many major transportation companies, including BNSF Railways, Canadian National Railway, Norfolk Southern, Expedia and several others. (No advertising for GOP Convention Strategies, though).

I spotted Representative John Mica, chair of the House Transportation and Infrastructure Committee, holding court on the patio before the event began. His committee passed out a massive transportation bill this year that was repeatedly slammed as a massive giveaway to special interests. (“This is an earmark for a handful of wealthy people who own these companies. This is a windfall,” a transportation union official told the Huffington Post.) Among many heinous provisions, his committee’s version stripped rail-industry workers of federal minimum wage and overtime protections. Rail companies—the very ones sponsoring this party—often pay workers only the minimum wage, and many employees are forced to work long hours during long-distance hauls.

Senator Jim Inhofe, the ranking member and potential future chair of the Senate Public Works Committee and a key figure in getting that transportation bill through the Senate, was also there. I caught him coming out of the party after about ninety minutes inside, and he amiably said he had a “great” time. I asked who was throwing the party, and he responded “it’s a transportation thing. Transportation industry.” I asked if he spoke with any lobbyists, and Inhofe said “it’s funny, I don’t remember meeting many,” before his staff shooed me away. (And called me a “punk” for good measure).

This is hardly the only party of this nature in Tampa Bay this week. The calendar is full of them, each carefully calibrated to avoid violating ethics rules—the storm may stop the speeches, but won't stop the all-important cash from flowing. 

Hundreds Protest Bain-Owned Corporation in Tampa Over Low Wages

Far away from the glistening convention center in downtown Tampa Bay on Monday, there was a battle over the minimum wage as throngs of workers and progressive activists marched in driving rain outside the corporate headquarters of Bloomin’ Brands, a mega-restaurant chain owned by Bain Capital.

Nearly 200 protesters arrived at a corporate park about five miles from the convention site in the late-afternoon—only to find a massive police presence that included two helicopters circling overhead. Police and private security officers asserted that Bloomin’ Brands did not want anyone on the property and even tried to remove reporters from a public sidewalk before relenting.

When the protesters arrived, the marched in circles chanting “How many millions do you need? We've got hungry mouths to feed!” and holding up homemade signs against the soaking rain, as a perimeter of police watched. Bloomin’ Brands is the Tampa-based owner of Outback Steakhouse, Carraba’s Italian Grill, Bonefish Grill, Fleming’s Steakhouse, and other restaurant chains, and is valued at $1.29 billion. (Bain Capital stands to earn a 88 percent return on its investment in Bloomin’ Brands, which it purchased in 2007).

Those restaurants frequently only pay the minimum wage, both for tipped and non-tipped workers. In Florida and Arizona, Bloomin’ Brands actually helped lead an effort to lower the prevailing state wages for tipped workers to the federal minimum of $2.13. This didn’t sit well with the minimum wage-earners at the protest. Simara Martinez, of Boston, MA, recently quit her job at Dunkin’ Donuts where she was paid the minimum wage for one year, before receiving only a 50-cent hourly raise. “It just doesn’t cut it, for myself or even for the house. We’re still struggling,” she said. “We pay market rent, and it’s not helpful. And I do a whole lot for the money that I get. I train people in my job.”

Though Mitt Romney was not a part of Bain Capital when it acquired Bloomin’ Brands, Martinez said she felt he is part of the same corporate philosophy. “I see the jobs he’s trying to create and now he’s trying to become president. I just don’t think that he’s going to do a good job,” she said. “He doesn’t know what it’s like to live a lifestyle where like you’ve got to feed your family and you’ve got to live paycheck to paycheck, and he doesn’t understand that.”

Others at the protest had better-paying jobs, but traveled to Tampa Bay with the help of community organizers to lend support to the effort. “I’m retired, and thank god I had a good pension, and my wife has a good job. That’s what I want for my kids and grandkids,” said John Dougherty of Latrobe, PA. “I was blessed. My generation was blessed. But if you make 7 and a quarter an hour, you make a little over $15,000 a year. How can you live on that?”

After about 30 minutes, the protesters loaded back into buses and headed seven miles away to protest a dinner for the Republican Governors Association. A helicopter overhead tracked them the entire way. 

GOP Concern for Disaster Preparedness Doesn't Extend Beyond Tampa

When the edge of Hurricane Isaac brushes Tampa Bay today, the Republicans gathered here for the national convention will be ready—events have been canceled, speakers reshuffled and the convention staff “is working around-the-clock to ensure the delegations housed in storm-impacted areas have alternative housing if needed.”

This may not have been necessary, as it’s been clear for more than twenty-four hours that the storm is shifting away from the area; blue patches of sky were even visible over the city this morning. But the party is clearly sensitive to evocations of Hurricane Katrina, which top Bush advisers viewed as “the final nail in the coffin” for the Bush-era GOP after the administration failed to respond properly. (“Ghost of Katrina hangs heavy as Romney readies for convention,” reads a headline in today’s Washington Post.) So Republicans are willing to sacrifice their carefully planned itinerary in the name of appearing responsive and sensitive to the impact of major storms.

This, to be clear, is purely optical. Since assuming control of the House, Republicans have consistently played dangerous politics with disaster relief funds and slashed the budgets of storm monitoring agencies, thereby executing the same small-government-at-all-costs mentality that led to widespread destruction in New Orleans. They may go to great lengths to assure the safety of party delegates in Tampa Bay, but they have not shown the same compassion for storm victims in the rest of the country.

When the GOP nominates Paul Ryan as its vice-presidential candidate on Wednesday night, they will be putting a man who proposed steep reductions to disaster relief funds in his most recent budget—restrictions so radical that GOP appropriators in the House disobey them. Ryan proposed that Congress adhere to the debt-ceiling limitations, and not spend over them when appropriating disaster relief, but instead make cuts elsewhere to pay for them. This is the same “morally reprehensible” approach to disaster relief funding taken by House Republican leaders last summer: even as Hurricane Irene bored down on the eastern seaboard, Congressional Republicans threatened to withhold disaster relief funds if offsetting cuts were not made elsewhere in the federal budget. Holding federal disaster relief hostage to political food-fights was a truly unprecedented move.

Republicans have also continued to starve the Federal Emergency Management Agency of the money it needs to respond to natural disasters. It held FEMA hostage to the same budget battles last summer, withholding money until cuts were made elsewhere. This brought the agency literally to the brink of bankruptcy, and it was even forced to temporarily suspend relief efforts in Missouri and elsewhere last summer as the dispute raged on in Congress.

Federal agencies that monitor storms have also been targeted. The funding resolution passed by Republicans in early 2011 specifically cut funding for the National Oceanic Atmospheric Association by $454 million from the president’s request. The National Weather Service, part of NOAA, saw a $126 million reduction.

Even at the state level, the party hasn’t been kind to funding victims of natural disasters. Under Republican Governor Rick Scott’s most recent budget, “Florida may not have enough money to pay off hurricane insurance claims if a big storm hits this year.”

The Progresssive Change Campaign Committee is running a web advertising campaign today in Florida, asking people to hold the GOP accountable for playing politics with disaster relief. Congregants to the convention will surely decry the nasty federal government countless times this week—but would they really rather there be a feeble National Weather Service to monitor storms, or an underfunded an agency like FEMA to help respond? Because that’s what many of the people up on stage are fighting for.

JPMorgan Starts Buying Congress Again

When the “fail whale” breached at JPMorgan earlier this year, creating billions in embarrassing losses as a result of risky trading, the bank immediately ceased its political giving. Not that the bank didn’t need help from Congress—it certainly did, but a long history of donations to key committees bought CEO Jamie Dimon friendly audiences during hearings exploring the losses. Rather, the bank realized that while on the hot seat, the donations were tainted and likely unwelcome in Congress.

But in a clear indication that JPMorgan’s seat has already cooled considerably, the bank is once again doling out the cash. On July 31, JPMorgan PAC wrote ten checks to the PACs of ten members of Congress, many of them key members of committees with the power to stop the risky trading that created the multibillion-dollar losses at the federally insured bank this year.

Nine Republicans and one Democrat split $36,000 from JPMorgan Chase & Co. PAC in roughly equal amounts. They were:

  • Senator Mike Crapo (R-ID)

  • Senator Bob Corker (R-TN)

  • Senator Pat Roberts (R-KS)

  • Representative John Carney (D-DE)

  • Representative Lynn Westmoreland (R-GA)

  • Representative Ron Kind (R-WI)

  • Representative Patrick McHenry (R-NC)

  • Representative Steve Stivers (R-OH)

  • Representative Scott Garrett (R-NJ)

  • Representative Pat Tiberi (R-OH)

Virtually none of these members are facing competitive races this fall. (Though their leadership PAC can distribute the money to colleagues who are). However, each of the Representatives sits on the House Financial Services Committee, except Tiberi, who is on House Ways and Means. Each senator is on the Senate Banking Committee, except Roberts, who sits on the Senate Finance Committee. These committees exercise oversight over financial reform implementation and the financial services industry needs them on it’s side.

It is crucial to watch the bank’s lobbying and influence efforts going forward—this certainly won’t be the last of them—and more importantly, what it buys the industry. Before the fail-whale catastrophe this year, several bills that would gut derivative reform were ready to move in the House, but were frozen by the scandal.

Lisa Gilbert, acting director of Congress Watch at Public Citizen, said that “Financial reform advocates will be watching to see whether supporters of these efforts think it’s now ‘safe,’ not only to take JPMorgan’s money but to go back to deregulating the derivatives markets.”

Akin Fiasco Gets Rove to Admit, Again, Why Crossroads Exists


Karl Rove, former chief political adviser to former President George W. Bush, gestures as he addresses members of the Virginia Chamber of Commerce in Williamsburg, Va., Thursday, Dec. 2, 2010. (AP Photo/Steve Helber)

Karl Rove’s Crossroads GPS is allowed to spend unlimited amounts of money on attack ads in battlegrounds states—without ever disclosing a single donor—because it has protected status as a 501(c)(4) nonprofit organization. Unlike Super PACs, which must disclose donors, Crossroads GPS and other groups don’t have to disclose because they supposedly don’t have political activity as a primary purpose, and therefore are allowed to protect their funding sources.

But this is one of the Big Lies in American politics. Of course the primary purpose of Crossroads GPS—which is run by former high-level Republican Party officials—is to influence elections. In recent months, there’s been increasing pressure on the IRS to call the bluff: Congressional Democrats wrote a letter to the agency asking it to reconsider the tax status of Crossroads GPS and other groups, and nine Republican senators quickly responded with an ominous letter to the IRS warning it not to act.

But Crossroads GPS’s decision to pull television advertising in Missouri in the wake of Republican Senate candidate Representative Todd Akin’s abhorrent comments about rape and pregnancy are (another) bold admission of why the group really exists.

Crossroads GPS is a major player in the Missouri Senate race—it has spent $5.4 million already, which more than doubles the $2.2 million spent by Akin’s actual campaign. The ads “seek to paint [Democratic candidate Claire] McCaskill as a big government-loving, tax-increasing liberal” and hit her for voting to increase the debt limit, among other things.

Under the law, Crossroads GPS and other 501(c)(4) can’t expressly advocate for or against the election of a specific candidate—it can intervene in political races “as long as its primary purpose is the promotion of social welfare” (and then no more than 50 percent of its total activities should be such interventions). Ostensibly these ads are educational—telling voters about issues at stake in a race, but not backing a particular candidate.

But after Akin made his horrific comments about “legitimate rape,” Crossroads GPS announced it was pulling all advertising. “The act speaks for itself,” Crossroads spokesman Nate Hodson said.

This obviously vitiates any argument that the ads are simply to promote social welfare—that, say, the most recent spot is simply meant to educate voters about the national debt. What has changed about McCaskill’s vote on the debt limit? Nothing. What has changed is that suddenly the Republican candidate in that race is viewed as unelectable by basically the entire political establishment—and now Crossroads doesn’t want to spend any more money there. That act speaks for itself, indeed.

Schneiderman Launches Inquiry Into Outside Political Spending

This was the most expensive week in American election history, and it’s only August. Outside groups are pumping millions into swing-state advertising, which is targeting Democratic candidates over Republican ones by a ratio of seven-to-one. Much of this air war is being launched by nonprofits that are not required to disclose donors, and enjoy special tax exemptions on top of it. This is where most corporate spending goes—big companies are reluctant to fund Super PACs, which must disclose their donors.

Today, the New York Times reported that New York Attorney General Eric Schneiderman has launched an inquiry into how these nonprofits operate—and whether they should be allowed to retain their secretive, tax-exempt status. To qualify for that, the groups must have “social welfare” as their main purpose, not influencing elections.

Schneiderman has authority over many of them since they do business and raise substantial amounts of money in New York State. He is asking several groups—including Karl Rove’s Crossroads Grassroots Policy Strategies and Priorities USA Action, a White House–affiliated organization—for tax returns and other financial information. Reports the Times:

With New York both the center of the country’s financial industry and home to many of its leading conservative and liberal donors, that jurisdiction could give Mr. Schneiderman oversight power over many of the biggest-spending groups.

“Given how many nonprofit organizations are raising tens or hundreds of millions of dollars and evading campaign finance disclosure laws, any and all scrutiny of these organizations by regulators is a welcome development,” said Paul S. Ryan, associate legal counsel of the Campaign Legal Center, which has pushed for tighter regulations.

The letters sent by Mr. Schneiderman’s office, part of a broader look into political activities by charitable organizations, went to groups that appear to fall under those regulations but have not filed the required paperwork, according to people with knowledge of the inquiry.

The letters remind the groups that Mr. Schneiderman could, if necessary, exercise his subpoena powers, and asks them to respond to a questionnaire if they do not believe they fall under Mr. Schneiderman’s jurisdiction.

Schneiderman isn’t the first person to go after the special tax-exempt status enjoyed by groups like Crossroads GPS. Democrats in Congress and good government groups have been pressuring the Internal Revenue Service to probe the paper-thin premise that Karl Rove founded Crossroads GPS as an education organization. They have pointed to many of Rove’s public statements, like this op-ed by Rove in the Wall Street Journal just last week:

Roughly $111 million of Mr. Obama's ad blitz was paid for by his campaign; outside groups chipped in just over $20 million. The Romney campaign spent only $42 million over the same period in response, with $107.4 million more in ads attacking Mr. Obama's policies or boosting Mr. Romney coming from outside groups (with Crossroads GPS, a group I helped found, providing over half).

Right there, Rove seems to confirm that the purpose of Crossroads GPS is to influence the election. Moreoever, an examination of that and similar group’s finances would likely reveal almost everything is being spent on political attack ads.

The IRS did recently signal that it would step up scrutiny of these groups, but immediately found itself at the center of a political firestorm. Republican Senator Orrin Hatch sent the IRS an ominous letter this week, joined by nine other Republican Senators, pre-emptively accusing it of acting politically:

“We believe these petitions have less to do with concerns about the sanctity of the tax code and more about setting the tone for the upcoming presidential election, and we urge you to resist allowing the IRS rulemaking process to be subverted to achieve partisan political gains,” wrote the Republican senators. “Your letter seems to suggest that outside political pressure is actually what is triggering your agency’s considering of changes to the law.”

“The only thing missing from the Republicans’ letter is the ‘or else,’ ” said Senator Charles Schumer in a statement. “This unsubtle threat is clearly designed to put a chilling effect on the agency’s enforcement of the law. But this Washington tug of war over the IRS isn’t something Schneiderman is likely to face, which is why his effort is so promising.

It isn’t the first time Schneiderman has waded into the arena of campaign finance as attorney general, either—recall that in late June, he began investigating the US Chamber of Commerce over potential tax fraud violations relating to political spending.

It's Still Party Time at National Conventions

Grand, lobbyist-funded bashes used to be a staple of the political convention scene—in 2004, for example, Senator John Breaux threw a huge Mardi Gras–themed party at the New England aquarium during the Democratic National Convention in Boston, complete with performances by Ziggy Marley and Buckwheat Zydeco and a half-million-dollar price tag.

But in 2007, as the Jack Abramoff scandal enveloped Washington, Congress passed reforms that banned, among other things, lobbyist-funded parties at the national conventions to “honor” lawmakers.

So in Tampa Bay and Charlotte this year, the party’s off right? Not so fast.

Recently, ethics committees in the House and Senate have interpreted the law differently. While the Senate views it strictly, the House has determined that the law does not apply to parties that honor a group of members, a committee, or a caucus—only individual members. So under the House interpretation, bank lobbyists could throw lavish parties in Tampa Bay for Republicans on the House Financial Services Committee, for example, and it wouldn’t violate the guidelines.

This has prompted a collection of eight good-government groups to send letters [pdf] to lawmakers this month urging them to play by the spirit of the 2007 law, and not the narrow House interpretation:

Our organizations strongly urge you to ignore this interpretation of the new congressional ethics rule. It is nothing more than a roadmap for lobbyists and Members to circumvent the rule, and it directly contravenes the spirit, purpose and meaning of the rule.

Finally, we also strongly urge you not to participate in any lobbyist-funded party to “honor” you that is held during the weekend before or on the eve of the conventions. Your participation in any such party would be contrary to the clear spirit of the new ethics rule.

The convention proceedings, and especially the evening parties at the conventions, are going to be closely monitored by the press. Any violations of the ethics rules will likely be broadcast on television and written in the newspapers. So we strongly encourage all Members in the House and Senate to preserve the integrity of the convention proceedings, as well as the integrity of Congress itself, by honoring the spirit and letter of the new ethics rules.

The Nation will be present at both conventions, and we’ll surely be keeping tabs on who is partying with who—and most importantly, who is footing the bill.

Media Help Advance Romney's Lies About Ohio Early Voting

This weekend, Republican presidential candidate Mitt Romney launched on attack an the Obama campaign that is unambiguously based on a lie. On his Facebook page, Romney posted a note directly accusing the re-election effort of working to undermine the voting rights of military members in Ohio:

President Obama’s lawsuit claiming it is unconstitutional for Ohio to allow servicemen and women extended early voting privileges during the state’s early voting period is an outrage. The brave men and women of our military make tremendous sacrifices to protect and defend our freedoms, and we should do everything we can to protect their fundamental right to vote. I stand with the fifteen military groups that are defending the rights of military voters, and if I’m entrusted to be the commander-in-chief, I’ll work to protect the voting rights of our military, not undermine them.

The background is that, while all Ohio voters used to enjoy in-person early voting privileges for three days, Republicans in the state legislature this year restricted that right to military members only. The Obama campaign subsequently filed a lawsuit asking that the privileges be extended to all voters:

Plaintiffs bring this lawsuit to restore in-person early voting for all Ohioans during the three days prior to Election Day—a right exercised by an estimated 93,000 Ohioans in the last presidential election. Ohio election law, as currently enacted by the State of Ohio and administered by Defendant Ohio Secretary of State, arbitrarily eliminates early voting during the three days prior to Election Day for most Ohio voters, a right previously available to all Ohio voters.

The injunctive relief sought by the lawsuit is the restoration of early voting rights to all Ohioans, not the cancellation of those rights for military members. One doesn’t need to be a lawyer to understand that—any sentient reporter would get it upon reading the lawsuit in question—but just in case, legal experts have also characterized Romney’s allegations as “extremely misleading.”

Yet many mainstream political reporters are unable or unwilling to discern that a lie has been told, and say so in their reporting. Eric Alterman recently described the pernicious so-called “even-handedness” of much of the political press, and it’s on display in no clearer fashion than in this case—there is zero room for interpretation about what the Obama campaign lawsuit seeks.

Here are the first round of stories from many major outlets, however.

Romney Says Obama Lawsuit Blocks Ohio Military Voters,” from ABC News’s Matthew Larotonda:

Republicans say a lawsuit brought by Obama for America in July seeks to eliminate additional time for in-person early voting allotted to service members in the battleground state. Democrats, on the other hand, contend the presumptive GOP nominee is deliberately trying to distort the facts.

 

"Biden Calls Ohio Election Law Efforts 'Shameful'" from Time's Mark Halperin:

 

Republicans are clearly trying to use an otherwise slow Saturday to gin up a redux of their successful 2000 Florida recount gambit regarding military personnel voting rights. Their various statements and tweets are clearly just the beginning of an echo chamber effort on national security and (let’s face it) patriotism that will mirror in faux umbrage and techniques what they have done on the President’s recent remarks on small business.

 

Romney campaign calls Dem challenge to Ohio voter law ‘despicable,’” by The Hill’s Cameron Joseph:

Mitt Romney’s campaign is mounting pressure on an Obama campaign lawsuit challenging Ohio’s early voter laws, claiming it unfairly targets military personnel…. Democrats say they want all voters to enjoy the extended early-voting period, and not just those in the military…. But the optics may be damaging to the Obama campaign.

Obama sues Ohio over early voting rules,” by USA Today’s David Jackson. (This piece at least accurately describes the Obama lawsuit immediately, but outsources the charge that Romney has launched a false claim to an Obama flack.)

President Obama’s campaign has sued the state of Ohio over new rules for early voting designed to benefit members of the military, saying the extra hours should be available to all voters. That lawsuit prompted claims by Mitt Romney and aides that the Obama campaign is targeting military voters—a false claim, Obama’s team quickly responded.

Obama camp slams Romney’s claim about Ohio early-voting lawsuit,” by the Los Angeles Times’s Sheema Meta:

The suit, which Romney has seized upon to argue that Obama is trying to undermine service members’ voting rights, calls for all Ohioans to be able to cast early votes up until the Monday before election day…. A spokesman for the Obama campaign said Romney was trying to restrict access to the polls and was fabricating the notion that Democrats sought to restrict voting rights.

A good template for how to cover the dispute actually comes from Politico, which can often fall victim to phony even-handedness—but reporter Reid Epstein noted in his lead that Romney made the claim “without pointing to any evidence.” A subsequent piece by Maggie Haberman says plainly that “The [Obama] suit doesn’t actually say this.”

There are much more punishing stories that could be written about this—like how a political party clearly dedicated to restricting voting rights can have the audacity to attack Democrats for doing the same, especially when Democrats were, with that very lawsuit, trying to expand them.

But the first step is getting the facts right, and calling lies what they are—something many political reporters seem unable to do.

August Jobs Report: Modest Gains Not Enough


A job fair in San Jose, California, Wednesday, July 25, 2012. (AP Photo/Paul Sakuma)

The economy added 163,000 jobs in July, a notable uptick from the 80,000 added in June and well above the prediction that 100,000 jobs would be added. After several months of slumping numbers, it could mean the slide has been arrested—which is good news—but this is not the start of a real recovery.

We reprint this chart almost every time there’s a new jobs report, but here it is again—a stark reminder that the country sits in a deep valley of mass unemployment:

All year, the economy has been adding jobs roughly around the level needed to keep up with population gains—sometimes more, as was the case in June and earlier this year, sometimes less, as was true in the spring and early summer months.

The monthly numbers are magnified by the presidential election, which will largely turn on the economy, and the employment situation in particular. But ultimately, these monthly ups and downs are almost just static noise—and a serious policy response is desperately needed, and failing one, we’ll just keep seeing jobs reports that are just extensions of a sad status quo. “Today’s jobs report showing some pickup in job creation does not reduce the need for policymakers to implement measures to give the flagging recovery a needed boost,” said Chad Stone, chief economist at the Center for Budget and Policy Priorities. “The overall pace of job creation remains modest, and jobs remain very difficult to find for large numbers of the unemployed — a situation that likely will persist for some time.”

Unfortunately, that response remains elusive. We can guarantee it won’t come if Republicans regain control of the government in November—an analysis out this week from the Center for American Progress found that Mitt Romney’s economic plan, with deep cuts in federal spending and tax hikes for middle-income earners, would strip 360,000 jobs in 2013 alone.

Obama has a noble jobs plan calling for investment in public sector hiring and the creation of an infrastructure bank. It would create 1.9 million jobs in the first year, which is wonderful for those people and should be enacted—but 25 million people are unable to find full-time work, so more will be needed.

And just this week we saw how hard it can be for the administration to move Washington forward on jobs anyhow. The Federal Reserve declined to take any action on unemployment, despite professed concern for the economy. And FHFA head Edward DeMarco declined to throw a lifeline to underwater homeowners involved with Fannie and Freddie—those two agencies won’t be offering any write-downs despite proven benefits to both homeowners and taxpayers.

Congress, meanwhile, has adjourned without passing a farm bill, without rescuing the US Post Office, to say nothing of actually enacting real jobs legislation. (It did prepare to consider a bill making English language the country’s official language, though).

As Jonathan Chait argued powerfully this morning, the political system simply isn’t responsive to the problem of mass unemployment, which is the real and constant news peg every time these middling jobs numbers come out. “In the years since the collapse of 2008, the existence of mass unemployment has stopped being something the economic powers that be even pretend to regard as a crisis,” he wrote. “To those directly impacted, the economic crisis is an emergency, a life-altering disaster the damage from which will endure for years. But most of those in a position to address it simply have not seen it in such terms.”

It’s Time for Obama to Fire DeMarco—Will He?


Federal Housing Finance Agency Acting Director Edward DeMarco. (AP Photo/Manuel Balce Ceneta)

Fannie Mae and Freddie Mac won’t reduce the principal of underwater homeowners—FHFA head Edward DeMarco made that official yesterday. Despite the fact that FHFA analysts concluded this week that forgiving certain mortgage debts could save public money, DeMarco said yesterday he would not allow it because of the “costs and risks”—he is particularly concerned that people might strategically default to qualify for help.

This is a nonsense argument—as Treasury Secretary Timothy Geithner pointed out in a letter [pdf] to DeMarco yesterday, strategic default is an incredibly risky strategy:

A borrower who defaults cannot be certain that he and she will obtain a HAMP modification, much less…principal reduction. Therefore, a borrower would take a substantial risk be deliberately defaulting: they would have to choose to damage their credit for years to come and perjure themselves on the chance that they would be found eligible for the program.

Despite the consistent worry of financial elites, strategic default has never been a hazard in principal-reduction efforts—via Jared Bernstein, we see that nobody is strategically defaulting to get relief under the national mortgage settlement:

Few, if any, borrowers strategically defaulted to take advantage of mortgage servicer relief under the $25 billion settlement struck in March…

In fact, the percentage of current underwater borrowers moving to delinquent status, or the roll rate, shrank to 2.8% in June from 3.1% in February, a trend consistent since before a deal was reached with mortgage servicers to settle past foreclosure abuses.…

“Fitch views strategic defaults as an ongoing concern,” the credit ratings agency said in a report Monday. “That said, there does not appear to be any sign yet of a material change in the behavior of underwater borrowers attempting to strategically default to qualify for a reduction.”

But bankers always worry about these phantom defaulters. “This is something you often see among bankers and lenders who view any sort of write down as the unacceptable breaking of a contract,” notes Bernstein.

Democratic critics—who have for months been hammering DeMarco for his obstinacy—are now focusing on his apparently ideological opposition to principal write-downs. “We are five years into the housing crisis, and FHFA remains paralyzed by the fear that somehow homeowners innocently trapped in the worst economy since the Great Depression are going to weasel out of paying every penny on their mortgage that they could,” said Representative Brad Miller in a statement.

In a way, DeMarco is making his position more untenable by opposing write-downs on ideological grounds. That’s not something that can be easily rectified—as opposed to having complaints about technical aspects of the program.

Obama has the power to replace DeMarco whenever he wants. Since DeMarco is only Acting Director of the FHFA, Obama can simply nominate a permanent one. That person would have to clear a Senate confirmation vote, which won’t happen this year (but might be an interesting fight to have in an election year anyhow). Moreover, Obama could use a recess appointment to install someone else.

Progressives have been pushing hard on the White House to replace DeMarco—and now that DeMarco has dug himself in, why not do that, especially now that he has gone through the motions of considering and then denying write-downs. 

Many progressive critics of the administration correctly note that for years, the administration opposed principal reduction too, and has only recently come around to it. So was that a true policy evolution, or political theatre in an election year? Forcing in an FHFA chief who will do principal reduction—or failing to install that person—would go a long way to answering that question.

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