The Rise of the Radical Center: The Crisis of the Old Order

Jul 26, 2011Bo Cutter

Big changes are coming for Americans fed up with the crisis in governance.

Big changes are coming for Americans fed up with the crisis in governance.

Last week one of my oldest friends -- named Les Francis -- and I hosted a small dinner in Washington D.C. we called "the annual meeting of the Radical Center." Policy preferences differed. Party allegiances differed. Explanations for why we are where we are differed, but among this group -- everyone of whom had long histories of deep involvement in government and politics -- there was no disagreement on a central point: in the deficit/debt ceiling debacle unfolding before us we are seeing a crisis of governance.

This debacle is confirming -- and solidifying -- a view that has slowly been building among ordinary Americans for a long time: the Republican and Democratic parties are essentially bankrupt in a central sense of the term. They are not capable, separately or together, of governing America. The effects of this realization and conclusion will not be felt immediately -- next month -- but the avalanche has begun to move down the hill and it is going to pick up speed.

The evidence is increasingly hard to deny. Republicans have a 55% unfavorable rating by voters -- only exceeded by a 57% score in 1998 during their stupid effort to impeach President Clinton. Democrats have an unfavorable rating of 49%, their highest ever. A resounding 12% of voters express confidence in the Congress. And 62% of Americans think the country is on the wrong track. My bet is that these numbers will become worse not better between now and the 2012 election.

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But so what? Don't the two parties constitute a duopoly, so there is no real way for dissent to be registered except by not voting? Well, that may be changing.

To get a sense of this, I recommend two recent articles to you: first, Tom Friedman's column of July 23, "Make Way for the Radical Center"; and John Avlon's July 22 Daily Beast column, "The Web's Stealth Presidential Race." Both columns discuss the emergence of a new group -- Americans Elect -- which intends to do two simple things: (1) Provide ballot access to an independent bipartisan presidential ticket, which will be chosen through (2) a web based convention to be held in June 2012. I've been part of this effort for a couple of years, but that is not why I mention it here. Rather, I mention this new group to emphasize the following points: we are in the midst of a governing crisis; we are also in the midst of fundamental change in the "old order"; Americans are losing confidence rapidly in existing political arrangements; and technology now provides a way of leap-frogging the two party duopoly and going directly to the voters with a different message.

Both the necessary and the sufficient circumstances for the effective emergence of the radical center are now fulfilled. And the odds are mounting that within the next 2 presidential elections we will see political changes of the kind this country sees about twice a century.

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

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Why Republicans Will Block Richard Cordray for the CFPB

Jul 18, 2011Mike Konczal

It's not just that they don't like Elizabeth Warren. It's that they want to undo the entire Consumer Financial Protection Bureau.

Elizabeth Warren is out. And former Ohio Attorney General and current Consumer Financial Protection Bureau (CFPB) Director of Enforcement Richard Cordray is in as the nominee to head the CFPB.

It's not just that they don't like Elizabeth Warren. It's that they want to undo the entire Consumer Financial Protection Bureau.

Elizabeth Warren is out. And former Ohio Attorney General and current Consumer Financial Protection Bureau (CFPB) Director of Enforcement Richard Cordray is in as the nominee to head the CFPB.

Cordray took the problems in the foreclosure fraud crisis very seriously while in Ohio, going as far as to sue GMAC when the robosigning scandal broke last October. Here is coverage of that lawsuit from Yves Smith and David Dayen from back then. Beyond GMAC, Cordray sent letters to Bank of America, JPMorgan Chase, Citi and Wells Fargo to question their use of robosigning. I hope he is going to support other AGs like Eric Schneiderman who are currently investigating these problems further up the securitization chain. He also did a telling interview with Annie Lowrey last October. Cordray: "What we're talking about here is not just sloppy paperwork," he said. "We're talking about fraud in a court of law. The [foreclosure document signers] were lying under oath, to a judge. And there is evidence that this company has illegally ousted people from their private property, violating their property rights." Sadly Cordray lost his election with the Tea Party wave of 2010, but he did promptly land a job with the Consumer Financial Protection Bureau, which was just starting out.

Forty-four Republican Senators had already vowed to block anyone nominated to head the CFPB unless structural changes are made, and they have reiterated today that they will continue to do so. This is important as there are many things the CFPB can't do -- basically powers that aren't transferred over from another agency -- without a Director. What's their deal?

Let's back up for a second. What are the strengths of the way the CFPB is structured in the Dodd-Frank Act? There are many, especially the consolidation of consumer regulation and the focus on research. But three structural strengths stand out: it has a single director, there's been careful attention paid to its budgeting process and it is just like other regulators in terms of accountability. These three parts of the CFPB were carefully planned, designed and fought for.

In early May of 2011, 44 Republican Senators signed onto a letter written by Senator Shelby that requested three specific changes before they released the hostages confirmed any nominee to head the CFPB. The changes, quoted from the document:

- Replace the single Director with a board to oversee the Bureau. This would prevent a single person from dominating the Bureau and provide a critical check on the Bureau's authority.

- Subject the Bureau to the Congressional appropriations process. This would provide oversight and accountability to the American people on how public money is spent.

- Establish a safety-and-soundness check for the prudential financial regulators who oversee the safety and soundness of financial institutions. This would help ensure that excessive regulations do not needlessly cause bank failures.

See that? Three of its major strengths -- a director, funding, and accountability with a focus on consumer protection -- are exactly what the Republicans want to dismantle. No doubt they are trying to stall the implementation of Dodd-Frank and prevent the CFPB from doing all its work -- of course they are -- but these are three critical points where they can significantly weaken what the CFPB can do. Any leeway given on these requests would be a major problem.

The CFPB is going to have a large operation with people overseeing various parts of the regulatory framework. It's not clear what problem having a board instead of a Director is meant to solve, and it is very clear that having a board instead of a Director will throw sand into its gears. Subtly, it will reduce the Bureau's presence among all other banking regulators, as they all have a clear chief agent who coordinates the activities of the agency. Not so subtly, it'll cause in-fighting and a lack of focus during its crucial first years.

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The second change on how it is funded is a major battlefield. As Adam Levitin wrote last year in The Political Economy of CFPB Funding:

CFPB funding isn't a poorly thought-through piece of legislation; a lot of thought went into this particular issue. The concern that Congress and CFPB advocates had was that if CFPB were subject to the regular appropriations process, it would be too easy for CFPB to be strangled in the appropriations process, which is one of the least transparent parts of Congressional activity, and therefore the ideal place to ice an agency. The whole point of giving the CFPB a percentage of the Fed's overall budget was to ensure that the CFPB will always have the financial wherewithall to be effective -- consumer financial protection shouldn't be a politically dependent matter. Congress acted deliberately and intentionally to bind its own hands in the future when political winds change... The CFPB funding mechanism is based on a careful assessment of the CFPB's needs and the political economy of consumer protection... Recall that a major reason we needed a CFPB was that consumer financial protection was severely compromised by housing it in bank regulators who got their funding from banks, not through the appropriations process.

If it was funded by Congress, Republicans in Congress would try to strangle it in the dark as financial lobbyists cheered, the same way Phil "Unless the waters are crimson with the blood of investors, I don't want you embarking on any regulatory flights of fancy" Gramm did back in the 1990s to people like Arthur Levitt at the SEC.

The third change is usually phrased as a blend between accountability and goals. Again I'm going to kick it to this chart from Levitin on accountability:

The CFPB is at least as accountable, if not much more so, than any other regulatory body. It's the only regulator that the Financial Stability Oversight Council (FSOC) can veto, a disturbing development during the Dodd-Frank process that was inserted to deal with the criticism that the agency wouldn't be accountable enough (how's that going?). As I noted at the time, between Treasury, the head of the OCC, and the Fed Chair, the FSOC is likely to be bank friendly. There's already enough of an obstacle built into the very framework.

Meanwhile, consumer protection was usually treated as an orphan mission, the third or fourth most important objective for many regulators, in the pre-Dodd-Frank era. If everyone was in charge of it, then nobody was. Consumer protection is the CFPB's main focus and it consolidates this functioning from other regulators. As Tim Fernholz wrote in his paper on the CFPB for New America, "the agency's founding purpose [is] to create a single, accountable home for consumer financial protection." The GOP's change would water down its mission and divert it from its objectives, and thus significantly hurt the new agency.

The Republicans are not stupid, and these three structural changes were not picked out of a hat. Meanwhile, a lot of what the CFPB has to do won't come online without a director. Will Obama be aggressive and go with a recess appointment? According to Public Citizen, he has more discretion than we realize.

Mike Konczal is a Research Fellow at the Roosevelt Institute.

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Tom Ferguson and Rob Johnson Explain Why the Tea Party Became the Big Banks' Best Friend

Jul 12, 2011

money-question-150A year after the passage of Dodd-Frank, why is the Tea Party serving the big banks to thwart it?

It was anger at the bank bailouts that spawned the Tea Party, but now this same movement is becoming the big banks' best friend. What's up with that?

money-question-150A year after the passage of Dodd-Frank, why is the Tea Party serving the big banks to thwart it?

It was anger at the bank bailouts that spawned the Tea Party, but now this same movement is becoming the big banks' best friend. What's up with that?

Recently, our friend Robert Scheer of Truthdig reminded us that the same gigantic banks that caused the economic meltdown enjoy record-breaking profits while doing zilch for the American economy, which continues to stall and sputter. How do they get away with it? Scheer notes that the Wizards of Wall Street have turned away from Obama and are going to the Tea Party for support. And they're getting it.

In a trend that is doubtless making Lloyd Blankfein weep for joy, Tea Party-backed Republicans in Congress are furiously trying to block financial reform and the critical regulations that would prevent reckless speculation and another, possibly worse, economic meltdown. They appear determined to slash the budgets of the Securities and Exchange Commission and Commodity Futures Trading Commission. Scheer notes that the CFTC is run by former Goldman Sachs partner Gary Gensler, one of the Obama "regulators" who has specialized in thwarting proper supervision of the out-of-control derivatives market.

I asked my colleagues at the Roosevelt Institute to help me understand what the heck is going on:

From Roosevelt Institute Senior Fellow Thomas Ferguson, Professor of Political Science at U Mass, Boston:

Alas, this story is all too familiar. In the midst of a giant economic downturn, a new government comes to power. It talks boldly, but acts tepidly. Its massive policy failure discredits the idea that public authority can act effectively at all. At that point a desperate population starts looking around for saviors. In the absence of any plausible progressive alternative, many turn back to primal roots or sacred texts -- in the case of the Tea Party, the Constitution. But in a money-driven political system, cash is still king. Leaders of the "populist" uprising soon find they can do good and do well at the same time by striking deals with elements of big business that have political demands of their own.

So the deadly circle begins to close. Big sections of the population cheer on measures that insiders recognize are designed to wreck them.

There is a bright side: This process doesn't have to end as it did in Weimar or the French Third Republic. Who now recalls that Herbert Hoover's "activism" in the Great Depression was once hailed as epochal? But when the Great Engineer failed to jump start recovery and capitulated to bankers' demands for austerity, he was supplanted by Franklin Roosevelt and the New Deal. But anyone can also see the sticking point now: In 2008, the population threw out the Republicans. In 2010, it tossed out the Democrats. So who does it eject in 2012?

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From Roosevelt Institute Senior Fellow Robert Johnson:

We live in a country where the experience of decline has gone from suspected to obvious. The energy that is built up by the pain is not going to go away. In that painful state the search for culprits and blame is inevitable. The storytelling, through technique and repetition, need not bear any resemblance to the truth when the blame is affixed. Unless strong leaders stand up repeatedly to counter the false narratives, scapegoats will be determined by power, not truth.

Unfortunately, strong leaders do not arise when public officials are imprisoned by the need for money in order to survive in office. As trust deteriorates anyone who espouses a vision of "the public good" is treated like a romantic fool. Pretend rituals of statesmanship abound, i.e., deficit commissions that impose hardship on vulnerable. Elites stand around and scratch their head about why people are so angry and join the Tea Party. Why are elites confused by this? There is no where else for people to go. It reminds me of the lyric in the Leonard Cohen song "Everybody Knows", a song that may as well be the anthem for our time.

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost

Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That's how it goes
Everybody knows

Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

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To Win the Debt Ceiling Showdown, Obama Must Stand His Ground

Jul 7, 2011Bo Cutter

The President has to acknowledge that the opposition is ready to send the country into default -- and make it clear he's not interested in doing so.

The President has to acknowledge that the opposition is ready to send the country into default -- and make it clear he's not interested in doing so.

The last two weeks have been beyond depressing if you believe the debt issue and impending default are actually serious or if you think governance is, or at least ought to be, about solving problems. And if you like and basically agree with the policies of President Obama, it has been hard to see how he emerges from this mess a winner.

On the other hand, if you see this as a theme park or as a political opening for the emergence of the radical center, then you see it all as sort of fun.

To review the bidding, all of the current set of negotiations seem to have gone nowhere -- unless both sides are cleverly hiding a grand bargain. The Senate Gang of Six is on sabbatical. The Biden negotiations are paused. The nation's economists have just sent two contradictory letters to the Hill. The far right, i.e. the Republican House of Representatives, has convinced itself that default is actually not a big deal. The far left is in the process of convincing itself that the President can simply ignore the debt ceiling and rely on a new interpretation of Section 4 of the 14th Amendment. This seems to be what passes for useful strategy today: ignore the problem and create another problem, in this case impeachment.  What passes for a middle is reduced to arguing that the Secretary of the Treasury can manage his way around default by paying bills selectively. (A Treasury Secretary who, by the way, has all but shouted that he is departing, thus rendering himself a short-timer with no negotiating clout. Why doesn't President Obama tell Tim Geithner that he can't leave? Other presidents have.) We are running a $1.5 trillion deficit -- $125 billion  a month. The U.S. Treasury receives about 80 million bills a year, 7 million a month. So each month the Treasury is supposed to sort through 7 million bills and find $125 billion it can avoid paying, while paying all interest and finding a way to roll over maturing debt? This is utter nonsense.

Meanwhile, the President's own strategy is impossible to figure out. He seems reduced to saying that there's a deal if the Republicans agree to alter the depreciation schedule for private jets and reduce America's charitable giving. The administration seems to also be fearful lest an inadvertent comment offend the Republicans. I don't pick up quickly on subtlety, but I can't find a political strategy, or an economic narrative, or a consistent public relations effort in all of this. I hope his call to bring all the negotiators to the White House for another try is the start of a strategy and a narrative.

But this issue is the ball game. Nothing else truly big, truly election settling, is likely to happen before the 2012 elections. There are always unknown unknowns, but most of them are bad. The President has to win or stalemate this issue.

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I think there is a way to do this, and David Brooks posed it indirectly in his excellent column yesterday. He argued that the Republican Party may be moving away from being "a normal conservative party, but an odd protest movement that has separated itself from normal governance, the normal rules of evidence and the ancient habits of our nation." The President has to take the measure of his opposition, offer a short-term deal reasonable people could not refuse, and put such a deal in the context of a real economic strategy. The opposition is moving in the direction Brooks suggests: becoming ideologues and nihilists (and making it obvious), while the nation is composed largely of moderates and centrists who increasingly see themselves as politically independent. The new Congressional Republicans also they think they have the Administration's number and that he will cave before risking default, and they think the economic and financial disaster a default would represent would hurt President Obama more than them. The President has to raise the risks a default poses to the Republicans.

He can accomplish this by:

  • Defining himself as clearly being in the center and trying to solve the nation's problems.
  • Defining the opposition as acting beyond any acceptable political boundaries in being willing to expose Americans to the kinds of risks default entails.
  • Proposing a broad economic strategy comprising deficit reduction, tax reform, and infrastructure investment phased in so that the economy can continue its (weak) recovery. (This strategy won't have a chance before the election, but the President can campaign on it for the next 15 months.)
  • Proposing a modest short-term deal: a limited debt ceiling increase with accompanying deficit cuts coupled with a process for a real negotiation. I would suggest a debt ceiling increase covering roughly the next 6 months, and a full fledged process of negotiation out at Andrews Air Force Base starting in September. I would make the short-term proposal hard to turn down by designing it so that about 80% of the deficit reduction came from spending cuts. (They have already identified more than enough enough budget cuts to do this.)

But the President has to believe all of this if he says it. The only way he wins is if he puts forward a reasonable, doable proposal and then stays with it. Does he go all the way through a default? I just do not know, but he has to come close.

This debt ceiling debacle is not acceptable. Americans have a right to be furious at both parties for all of this, and these events will accelerate the movement away from our current duopoly. What right do politicians have to threaten the economic security of all Americans because they are having an ideological quarrel? Most Americans mostly want to be left alone, not made the victims of a political system that has seemingly lost touch with what governance is. As my friend Les Gelb said on another topic: "Without vision men die; with vision more men die."

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team.

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What's Wrong with the Obama Administration's Cuts to Medicaid

Jul 6, 2011Richard Kirsch

President Obama's proposed Medicaid cuts won't address the source of rising costs, but they would be a major step backward for public health care.

President Obama's proposed Medicaid cuts won't address the source of rising costs, but they would be a major step backward for public health care.

While the public debate about the Republican budget focused on the sharp reactions against Paul Ryan’s Medicare privatization scheme, the other big “M” in health care, Medicaid, hasn’t received the attention it deserves. As a result, the Obama administration has proposed cuts in Medicaid. These will undermine the achievements of its own historic health care law and harm access to health care for tens of millions of women, children and seniors.

Unlike Medicare, our national health insurance program for seniors and the disabled, Medicaid comprises 51 different state programs (including Washington DC) operating under a set of federal rules, financed by both the federal and state governments. As a result, it’s much harder for the feds to control Medicaid costs through policy changes. The Ryan/Republican budget doesn’t even try; it simply limits the amount that the federal government will spend on Medicaid and shifts the rest of the costs to the states, while weakening the rules so that states can dump people out of the program.

Unfortunately, most of the proposals that have been made by President Obama in the debt-ceiling negotiations are a kinder and gentler version of the same wrong-headed policy of shifting costs to states, and through them to American families, rather than dealing with the underlying reasons that Medicaid costs are rising.

It’s true that Medicaid costs are increasing, but that’s not because Medicaid has done a poor job of controlling health care costs, at least compared with the rest of the nation’s health care system. For example, from 2000 to 2009 private health insurance companies spending per person increased by 7.7% each year while Medicaid spending on acute care health services –- doctor, hospital, prescriptions, tests, mental health – increased by 5.6% a year. Medicaid did an even better job controlling spending on long term care, which went up an average of just 3% a year per beneficiary, the same rate at which the economy grew and lower that the overall rate of medical inflation (4.1%).

To really see where Medicaid spends it money, you only need to look at the 5% of Medicaid beneficiaries who are responsible for more than 50% of the costs. These are people with very serious, chronic health conditions and serious disabilities. President Obama knows this –- in fact, he raised the issue at the National Governor’s Association in February.

The other major factor in Medicaid spending is increased enrollment –- particularly when the economy tanks. For example, enrollment of families was flat from 2004-2007 but spiked sharply once the recession began. Enrollment jumped by three million from June 2008 to June 2009 alone, the biggest increase since the early day of the program.

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Rather than dealing with the root causes of high Medicaid spending, the Obama administration proposes to cut $100 billion from Medicaid over the next decade, mostly by changing the way it pays states for the program. The biggest change would be to reimburse states at the same rate for all their Medicaid patients, unlike now, where states get a different rate for different populations, such as children or seniors. The new so-called “blended rate” would be set at a lower amount than current health spending. Like the Ryan plan, the proposal is simply a cut to states, albeit a much smaller one than Ryan proposed and without the loosening of rules on who and what to cover included in the Republican budget. States would still cut back on who and what it covers, if only to the extent allowed within the current rules. States would also cut payments to providers, which in many cases – particularly physicians, dentists and hospitals in some states – would make it harder for patients to get needed medical care.

The “blended rate” proposal also strikes a blow at the Affordable Care Act, which is counting on Medicaid to provide care to more than half of the 33 million uninsured who will be covered under the new law. Under the Affordable Care Act, the federal government will reimburse states 100% of the cost of these new enrollees for the first three years and gradually reduce that to 90%. Compare that to the average 57% now that the federal government pays as its share of Medicaid. The blended rate would result in states having to pay a lot more for people who become eligible for Medicaid under the Affordable Care Act. As a result, states will throw up more barriers to enroll these working families and will scream more loudly about how the ACA is hurting their budgets. That later charge has almost no basis in fact now, but will become true under the blended rate proposal.

A second Obama administration proposal would close off one source that states now use to finance Medicaid, taxes on health care providers. Since states would be reluctant to replace these taxes with other taxes, they would also cut their spending on Medicaid, lowering federal spending.

In fact, only 10% to 15% of the cuts in Medicaid spending in the Obama proposal would come from rational savings in the system – increased efficiencies in providing medical equipment and prescription drugs – as opposed to simply giving states less money and making it harder for them to raise money for Medicaid.

The Affordable Care Act was a huge step toward a more rational health system, but the Obama proposals for Medicaid in the budget take us backward. Instead, the President should accelerate reforms that focus on the handful of high cost patients that drive most of the costs, by requiring states to implement care coordination programs which provide systems and incentives for health care providers to improve the care of the chronically.

Early this June, Senator Jay Rockefeller announced that 41 Democrats had pledged to “stand united against any efforts to slash Medicaid." Their action was aimed at the debt-ceiling and budget talks. Unfortunately, their resolve will be tested soon, in the Medicaid proposal made by their Democratic President.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, whose book on the campaign to win reform will be published in 2012. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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Republicans Remain Poor at History – But So Do American Citizens

Jun 17, 2011Harvey J. Kaye

story-book-200We could all use a brush up on some of the nation's most important historical moments.

story-book-200We could all use a brush up on some of the nation's most important historical moments.

In a recent article, New York Times writer Sam Dillon reports that the results of nationwide exams conducted as part of the National Assessment of Educational Progress show that "American students are less proficient in their nation's history than in any other subject." And there is, as Dillon notes, a developing consensus as to why this is so: "History advocates contend that students' poor showing on the tests underlines neglect shown to the subject by federal and state policy makers, especially since the 2002 No Child Left Behind act began requiring schools to raise scores in math and reading but in no other subject. The federal accountability law, the advocates say, has given schools and teachers an incentive to spend less time on history and other subjects."

That may well be so. But I want to suggest another possible cause for young people's poor knowledge of American history: kids are simply emulating conservative celebrities. And the kids are no fools. They know from the news that if you want to get ahead, if you want to be taken seriously, if you want to be a contender, if you want to be a candidate for President of the United States -- a rightwing candidate, that is -- you can't be good at history. Isn't that the lesson of the past few weeks? Sarah Palin couldn't explain what Paul Revere's ride was all about. Bachmann didn't know that Lexington and Concord -- the first battles of the American Revolution -- were fought in Massachusetts, not New Hampshire.

But while we can laugh all we want at Palin and Bachmann, the problem isn't that they don't have the facts straight about American history -- it's that too many of us don't know enough about it. And our ignorance can be politically debilitating. Consider...

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Two weeks ago, on the 67th anniversary of the D-Day Landings at Normandy, former U.S. Senator Rick Santorum, a Pennsylvania Republican, announced that he was entering the race for the presidency. Eager to harness the Greatest Generation to his cause and strike a blow against "Obamacare," Santorum stated: "Almost 60,000 average Americans had the courage to go out and charge those beaches on Normandy, to drop out of airplanes who knows where, and take on the battle for freedom... Those Americans risked everything so they could make [their own] decision on their health care plan."

Naturally, leftwing commentators mocked him for saying it. But the progressive punditocracy missed a great opportunity. Santorum wasn't just speaking stupidly; he was also speaking wrongly. Contrary to what he asserted, the GIs who stormed the beaches of Normandy essentially were fighting for the chance of pursuing freedoms and securing government-guaranteed national health care. They and their fellow Americans knew quite well that just six months earlier President Franklin Roosevelt, in his State of the Union Message of January 1944, had translated his original vision of the Four Freedoms -- freedom of speech, freedom of worship, freedom from want, freedom from fear -- into a proposal for a Second Bill of Rights. And among the rights he enumerated was "The right to adequate medical care." Moreover, the President himself knew that the vast majority of his fellow citizens supported his proposal. Polls conducted for the White House in 1943 by Princeton's Public Opinion Research office showed that 83 percent of the American people wanted Social Security to include health care, not just for veterans, but for all Americans.

To listen to the right, you'd think the very idea of national health care was the Trojan Horse of communism. And yet a bit of history teaches that the Greatest Generation and its greatest leader -- our foremost heroes of the twentieth century -- hoped to enact it. Un-American? Hardly.

I don't care if conservatives know enough about history. But I do care that we and our fellow citizens do. For starters, we have got to be able to point out when the Tea Party right gets history dead wrong. Moreover, we have got to remember who we are. And to do that we need to not only restore the study of history to its rightful place in the school curriculum, but also make sure that the history we teach enables students to think and act as citizens, not game show contestants. Responding to equally dismal reports of student ignorance of America's past, progressive columnist Max Lerner wrote in April 1943: "History belongs to the people. It must be taught as part of the people's struggle to build a free democracy on this continent. It must be taught as the prelude to what American democracy can do and be."

Harvey J. Kaye is the Ben & Joyce Rosenberg Professor of Democracy and Justice Studies at the University of Wisconsin-Green Bay and the author of Thomas Paine and the Promise of America. He is currently writing The Four Freedoms and the Promise of America: FDR, the Greatest Generation, and Us. Follow him on Twitter: www.twitter.com/HarveyJKaye

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Tom Ferguson on the Budget Battle: "We've Got Two Conservative Parties"

Jun 14, 2011

In a recent interview with New School Radio's Antonio Seccareccia, Roosevelt Institute Senior Fellow Tom Ferguson weighs in on the budget debate, which he sees as "the end stages of the Reagan Revolution." The problem, he says, is that there are essentially two conservative parties at the national level: "Republicans want to cut, Democrats want to cut less." That leaves no one to defend programs like Social Security at a time when people need them most.

In a recent interview with New School Radio's Antonio Seccareccia, Roosevelt Institute Senior Fellow Tom Ferguson weighs in on the budget debate, which he sees as "the end stages of the Reagan Revolution." The problem, he says, is that there are essentially two conservative parties at the national level: "Republicans want to cut, Democrats want to cut less." That leaves no one to defend programs like Social Security at a time when people need them most.

As for the growing deficit, Tom argues that the Republican push to cut taxes without cutting expenditures created the problem.  However, it only became truly catastrophic after the financial crisis, since "financial collapses typically crush economies for years, and that's driven down the tax take of governments."  In order to close the gap, we need to return to full employment as soon as possible.  Tom believes President Obama's biggest mistake was his failure to pass a big enough stimulus in 2009, and the economy continues to drag because of his reluctance to push for another round.

Click here to listen to the full interview, including Tom's take on Social Security, the Bush tax cuts, state-level union-busting, and more.

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Cato: Privatization Deals Are "Fraught with Peril"

Jun 10, 2011Matt Stoller

In a recent op-ed for Politico, Roosevelt Institute Fellow Matt Stoller argued that privatizing public assets leads to poorer service at a higher price. Below, he responds to a libertarian critique of that piece.

In a recent op-ed for Politico, Roosevelt Institute Fellow Matt Stoller argued that privatizing public assets leads to poorer service at a higher price. Below, he responds to a libertarian critique of that piece.

Cato's Roger Pilon, who according to his bio held "five senior posts in the Reagan administration," responded to my piece on infrastructure with an interesting sentiment: agreement.

Stoller does go on to criticize much of the “privatization” that’s taken place since – starting with Fannie Mae and Freddie Mac. He’s right there: These “private-public partnerships” are fraught with peril, not least by giving privatization a bad name, something he doesn’t consider.

I'm pleased that Pilon shares my skepticism towards privatization deals. Since Fannie worked pretty well when it was a fully public agency, I'm not inclined to care as he does about the PR value of privatization, but I will take agreement on the substance where I can get it. In fact, I'll return the favor, and showcase another area of agreement between us.

The idea of “public goods” is not meaningless, but the definition has to be strict, as economists know, and the means for privatizing ersatz “public goods” have to be clean. Given the vast public sector before us, we’ve got years of privatization ahead. Let’s hope it’s done right.

I too hope these deals are done right. So whenever you see a private actor complaining about environmental reviews, safety reviews, Davis-Bacon restrictions, excessive public input, or pushback against other mechanisms that a democratic society uses to govern its own decisions, you should, as no doubt Pilon would, express skepticism that privatization is simply being used as a way to avoid public accountability.

Matt Stoller is a Fellow at the Roosevelt Institute and the former Senior Policy Advisor to Congressman Alan Grayson. You can follow him on Twitter at @matthewstoller.

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The Well-funded Assault on the CFPB

Jun 3, 2011Bryce Covert

Republicans may claim that the Consumer Financial Protection Bureau has too much power, but the money and lobbying has piled up on the other side.

Republicans may claim that the Consumer Financial Protection Bureau has too much power, but the money and lobbying has piled up on the other side.

Rep. Spencer Bauchus may have called the Consumer Financial Protection Bureau "the most powerful agency ever created," but a new piece at The Nation by Ari Berman details the extensive power being marshaled on the other side. While the Republicans who are trying to handcuff its authority claim to be defending small community banks and businesses, the real money is coming from much deeper pockets:

Warren and the CFPB are up against what she estimates to be a $3 trillion consumer financial services industry, which views the bureau as a potentially grave threat to its prosperity. According to the Center for Responsive Politics, 156 groups -- the vast majority representing corporate interests -- lobbied the government about the CFPB in the second half of 2010 and the first quarter of 2011. The list ranged from JPMorgan Chase to McDonald's.

And it goes on further:

The Chamber [of Commerce] has an entire division devoted to fighting Dodd-Frank, the Center for Capital Markets Competitiveness, and a huge budget. In the first quarter of this year, the Chamber spent $17 million on federal lobbying, far more than any other group, with a dozen lobbyists focused on the CFPB alone. In 2009 the Chamber was anything but subtle in its attacks on the bureau. "We're fundamentally trying to kill this," said senior director Ryan McKee.

It's pretty clear why banks of all shapes and sizes would be lining up against this Bureau. For the first time in decades, the CFPB promises to be a watchdog on lenders that looks out for the consumer with some actual teeth. That will likely mean crackdowns on payday lenders, debt collectors, loan sharks, and others. But why would the Republicans be the first line of defense in this fight? After all, they've proposed bills to replace the single job of director with a five-member committee, make it easier to overturn and veto the new rules it writes, and prevent it from using its powers until it has a permanent director. (Meanwhile, they've threatened to block any nominees to that position, effectively kneecapping its authority if that bill were to pass.) All of this is likely to slow down the reforms and regulations that the agency has been tasked with creating.

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As I've pointed out before, the GOP's timing couldn't be worse for the middle class. A recent report showed that these days a single worker needs an income of $30,012 a year to cover basic expenses and save up for retirement and emergencies -- in other words, achieve financial stability -- which is about three times the national poverty level. A single worker with two young children needs $57,756 a year, and a family with two working parents and two young kids needs $67,920. But wages have actually been falling for the first time ever over the past decade, which lead to the median American family's earnings dropping to $47,127 in 2010 -- only enough for a single worker to meet financial stability. When Americans don't have enough income flowing in, they turn to debt to plug the holes. That's a big part of the reason that Americans carry $796.1 billion in revolving debt. With so many relying on credit products, you would think it would be imperative to make sure they're safe. As Elizabeth Warren herself has pointed out, we do more to ensure that consumers can't buy toasters that have a 1 in 5 chance of exploding than we do to ensure that consumers don't take out mortgages that have the same chance of putting a family on the street.

Yet Republicans stand in shoulder to shoulder opposition. As quoted in Berman's piece, Hazen Marshall, a former Republican staff director for the Senate Budget Committee, said earlier this year, "If the House Republicans had their way, they would just repeal the CFPB!" The answer to why they have taken this stance might lie in following the money that he traces so well.

And the fight won't be over even if the current Republican bills are struck down. "Everyone agrees the real fights are yet to come, once the CFPB goes live and begins tackling difficult issues like policing scams in the credit and mortgage markets, and cracking down on overdraft lending fees and shady prepaid credit cards," Berman reports. "'There's bound to be a fight about every single rule-making, supervision and enforcement action,' says [Lisa] Donner of AFR."

Buckle up, it's going to be a long fight. But it's one that's worth having.

Bryce Covert is Assistant Editor at New Deal 2.0.

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The Political Winners and Losers of a Debt Ceiling Showdown

May 19, 2011Bryce Covert

Assistant Editor Bryce Covert sat down with Roosevelt Institute Senior Fellow Bo Cutter, who was director of the National Economic Council and Deputy Assistant to the President from 1992-1996 in the Clinton White House. In the second of a two-part interview, he calculates how likely a default is, looks at the extremism on the Republican side preventing negotiations, and games out a winning strategy for the administration.

Bryce Covert: What are the odds of the debt ceiling being raised?

Assistant Editor Bryce Covert sat down with Roosevelt Institute Senior Fellow Bo Cutter, who was director of the National Economic Council and Deputy Assistant to the President from 1992-1996 in the Clinton White House. In the second of a two-part interview, he calculates how likely a default is, looks at the extremism on the Republican side preventing negotiations, and games out a winning strategy for the administration.

Bryce Covert: What are the odds of the debt ceiling being raised?

Bo Cutter: I would put the odds of a default at 15 or 20 percent. Sounds low, but it ought to be zero. It is so inconceivable to me that it wouldn't be raised. It's not like the shut down where there was a fairly large number of people who wanted one and there was another set of people -- I was in that other set of people -- who thought that if we were going to play those games, I'd rather have a shut down than a default. Unlike then when there were people who could figure out arguments for why we ought to have a shut down, no one can come up with a good argument for why we should have a default.

There are three kinds of players in this. There's the administration, which basically wants to do everything it possibly can to not have a default. Part of that is that they are responsible. There's a real sense of fiduciary responsibility for the country. So they're out there trying to avoid it. Group two is the set of people, a set of the Congressional Republicans, who fundamentally believe it doesn't matter, that there isn't an effect. I don't see how you change their minds other than have a real problem. Group three is a dangerous group. It's the other group of Congressional Republicans who believe that it would be a very bad thing to do, but they're going to push it for all they can and run some risks. For example, that's where Newt Gingrich was on Meet the Press and that's where a lot of them are. Some of them are there because they think that's the right way to negotiate and the problem is not as big as people think. Others are there because that's the politically convenient place to be. That's the dangerous group, and that's where the miscalculation can occur.

Bryce Covert: What were the circumstances you faced when dealing with this battle during the Clinton administration?

Bo Cutter: Remember that we had lots more time and in effect by being able to push it off and to run an extremely active communications campaign about how truly insane this was, we got the debt ceiling raised without having to give anything. Because in the negotiations our side was saying to their side, how much pain do you want to take? We can do this for a long time, and at the end of the day good things don't happen if there's a default. So you're not going to do it anyway, but between now and then we're going to beat you over the head every day on this issue. Do you really want to have this fight? They then decided, okay, we'll do a shut down and the mechanism we'll use will not be the debt thing because we've concluded that's the third rail. Rather, it'll be the budget.

The difficulty for them under those circumstances was having already been beat like a rug on the budget stuff. They were weakened. The shut down, as I said when it was getting close, is quite hard to sustain because the administration tends to speak with one voice while the Congress speaks with a hundred. There's a kind of cacophony on the one hand and a single voice on the other. If the single voice is saying every single day why are these crazies doing this to the American people, they get tired of it in a hurry.

Bryce Covert: What are the differences between now and then?

Bo Cutter: This time around you knew going into it, and the "it" is this whole set of fights over the budget, you knew they were going to be different. You knew that there's a much more extreme set of Congressional Republicans, incomparably more extreme, than during the Clinton administration. Second, the wiggle room around the default was much less and the budget issue hit first. So my theory was that President Obama should absolutely have forced them into a situation where they had to choose to close down the government. They should not have given a dime on that. I think there is no question that he would have won a shut down battle for all the above reasons.

If you win the shut down battle and then you go into the default battle, you've already won. These guys do not want that pain again. So if you had the shut down battle in mid-March you'd have had two to three months to have the debt ceiling fight. I personally felt at the time that he'd win the shut down battle and it would almost certainly mean reelection. I think he's going to be reelected anyway, but it would have been such a thorough and complete defeat and it would have ended any fight about default.

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So I think they chose the wrong path there. I think they did it because there is an inevitable tendency in Washington and in government to think that the current deal is the deal you have to get rather than thinking much more strategically and choosing the terrain on which you want to fight. I'd rather fight the shut down battle than fight the default battle.

Bryce Covert: Who are the key players then and now and are there any differences?

Bo Cutter: I think the administration side of it is every bit as capable as we were. Some of them are the same players, and the ones who aren't are pretty able people. I don't think there's a big difference on the Democratic side. On the Republican side, I think that they have a much, much more difficult caucus to manage than the Republicans then did because the extreme wing is so much more extreme. They believe that they won the shut down battle, they got $38 billion worth of cuts. So you've got this extreme group elected six months ago that thinks they won their first battle. The reasonable -- reasonable being a term you have to qualify in these circumstances -- Republican leaders have crazies on their hands that they have to manage. My own sense is that the leaders probably would have preferred a short, abrupt, losing shut down battle to this scenario. Because they knew they were going to be in a situation where their crazies were pushing them right off a cliff. I think the dynamics are much worse, but it isn't on the quality of the people on the Democratic side. It's the structure of the caucus on the Republican side.

Bryce Covert: If we go into default, who will end up being the political losers and winners?

Bo Cutter: It depends on who does what in the next two months. If the administration doesn't create the right kind of narrative, I think it's likely to be the one that's blamed. Although it's never all or nothing. If you were President Obama, this is such an awful set of circumstances it's hard to even imagine scenarios, but you would say to yourself that the Congressional approval level is in the low double digits, like 11. Mine is about 50%. So I have five times the approval rating and I can afford, if I had to, the blip to 40%, but they can't take the blip to zero. If they're absolutely pushing me right against the wall and there is no give and no reasonable proposal, if I'm President Obama I probably say I'm still better off by holding. But it's a real close call.

Gingrich basically stated what the Republican strategy is going to be. He said they're not going to go into default. The country would come down hard on all of the leadership. But he said what we can do is take a bite, raise the debt ceiling by $10 billion, it will last for a relatively small time, and the administration will have to give. Then we'll raise it by $60 billion. That's two weeks, so we'll come back two weeks later. And we'll just keep doing that over and over and over and force them into giving.

I really believe that it depends on what the administration does to prepare. There's a lot they can do, and there are actual proposals you can make. I think President Obama's strategy has to be a process strategy. It has to be to say we are not going to agree on policy. We can come to some really vague, really general framework about the general numbers. Obama has made a ten-year proposal for a $4 trillion reduction in debt total and therefore a substantial reduction in debt as a percentage of GDP. If you look at Congressman Ryan's proposal, in reality he proposes a lot less than that because there's a lot of fakery in his numbers, but you could dress it up and say that he proposes about that amount. Therefore he and Obama are in rough agreement that something like $4 trillion in debt reduction has to occur in the next ten years. Obama can say let's agree to that. Let's agree to a process by which every six months or so, if Congress hasn't enacted and the president hasn't signed legislation that actually makes that happen, there are automatic across the board cuts and there are automatic tax increases. We can have a battle about how much and who does what. But in other words, President Obama's proposal would be let us agree on a framework for debt and understand as grown ups that we are not in the next two or three months going to agree on fundamental policy differences. If I were him, I would put that out there and I would campaign on it every day. I think that's the only way they win it. I think otherwise they are caught in this bite by bite by bite and are running a real risk of miscalculation. That's my big worry, is that that the Republicans argue, well, we know that a default shouldn't occur but let's push a little harder. That side is running a big, big risk.

There is also governance point about this. What the hell right does the political leadership of any party have to impose these kinds of risks on the American people? I increasingly think they just forget whether you're for or against a particular Medicare policy or whatever, as a matter of governance and in a country that's supposed to consist of free government and free citizens, just what the hell right do they have to do that? This is a different game than a shut down. These are big damn risks.

 

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