What Are Conservatives Getting Wrong About the Economy? (Douthat Reply Edition)

Nov 19, 2012Mike Konczal

Ross Douthat argues in his recent New York Times editorial, The Liberal Gloat, that the coalition that elected President Obama was "created by social disintegration and unified by economic fear." Douthat argues that "single life is generally more insecure and chaotic than married life, and single life with children." The implicit argument is that marriage is an important part of handling the economic fears of the business cycle, and if there were more married couples there'd be

Ross Douthat argues in his recent New York Times editorial, The Liberal Gloat, that the coalition that elected President Obama was "created by social disintegration and unified by economic fear." Douthat argues that "single life is generally more insecure and chaotic than married life, and single life with children." The implicit argument is that marriage is an important part of handling the economic fears of the business cycle, and if there were more married couples there'd be less call for economic policy. Krugman notes that "insecurity is on the rise for everyone, driven by changes in the economy" and that "[y]our church and your traditional marriage won’t guarantee the value of your 401(k)."

For fun, how well has the income of couples with children held up in the Great Recession when compared to single households with children? Let's look at the Federal Reserve's recent Survey of Consumer Finance. This comes out every three years, with the last version covering 2010. Here's net income for single households with a child versus couple households ("families in which the family head was either married or living with a partner") with a child:

In the Great Recession, single households with a child lost 2.3 percent of their income, while couple households with a child lost 9.4 percent of their income. Now obviously having $67K is better than having $29K. And the 2.3 percent loss of income for people with less could sting a lot harder than the 9.4 percent loss for those with more.

But what is important to emphasize is that having a couple raising kids, whatever its other virtues, is not a good form of insurance against the business cycle. The Great Recession has hit married households with larger drops in income. This is probably driven by having two people working in the household, which, as Senator (!) Elizabeth Warren emphasized years ago, doubles the chance that someone might lose their job. So even if the number of children being raised in single households dropped suddenly, that's no replacement for an aggressively liberal, Keynesian welfare-state approach to driving the macroeconomy to full employment.

This isn't just conservatives, as education-obsessed centrists and liberals have a blind-spot here as well. I recently wrote a piece for The American Prospect about young people graduating into the recession. The focus was how the average college graduate is likely to have a permanent loss to their income, compared to the more temporary income loss for those who attend elite colleges or don't go to college at all. I mentioned it in passing at the end, but this technically means that the college premium, especially at the margins, drops in a recession. Therefore getting more education is a poor form of insurance from the business cycle compared to, once again, Keynesian welfare-state full employment.

Paradigm Down

I have no interest in seeing a resurgent conservative movement in this country. One reason I was worried about Romney winning the 2012 election and passing the Ryan Plan in January 2013 and Lochnerizing the Supreme Court is because an animal is most dangerous when it is dying and knows it. But it might be helpful for those on the right to get an outsider's perspective.

Douthat argues that conservatives focused too much on those getting "gifts" and other free-loader metaphors. But the most sustained conservative economic arguments of the Great Recession have been reviving the liquidationist, Mellonite approach to the business cycle. I think that's one important reason Romney and conservatives were unable to put real pressure to President Obama's vulnerability on the economy. They believe the recession is purging the weakness in the economy, doing healthy work, and to the extent the recovery is sluggish it is the fault of activist government and policy attempting to address unemployment.

The House GOP, in particular, has pushed the Mellon-wing, calling for austerity to promote growth, while also pulling back on monetary policy to stimulate the economy. Understanding the "47 percent" and "free stuff" comments benefit from the context of conservative arguments that government policy is the primary reason that unemployment remains high, as all the free stuff allows the unemployed to stay on vacation. If conservatives want to build a new economic paradigm that works for working people, they should probably have some idea on getting unemployment down sometime in the next decade.

Another important conservative focus is running everything the government does through private hands. The conservative movement is not about small government, it is about privatized government. From Bush and Ryan's attempts to privatize Social Security, to turning Medicare into a Groupon, to bringing private industry into the military, every step involves introducing market agents into government processes and pushing market risk to individuals. This continued under Mitt Romney's big policy ideas. He had an idea for taking our system of unemployment insurance and turning it into a system of private unemployment savings accounts. He wanted to fix higher education costs by expanding the for-profit industry, which would "hold down the cost of education," even though they are far more expensive than their non-profit equivalents.

The conservative idea that citizens don't have enough undiversifiable exposure to the risks of the new economy - long-term unemployment, low wages, risks of a large drop in income, globalization, automation etc. - is not one that is going to work going forward. The economic voters Douthat wants to win over see the cronyism of funneling money through private agents, and they think of the market with far more dread and anxiety than entrepreneurial glee. Though they may be ambivalent about more liberal solutions, they certainly don't like the perpetual conservative project of making all of government's functions look more and more like their empty 401(k)s. That might be another place to start for conservatives who want to rebuild their economic ideas.

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To Solve the Jobs Emergency, Put Government to Work for Us

Nov 14, 2012Jeff Madrick

As part of our series "A Rooseveltian Second Term Agenda," a reminder that creating more good jobs must be the president's top priority.

The presidential victory of Barack Obama was an important vindication for the uses of government. The small-government ideologues were defeated, but now the nation must go farther and recognize government is indeed a job creator.

As part of our series "A Rooseveltian Second Term Agenda," a reminder that creating more good jobs must be the president's top priority.

The presidential victory of Barack Obama was an important vindication for the uses of government. The small-government ideologues were defeated, but now the nation must go farther and recognize government is indeed a job creator.

Let’s begin with the harsh facts: Neither policymakers nor the media fully understand or communicate that America has a jobs emergency. In his victory speech last Tuesday, President Obama did not even cite job creation as one of his four main goals for the new term. Not only is unemployment high, but wages are stagnant and poverty is rising in an economic recovery. The evidence on the creation of low-wage jobs rather than high-wage jobs is almost frightening; the Roosevelt Institute’s own Annette Bernhardt has been a leader on this.

Our mainstream economists are not of much help. Many, though not all, are loathe to blame globalization for low wages in America. We hear almost nothing from them regarding Wall Street’s role in wage suppression, although American business was obsessed with creating rising short-term profits to appease Wall Street, which rewarded such consistency with high stock prices. Add to this the pressures of LBOs, privatizations, and hostile takeover threats. Little is discussed of the role of the Federal Reserve in maintaining a tight monetary policy until the late 1990s, in my view suppressing wages as an objective. Finally, almost nothing is heard of the benefits of adequate demand, except in the current crisis, in creating productivity growth over the long run, even as China and Japan have clearly suffered secularly from a lack of demand.

All of these mainstream economists warmly support the view that skill-biased technology is the main cause of stagnating wages. But such technologies cannot explain the runaway of incomes at the top. Nor can they explain the lesser inequality in Europe, which is also subject to technological change.

In my view, we need a very aggressive, jobs-related agenda. This includes aggressive fiscal stimulus over the next two years amounting to as much as $500 billion and focused on infrastructure, aid to the states, and extending unemployment insurance. These will meet dire needs and also will have the most GDP bang for the buck.

The minimum wage should be raised to end poverty for all those who work full-time, and a living wage, or something close to it, should be demanded for all federal contracts.  

Industrial policies to target critical new technologies should be aggressively pursued, which might require infant industry protection.

Policies to help our trading partners develop a progressive revolution, including higher wages, the right to labor organizing, and decent labor conditions should be emphasized. As reflected in the Trans-Pacific Partnership, the opposite is occurring. All emphasis is on protecting investors, very little on workers. This would also go some way to creating a more level playing field in trade.

A federal jobs-creating program, similar to those in the New Deal, should be undertaken, emphasizing construction jobs in public works, teaching, and care workers. Tax rates should be raised sharply on the well-off to ameliorate the temporary increase in the federal deficit. Such taxes will not reduce the GDP multiplier very much.

Wall Street pressure to cut wages must be softened. Business executive compensation must be more closely aligned to long-term results. The tax deduction on borrowing for LBOs, privatizations, and corporate takeovers should be sharply reduced or eliminated.

In addition to these immediate needs, there are three longer-term policies we must pursue. First, in three years or so, America will need a sharp tax increase. Its average tax rate, including federal, state, and local, is 10 percentage points below the OECD average. If that is reduced to five percentage points, it would raise nearly $1 billion more a year. There is little evidence such an increase would impede economic growth.

Second, any such tax increase should only partly be used to pay down the debt. It should be used to shore up major entitlements programs, develop a public option for health care, and increase infrastructure and education spending.

Finally, although educational deficiency is not the primary cause of the current wage problem, it will be in the long run. A major educational equalization campaign is necessary, which includes pre-K for all.

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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Showing Leadership By Putting Graduates to Work

Nov 13, 2012Joshua McKinney

As part of the "Millennial Priorities for the First 100 Days" series, a recognition of the need to address student debt levels and unemployed graduates.

As part of the "Millennial Priorities for the First 100 Days" series, a recognition of the need to address student debt levels and unemployed graduates.

In 1933, Franklin D. Roosevelt was faced with a widespread catastrophe. The Depression had given birth to shattering rates of unemployment, bank failures, and a widespread loss of confidence in government. From the start, FDR knew that what the people needed most was reassurance that under his leadership, they could weather the storm. In his inaugural address on a gloomy March morning, FDR said, "This nation asks for action, and action now. Our greatest primary task is to put people to work. I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require." Soon thereafter, he set a high standard for new presidents during his first 100 days, launching a raft of New Deal reforms over his first three months in office.

With a laundry list of issues and a divided congress, President Obama faces hurdles in acting and acting quickly. In the three months following his second inauguration ceremony, his actions need to provide the country with reassurance that this ship is moving in the right direction under his leadership. Perhaps his most important task will be addressing this through the lens of education policy.

Education has long been the primary driver of upward mobility in America, a fact that is truer now than ever before. Yet as the demands on schools to impart 21st century skills have increased, school quality has not kept pace across the country, resulting in an ever-widening achievement gap. Our primary and secondary schools are tested to death but provide little to no growth in our national education numbers. According to NPR’s Claudio Sanchez, “the class of 2012 scored the lowest average SAT reading scores since 1972” while also managing to take a nine-point dive in writing. The only area where we saw a national improvement was in math, where it stands only five points higher than 40 years ago. Overall, College Board, which commissions the SAT, reports that six in ten college students are not ready for college work. Students are now faced with the decision to enter college unprepared or not enter college at all. The ACT reported even more dismal numbers: only a quarter of the high schoolers who took the test were college ready.

What comes of those students who enter into college unprepared? According to Complete College America, about 41 percent of the high school graduates who enter college are required to take remedial courses when they start college. Even more alarming is that two-thirds of these students fail to earn their degree in six years, some accumulating unreasonably high amounts of college loan debt.

What happens to the students who pass on college altogether? Armed with a high school diploma and little to no marketable skills, these students all to often face unemployment.

Is graduating college in four years the remedy, as many proclaim? It helps, but many college students are unemployed as well. The common problem for all three sets of students is the lack of skills – a problem which has also become a crisis in America.

To expect President Obama and Sec. Duncan to address every aspect of the system as a whole within the first hundred days is unreasonable. We can, however, expect them to address the increasingly alarming student loan bubble and the skills crisis.

Since 1978, average college tuition has skyrocketed by over 900 percent, while grants and scholarships continue to be slashed and only given to a select group of students. The result? Students are forced to mortgage their futures with student loan debt. This, accompanied with dismal job numbers for college graduates, has many worried that graduates will default on their loans, causing the bubble to burst and result in seismic shocks through every facet of American life. It is paramount that this bubble be addressed by the national government or the effects could cripple the already fragile economy.

One way to address this would be to get more young people to work. This could be done by revitalizing our skills training across the nation and investing in current skills training organizations such as yearup. If the president uses this approach, he can simultaneously address the skills crisis and the student loan debt crisis. But this project is more complex than simply increasing funding. It would have to begin with a role change for many of the community colleges around the nation. This is not to call for them to become full-fledged technical schools, nor should they carry identical curriculums to that of four-year institutions. They should, however, increase the number of classes available for training local people in the skills they need to do the jobs available in the area around them. Since the budgets of many community colleges are strained already, President Obama could provide tax incentives to companies that send trained workers to teach classes at their surrounding community colleges. This is imperfect in many ways, but could very well work if the nuances are worked out. 

President Obama has 100 days to reassure the people that his leadership will move this country in the right direction, just as FDR did in 1933. If he can solve the student loan debt bubble while addressing the skills crisis, he will send a solid signal to the American people that this country is really moving forward. 

Joshua Mckinney is the Senior Fellow in Education Policy for the Roosevelt Institute | Campus Network and a political science and philosophy double major at Morehouse College.

 

Barack Obama image via Shutterstock.com.

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Live at Boston Review with a Forum on Debt Relief

Nov 13, 2012Mike Konczal

I'm live with a forum on debt relief at Boston Review. Here's my lead essay, along with responses from Jacob S. Hacker and Nathaniel Loewentheil, Dean Baker, Tamara Draut, Robert Hockett, Barbara Fried, Mark Calabria and more. My piece summarizes much of the work done at this blog over the past several years, especially focused on balance-sheet recessions, bankruptcy, implications of "you didn't build that," and the battle between debtors and creditors. The respones afterwards were very informative. (Plus, Fried is the author of one of my favorite books, so I was really psyched to see her participate.) I hope you check it out!

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I'm live with a forum on debt relief at Boston Review. Here's my lead essay, along with responses from Jacob S. Hacker and Nathaniel Loewentheil, Dean Baker, Tamara Draut, Robert Hockett, Barbara Fried, Mark Calabria and more. My piece summarizes much of the work done at this blog over the past several years, especially focused on balance-sheet recessions, bankruptcy, implications of "you didn't build that," and the battle between debtors and creditors. The respones afterwards were very informative. (Plus, Fried is the author of one of my favorite books, so I was really psyched to see her participate.) I hope you check it out!

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Mitt Romney, Reactionary Keynesian

Nov 6, 2012Mike Konczal

I meant to develop this into a larger work on the Right and economic stimulus but it never happened, and with the election today favoring President Obama, it is likely I won't get a chance. So here's part of it for the blog.

I meant to develop this into a larger work on the Right and economic stimulus but it never happened, and with the election today favoring President Obama, it is likely I won't get a chance. So here's part of it for the blog.

In December 2008 Mitt Romney wrote "A Republican Stimulus Plan" at the National Review, announcing "this is surely the time for economic stimulus." What should be in a Republican stimulus plan? First up, tax cuts. Tax cuts for capital income and corporations, and tax cuts overalls. But tax cuts aren't sufficient to the task, and some sort of direct spending will be required. However, since most infrastructure takes too long to get off the ground, "[s]pending to refurbish and modernize our military equipment is urgently needed, and it has a more immediate impact on the economy."

In 2008 Mitt Romney wanted to stimulate the economy with tax cuts and military spending. It's worth noting that two of the central planks in Mitt Romney's currently underdeveloped economic policy are a series of tax cuts and a dramatic $2 trillion dollar increase in military spending. But don't call it stimulus! Mitt's National Defense Plan wants to "modernize and replace the aging inventories of the Air Force, Army, and Marines," as in the stimulus plan, but this is now to address "Obama's failure" in foreign policy.

Mitt Romney's tax plan is meant to offset tax cuts by cutting tax expenditures. But the tax plan currently looks like an unassembled game of Mousetrap where you know several of the pieces are missing. It could work, but it isn't clear how it would. But even if Mitt Romney did offset his tax cuts by cutting expenditures, those expenditure cuts would likely be put into place over a period of years, years where the deficit would balloon further. (The Ryan Plan also balloons the deficit in the short term dramatically.) This would still work as stimulus.

So Keynesianism through tax cuts and the military. The military stuff really does add to what John Kenneth Galbraith referred to as "a new and reactionary form of Keynesianism with which to contend" where "Tax reduction would then become a substitute for increased outlays on urgent social needs." Or as Michael Harrington wrote, in a 1966 Encounter article titled "Reactionary Keynesianism," "in the United States it is quite possible to envisage a conservative Keynesian policy which substitutes tax cuts for social investments, increases the maldistribution of income (the rich and the corporations gain more from tax cuts than the workers and the poor) and maintains a prosperity as that term would be defined by business."

Liberals like to point out the contradiction of Republicans attacking economic stimulus while arguing that defense cuts will tank the economy, and they are right to do that. But I'm still having difficulty thinking through where the distributional impact of various ways of managing the economy, the type of society it builds, connects into the political ideology. I imagine we'll have more opportunities to see this in the aftermath of the election.

 

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Guest Post: Heather Boushey on Inequality and Growth

Nov 6, 2012Mike Konczal

Mike here: Special guest post by Heather Boushey of the Center for American Progress, responding to a recent citation of her work with Adam Hersh on inequality and growth (work we discussed here). The launch of this post was delayed on my end as a result of Sandy-induced work/email chaos.

Mike here: Special guest post by Heather Boushey of the Center for American Progress, responding to a recent citation of her work with Adam Hersh on inequality and growth (work we discussed here). The launch of this post was delayed on my end as a result of Sandy-induced work/email chaos. Hope you check it out, as well as their excellent report that is discussed within.

Inequality does appear to affect economic growth

by Heather Boushey

It is now a well-known fact that the United States has the highest levels of inequality among developed countries. Increasingly, the economics profession is questioning how this affects our economy, not only in terms of what it means for those at the bottom of the income distribution, but in terms of how high inequality affects economic growth and stability.

The New York Times recently published a thoughtful piece on the relationship of rising U.S. inequality to long-term economic growth. In the wake of that article, they published a Room for Debate online forum on this topic and Scott Winship, a scholar a the Brooking’s Institution was among those participating. Mr. Winship cites our report on the topic to discuss what he argues is inadequate evidence linking inequality and growth.

We are grateful that Mr. Winship acknowledges CAP's central role in this debate, but grossly mischaracterizes our conclusions. The quote he pulled from our report gives the false impression that our research supports the conclusionthat inequality is not a problem for economic growth.

Our argument is that we need to look specifically at the channels through which inequality affects economic growth, specifically in the U.S. context. For example, there is evidence that documents how the rich don’t spend as much of their income as the non-rich. If inequality keeps rising and the rich pull in a larger and larger share of national income, this stunts demand, the lifeblood of the economy.

Another mechanism is through entrepreneurship, which is often portrayed as the dynamic force in a capitalist economy. Yet, most entrepreneurs come from the middle class. The middle class provides both the economic security and access to education and credit that entrepreneursneed.

If inequality is due to the top pulling far away from the rest of the economy,which creates a very wealthy elite, this is often associated with a well-known economic phenomenon of “rent-seeking.” The wealthy will tend to use their outsized resources to garner a bigger piece of the pie, rather than on investments that will increase productivity and make the whole pie bigger. And, there is growing evidence that this is exactly what is happening to our economy, threatening long-term growth. For example, economists have been finding that as money has flowed into the financial sector, that industry has increasingly used its resources to promote policies that benefit itself only.

In opposition to Mr. Winship’s claim, the preponderance of evidence does supports the conclusion that inequality can hamper economic growth. We conducted a thorough review of the literature and in the quote he took, we were highlighting methodological limitations in a specific class of empirical studies. We also pointed out that cross-country panel data studies look at reduced form equations for growth and we argue that we should be thinking instead about a structural model.

Others have found our report to be data-driven. Jim Tankersley, journalist with the National Journal encouraged his readers to consume the report “in its entirety,” describing is as a “The bulk of Boushey and Hersh's sources aren't partisan in any way - just detailed, data-driven analysis from top economists.” This blog called it “the best up-to-date arguments that progressives discussing inequality should understand inside out.” And in a lengthy discussion on the subject last month by Jared Bernstein, former chief economist to the vice president, our work was used to frame a summary of the latest research on this topic. 

We are typically pleased to have our research cited in the paper of record, the New York Times. However, it is no fun to have our work grossly misrepresented.

 

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A Post-Debate Interview with Glenn Hubbard on Housing Policy

Oct 22, 2012Mike Konczal

There were no serious housing questions at any of the presidental debates. Given how important the housing market is for both voters and the economy, this is surprising and disappointing. As Zachary Goldfarb noted, "here are a few words that surprisingly have not shown up through much of this debate: housing, mortgage, refinance, underwater." 

There were no serious housing questions at any of the presidental debates. Given how important the housing market is for both voters and the economy, this is surprising and disappointing. As Zachary Goldfarb noted, "here are a few words that surprisingly have not shown up through much of this debate: housing, mortgage, refinance, underwater." 

I attended last Tuesday's presidential debate at Hofstra University as press for Al-Jazeera English, providing TV commentary on economic issues. It was my first debate, so I took some time to wander around. While exploring after the debate was over, I found the Spin Alley area, which is the area where politicians and campaign people stand by to give quick media responses. Handlers held large signs advertising the people in question. I saw a "Hubbard, Glenn" sign in the air, and the Columbia economist and Romney economic advisor standing by to give spin on the debate.

I decided to get some housing questions on the table. When some people, notably Josh Barro, argue Romney has a secret economic plan, and in particular a secret housing plan, they cite Hubbard, who has been very vocal on boosting demand through interventions in the housing market. I've noted that his plans might not be that different from what Obama is currently doing.

Below is a transcript of what I got a chance to ask him:

Mike Konczal: In 2008 you co-wrote a plan with Chris Mayer on the housing market that called for mass refinancing and principal reduction through the GSE. In 2011 you released another plan with Mayer that just featured the mass refinancing. Why was there the change?

Glenn Hubbard: It wasn't principal reduction; it was setting up a Home Owners' Loan Corporation model.

There was a debt-to-equity swap in your proposal.

Right. What we focused on in 2011 was trying to give direction to the Obama administration, which was bungling the mass refinancing so badly. That's why we focused on that. I still think it would be a good idea to have a Home Owners' Loan Corporation. But the point of that piece was that the Obama administration had bungled every housing plan, so we were trying to provide some guidance.

Earlier this year, HARP, the Home Affordable Refinancing Program, was relaunched as HARP 2.0.

It's still a failure.

After the relaunch, we are seeing a large increase in refinancing on very underwater homes, particularly those with loan-to-value over 125 percent.

It's still a failure. If you compare it to the number that Chris Mayer and I had argued, it's trivial.

Compared to the number of possible refinancing?

Yes. The reason is the GSEs have stood in the way, and the Obama Treasury has not managed the GSEs in such a way as to facilitate its own policies. It's really quite sad.

But that's an FHFA problem, is it not?

I'm sorry, but you can't duck the FHFA.

So you think President Obama should have done a recess appointment [to replace Ed DeMarco] at the FHFA?

I don't manage the Obama appointments, but I do know that the FHFA has mismanaged the president's own plan.

What would a President Romney put forward in the housing market?

What Governor Romney wisely is focused on is the long term in housing. We need to wind down the portfolios of the GSEs and reassess the government's role in such a way to get more private capital back into housing.

In 2008 you argued that cramdown, or some sort of bankruptcy reform, was a bad idea because it could impact long-term growth. In retrospect, do you still think that?

Yes. I still believe that. I absolutely think that was the correct call.

Thank you for your time.

==========

Mike here, with a few notes. According to the latest data from FHFA, there have been 118,470 refinances of mortgages with an LTV over 125 percent between February, when HARP 2.0 allows for these seriously underwater refinancings, and now. Here's a graph from Dan Green's Mortgage report:

Matt Zeitlin has more on the initial successes of HARP 2.0 at the Daily Beast. Rather than the legal issues at FHFA, it seems that the next big blockages in turning record low mortgage rates into increased consumer demand through refinancing are applications overwhelming banks, the financial sector collecting oligopolistic rents from not passing along low rates to consumers via their pricing power, and lack of competition on HARP refinances.

Hubbard is correct that Ed DeMarco is blocking principal reduction at FHFA, preventing the adminstration from pursuing their own plans. I was surprised to see Hubbard pushing for a a Home Owners' Loan Corporation (HOLC) structure now, and I wonder if he'd fight for what Senator Merkley is currently proposing. An HOLC model could bypass some of these new blockage problems we are seeing on record low interest rates, benefiting homeowners.

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Despite a Strong Debate, Obama Remains Vulnerable on the Economy

Oct 18, 2012Jeff Madrick

The president found his voice in the second debate, but he still needs to make a clearer case for the progress he's made.

There has been entirely too much celebrating about President Obama’s debate performance on Tuesday. He did very well, without a doubt. He won hands down. He didn’t get into the ring cold, and he showed that he knew his stuff—and that Romney really didn’t.

The president found his voice in the second debate, but he still needs to make a clearer case for the progress he's made.

There has been entirely too much celebrating about President Obama’s debate performance on Tuesday. He did very well, without a doubt. He won hands down. He didn’t get into the ring cold, and he showed that he knew his stuff—and that Romney really didn’t.

But the economy remains the ace in the hole for Romney and Ryan. We haven’t nearly recovered in terms of jobs, and that’s a tough fact to slide by. The unemployment rate rose rapidly in Bush’s last term to around 8 percent, then peaked in 2009 at 10 percent and slowly came down to its current level. So we are only back to the start of the Obama term. No one ever won the presidency with a 7.8 percent unemployment rate. And we know, as Romney keeps reminding us, that median family income is awful and that poverty is up.

Everyone knows this, and yet Obama did not have a good enough explanation of how much progress has been made. He sounded defensive. So Obama needs a strong, non-defensive explanation of his achievements, and one way to put it is what would have happened had Romney won the presidency in 2008. You’d have a 10 percent unemployment rate with Romney as president. Poverty would be way up. He’d be blaming Social Security and Medicare for all his problems, and he’s find economists to claim he was right. They might already be cutting these programs forever “in order to save them.” It’s triage -- throw the elderly out of the boat and let everyone else eat the rations. People would be poorer. They would get less health care. Those in poverty would have fewer benefits. Is that the kind of America you want?

Odds are that Romney, if he put the Romney-Ryan plan into effect, would create a bigger deficit, too. That’s actually what we need, but a deficit based on tax cuts will create few jobs. (EPI ran some numbers based on Mark Zandi's multipliers.) And if Romney did close the many tax holes he promises to, recession is almost guaranteed even as your taxes rise.

This concept is tough to communicate in a credible way. It just sounds like economists bickering. But there is a record out there: George W. Bush’s. His central economic policy was tax cuts for the rich, and he produced the slowest job growth of any president since the Depression. Romney will do that again. Promise.

Obama has to be clear: He stopped a depression. He is getting the housing market to come back after the worst devastation since the early 1930s. Employment stopped falling. But he shows hesitation in critical areas. Will he protect Social Security and Medicare? If so, then say so. The other guys will cut it, even gut it. But is he vacillating too much here. The talk about Dodd-Frank doesn’t win him many points because most of America thinks the banks got away with murder. He needs a better way of talking about that. As for Obamacare, he is talking about its good points, but he needs to be bolder still. List them all, and list them fast.

And when he says Romney is lying, which is a deliberate motif of the Republican game plan, don’t say he lied with a smile. Say, "It makes me very sad and disheartened when the governor misleads the American people. It is unfair to you voters. And when challenged, my opponent will come back and tell you again, that’s not what his program is, or he never said that. Be proud of your claims, Governor Romney; don’t back off them to win over some in the middle of the pack. Tell them where you really stand."

Finally, it is critical to be constructive about the uses of government. Tell America the only way the country will succeed and the economy will remain prosperous is if we bring everyone with us. Every American must be able to contribute to the economy with a good education and good health. Every region must have good, dependable transportation. Every part of America must breathe clean air. Government can do that.

Unfortunately, there is no third debate about domestic matters since the next one is on international events. But I bet we get back to the economy in the third debate. I hope so. Democrats have to realize that every time Romney says "just look at the record," they are behind the eight ball. Obama needs a very clear, persuasive statement about how bad the economy was in 2009 and how much he did. He stopped the bleeding. The patient was in the hospital. Who put him there? The Republicans, with the same plan Romney is offering today. The patient is resuscitated. Jobs are coming back. The housing market has turned the corner. Everyone is still getting Social Security and Medicare. And now 30 million more will have health insurance. 

Oops, I've already said all this. Sorry, readers. But why do I have to keep repeating it?

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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Obama Failed to Defend Government from Romney's Bluster

Oct 4, 2012Jeff Madrick

Obama failed to defend his policies or the positive role of government. But next time he'll be ready.

President Obama lost the dabate. A night’s bad sleep did not change my mind about that. But let’s be clear that, if more relaxed and clear, Romney was the same as ever. There is no new Romney. He dissimulated, did not address details, and refused to answer what few charges Obama brought up.

Obama failed to defend his policies or the positive role of government. But next time he'll be ready.

President Obama lost the dabate. A night’s bad sleep did not change my mind about that. But let’s be clear that, if more relaxed and clear, Romney was the same as ever. There is no new Romney. He dissimulated, did not address details, and refused to answer what few charges Obama brought up.

He opened with a brilliant debating tactic—really a war tactic: open a second front and retreat on the first one. Romney tacked to the middle. No, he won’t cut any taxes he can’t pay for. No, it isn’t a $5 trillion plan. Obama wasn't ready and didn't seem able to adjust. But what is the Romney policy? He never said. More upsettingly, Obama noticed but never truly pressed him on it. 
 
In fact, Romney's is the same old George W. Bush policy, and it didn’t work then. Obama got to this point, too, but didn’t bring it home strongly enough. Job growth was the slowest under Bush of any other postwar president. Obama said it. Doesn’t anyone remember his saying it? But Romney dissimulated again, because he can’t pull this grand four or five point strategy off, just like he couldn't pay off his original tax cut program. Obama could have asked him how much he plans to cut tax rates. He would have dodged it, but in dodging it he would have looked more like the old Romney than the new, bold Romney. Obama could have pressed harder on the details of closing loopholes. He didn’t.
 
Romney ignored the facts time and again, a tried and true debating technique. Obama pointed out that in a Medicare voucher program with choice, the insurance companies will steal the elderly who are healthy and raise costs for Medicare, jeopardizing its future. Romney simply ignored the point and went on to say, as if Obama said nothing, that Medicare would still be there under his voucher program and if it worked better, it would stand. 
 
In his attacks on the role of government, he persistently said the private sector can do better. But private sector health care costs have risen faster than Medicare. Why is that? He pushed the old ideological sticking points. Government is bad, private enterprise good. No facts, mind you. Just shibboleths. Keep the federal government out of health care. Give it to the states. Should we keep the federal government out of Social Security and Medicare, too—both very popular programs?
 
But if Romney’s bluster was strong, Obama lost the debate more than Romney won it. He seemed incapable of defending Obamacare. He couldn’t even counter the alleged Medicare theft of $716 billion well. He didn’t defend his green investments. Ninety billion dollars is not much when you consider Japan will probably spend nearly $500 billion on renewables. He only passingly defended his stimulus bill, repeating the error of neglect he has made for most of his administration. In fact, he hardly defended his record at all, for fear it reminds people that unemployment is stil high, as is the deficit. The point is they'd both be higher under a Romney plan.  
 
And what of the policies for 2013? Where was talk of Obama's American Jobs Act? Why not say that Romney’s policies will bring you a recession, sure as you’re sitting there?
 
And what about bipartisanship, of which Romney bragged during his governorship in Massachusetts? Could Obama have pointed out that he couldn't deal with Republicans who proclaim their first priority is to stop his reelection? Did any prominent Massachusetts Democrats threaten Romney that way?
 
Now, the media will start analyzing the Romney promises, and therein will lie some justice. He won’t be able to defend them except in the same general, non-detailed ways. The Democrats have to counter-attack. There will be plenty of room to do so. 
 
And one other point: I think Obama will be ready next time. He went into the ring cold. Every boxer knows you have to warm up and break a sweat before the first bell. I think he learned. He almost got knocked out in the first round. Not again, I don't think. 
 

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

 

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State and Local Education Funding Declined (Again) in 2011

Sep 28, 2012Mike Konczal

Here's something that might put larger trends into perspective. Earlier this month, the Bureau of Economic Analysis released data on state and local spending for the 2011 year. Here's how spending looks for state and local spending on elementary and secondary education:

Here's something that might put larger trends into perspective. Earlier this month, the Bureau of Economic Analysis released data on state and local spending for the 2011 year. Here's how spending looks for state and local spending on elementary and secondary education:

This isn't adjusted for inflation, so the decline is even worse. The dotted line is the seven-year pre-recession average projected forward. I'm pretty cynical about these things and knew that spending had declined in 2010, but I had expected it to even out or go up in 2011. Instead, it has declined further.

There's been yearly increases in spending on elementary and secondary education going back decades. We didn't develop some sort of technology that made educating young people cheaper in 2009 - instead, states were hit hard by a housing crash and liquidity issues that come with having to maintain a balanced budget in light of the worst downturn since the Great Depression. This also comes on top of the mass layoffs of teachers, some 200,000 during this recession. Rather than firing teachers while spending more elsewhere, we are just spending less educating our children, period. This is the worst kind of disinvestment, made at the worst possible time.

To bring in teachers' unions, the anti-teacher's union agitprop film "Won't Back Down" is getting negative reviews, including Liza Featherstone in Dissent and Dana Goldstein in The Nation. When you see examples of parents filling in for a failing school system, notice that this will increasingly be the case with declining funding for education. That gap in the graph above is being filled by parents and teachers for free or with children getting less education. Megan Erickson wrote about this trend in Jacobin, noting, "parents and kids are increasingly being asked to pitch in and paint the building or hawk candy bars to fill budget gaps. That’s because the values of freedom, autonomy, and choice are in perfect accordance with market-based 'reforms,' and with the neoliberal vision of society on which they’re based."

And this graph is why you need some organization at the front lines fighting for better spending on education, which is part of what teachers' unions do. There's been some great write-ups of the successes of the teachers' union strike in Chicago, including Richard D. Kahlenberg at The New Republic, Hamiltion Nolan at Gawker, and Josh Eidelson at Salon. A significant part of the strike was over broader and better educational outcome and more resources for schools. As this graph shows, it is a battle that will continue to be important.

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