The Budget Chronicles: The Super Committee's Predestined Failure

Nov 16, 2011Bo Cutter

All signs point to empty political posturing without real solutions. And that was always the expected outcome.

All signs point to empty political posturing without real solutions. And that was always the expected outcome.

The super committee, set up after the debt limit debacle in early August, is due to report on November 23. This report is supposed to tell us how Congress will meet its self-inflicted requirement to reduce future deficits and the growth of the country's debt by at least $1.1 trillion over the next 10 years. If this goal is not met, then automatic cuts -- called sequestrations -- will go into effect, divided equally between domestic and defense expenditures. This report was actually due to the Congressional Budget Office well before now so that the CBO could score the proposals. But if you knew anything about congressional negotiating, you knew that would never happen; it was always doomed to be strung out until the last minute.

So what's the report going to propose?  Here is my handicapping of possible outcomes with commentary to follow:

1) Chances of a breakthrough and a major deal: 0 percent. There was never any chance of this. No member of the committee has anything close to the clout needed to move his or her party toward any kind of real deal.

2) Chances of a failure and the ensuing sequestration: 10 percent. This would be an awful result for the committee members and for Congress as a whole. I know that there is great pressure on the committee to avoid a failure. Embedded in my 10 percent estimate is some small chance of a modified failure, such as a decision to delay the report. But I cannot imagine the committee wants to prolong this agony.

3) Chances of a "kick the can down the road" minimum proposal filled to the brim with fake cuts, empty allocations, and meaningless two-step processes: 90 percent. The report will propose approximately $1 more than the absolute minimum combined with a maximum degree of fakery.

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To describe the "kick the can" option more completely: it will include a) a very small total of real deficit or debt reduction; b) maximum possible use of fake changes -- for example, counting currently planned troop reductions as defense cuts; c) broad, empty allocations -- other committees will be instructed to make cuts in very broadly specified areas (so no one is guilty of any actual reduction); d) I hear there is some chance of the return of an oldie but goodie -- the general fraud, waste, and abuse reduction; and e) a new maneuver -- the revenue increase two-step, by which a (small) revenue increase is stated with the actual tax changes assigned to the tax committees to decide upon next year.

One can be disappointed, but certainly not surprised. This super committee was, from its beginning, intended to produce this result. It is the Congressional version of the joke about the train car load of 10-year-old canned sardines: intended for trading, not for eating. Creating this committee was solely the way to get out of the debt limit/deficit debacle Congress created for itself. Yes, lots of people played their expected roles and presented to the committee. But no one who knows the town ever thought we would be any where else but right here.

The committee's report will then immediately become the vehicle for a much more satisfactory game of finger pointing, which will set an appropriate tone for the presidential campaign we are headed into. Some of the truest words ever spoken about pro football also apply to politics: Blain Francis Nye, Stanford graduate and tackle for the Dallas Cowboys, is credited with observing, "It's not who wins or loses, but who gets the blame."

But, to end on a positive note, there is some modest chance that events might force both sides toward a grand bargain immediately after the presidential elections in the period between November and Inauguration Day in January. No matter who wins, there is going to be a high sense of urgency to get this issue at least partially out of the way.

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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The City's Attack on Information

Nov 15, 2011Bryce Covert

Books dumped in the garbage. Press intimidated and shut out. These are not the signs of a functioning democracy.

Books dumped in the garbage. Press intimidated and shut out. These are not the signs of a functioning democracy.

In recent weeks, one of Occupy Wall Street's perhaps greatest victories became crystal clear: since the protests took off, the number of news stories talking about inequality has skyrocketed. This is perhaps one of the movement's greatest strengths: the spreading of information about issues that were previously ignored, if felt viscerally by most Americans. Growing income inequality has been no secret, but few were talking about it on a national scale until the movement put it on the radar.

The discussion and dissemination of information is a hallmark of the movement. On any given trip down to Zuccotti Park, by far the most common activities I observed were teach-ins on various issues surrounded by smaller, informal conversations ranging from crony capitalism to bank bailouts to student debt. The way most illustrious thinkers got involved with the movement was to visit the encampment and share their wisdom. This love of information was also embodied in Occupy's call for transparency. Protesters seek a government whose operations are open to the public and not just to lobbyists, one that is accountable and accessible to its citizens. Signs like this said it simply:

transparency

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But perhaps no greater embodiment of this love of information and knowledge was the People's Library. The first time I went to donate books it consisted of a dozen or so bins neatly arranged by category and title; the last time I was there it had grown to become one of the largest pieces of infrastructure in the park, insanely well organized and beautifully displayed:

library

It's perhaps most chilling to me, then, that when I awoke to news of the evacuation it quickly became clear that police simply threw all of those carefully donated and organized books in the trash. The symbolism of a militarized police force piling thousands of incarnations of our country's knowledge and history into dumpsters is hard to escape today.

To top it off, the press was barred from entry and the few who snuck their way in were treated terribly. Those who tried to reason with the police that they had media credentials and therefore should be allowed access to cover events in a public space were rebuffed. As Rosie Gray of the Village Voice tweeted, "Me: 'I'm press!' Lady cop: 'not tonight.'" Those who were able to find their way past the barricades were purportedly arrested and roughed up. Freedom of the press is ingrained in the DNA of our country. Why? Because without it, citizens remain in the dark. Opacity reigns. Corruption can fester and citizens become less engaged.

Mayor Bloomberg claims the raid was to protect people, including the protesters, from supposed dirtiness and violence. But who is protected when information is blocked or destroyed? Only those doing deeds that can't stand up to the scrutiny of transparency. Information is one of the most powerful tools of a functioning democracy. It suffered a blow last night.

Bryce Covert is Editor of New Deal 2.0.

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Dredging Up the Submerged State: How Democrats Lost Their Nerve

Nov 14, 2011Mark Schmitt

The greatest obstacle to a New Deal-worthy response to our current economic crisis is Americans' distrust of government. But what causes that distrust? Is it just bred in the American spirit, from the Founding Fathers? If so, how were FDR and his successors able to overcome the distrust and bring newfound powers of government to bear against an economic crisis? Is it just propaganda carried over from the Reagan era?

The greatest obstacle to a New Deal-worthy response to our current economic crisis is Americans' distrust of government. But what causes that distrust? Is it just bred in the American spirit, from the Founding Fathers? If so, how were FDR and his successors able to overcome the distrust and bring newfound powers of government to bear against an economic crisis? Is it just propaganda carried over from the Reagan era?

Last year, a fresh answer emerged in a couple of articles and now an important book, The Submerged State, from Cornell political scientist Suzanne Mettler. Mettler showed that Americans distrusted government in part because, unlike in the New Deal era, they don't see or feel what government does. We've created programs that are so complicated, vague, and nuanced -- tax credits and public-private partnerships -- that many of their beneficiaries don't know that they are benefiting from government at all. Mettler's analysis has multiple implications: We have to call attention to the purpose of government and how programs like student loans help to achieve it, but we also need a new approach to the structure of government and a willingness to move decisively and visibly on big public missions.

I reviewed The Submerged State in The New Republic in October, and have subsequently had the pleasure of asking Suzanne some questions about her new book. The answers will appear in a question-and-answer format, expanding on points in the book, over the next few weeks.

Mark Schmitt: In your wonderful book, you show how the "submerged state" programs of the current era, like the tax credit for education savings, are invisible to their beneficiaries, thus fostering their feeling that government does nothing for them. You draw a contrast to older programs like Social Security and the GI Bill that recipients knew about and could feel. Most of the New Deal and Great Society programs were much more visible. How do you explain that? Was it that FDR, Harry Truman, and Lyndon B. Johnson were smarter about creating programs that people would appreciate? Or were those just simpler times?

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Suzanne Mettler: Social welfare policies created as part of the New Deal and Great Society did tend to feature a more visible role for government, for various reasons. Presidents Franklin D. Roosevelt and Lyndon B. Johnson benefitted from large majorities of Democrats in Congress, so they more often had the political clout to enact policies with designs they favored. The policies of the submerged state, some of which date back to the early and mid-twentieth century, were typically promoted by Republicans or by conservative Democrats who favored arrangements that worked through market mechanisms rather than government bureaucracies. In addition, submerged policies often emerged as the fruit of compromises with powerful interests -- groups who would only support reform if it channeled funds in their direction. This is exemplified by the creation of bank-based student lending in 1965.

In the period of conservative governance that the United States has experienced since 1980, creating and building the submerged state has become a bipartisan affair. Such designs appear, at least at first blush, to embrace the market-based priorities of this period, the view that the private sector does things more effectively and efficiently than government. In reality, submerged policies are antithetical to genuine laissez faire principles, because they actually intervene in the market and channel government resources to promote particular industries at the expense of others.

In addition, as partisan polarization has escalated, submerged policies have grown more attractive to Democrats because they offer a more politically feasible manner of channeling resources to low- and moderate-income people than the creation or expansion of direct policies. This is the case not only because conservatives are more willing to support them, but also because they encounter fewer procedural hurdles in Congress. They are not subject to the public glare and multiple veto points of normal budget items, and once enacted, they can grow automatically and are not subject to annual appropriations.

Mainstream Democrats have increasingly come to recognize that such policies poll well. This point is explored in fascinating new research by Jake Haselswerdt and Brandon Bartels, discussed recently at The Monkey Cage, and by Kevin Drum at Mother Jones. But contrary to Drum's conclusion that these policies show "how to fool conservatives into spending money," in the longer run it is liberals and moderates who are shown to be the fools for embracing such policies. As I show in The Submerged State, government's role in such policies eludes Americans, including even the beneficiaries. This makes it possible for people to become increasingly indifferent or even hostile to government, not recognizing that it is the source of policies they depend on. In turn, it prevents people from mobilizing to support reforms to address the major social problems that concern them.

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A Ticking Time Bomb: The Arab Spring and America's Lost Generation

Nov 14, 2011Mike Konczal

High unemployment pushed young people in the Middle East and North Africa to revolt. Why wouldn't it happen here?

Is it useful to think of the Occupy movement more as a "left" movement or a "youth" movement? To answer that question, it's worth looking into data on the young, particularly as it relates to unemployment.

High unemployment pushed young people in the Middle East and North Africa to revolt. Why wouldn't it happen here?

Is it useful to think of the Occupy movement more as a "left" movement or a "youth" movement? To answer that question, it's worth looking into data on the young, particularly as it relates to unemployment.

To leave the United States for a minute, one way people are trying to understand the Arab Spring is through the lens of massive youth unemployment and inequality. Given how high unemployment has been in these MENA (Middle-East and North African) countries, what else could we expect besides revolution?

For instance, in early February then-IMF chief Dominique Strauss-Kahn told a conference, "this summer I made a speech in Morocco about the question of youth employment including Egypt, Tunisia, saying it is a kind of time bomb" and "such a high level of unemployment, especially youth unemployment, and such a high level of inequality in the country create a social situation that may end in unrest." Here is the "youth unemployment" blog tag at the IMF to give you a sense of what people there have been saying about it. In particular, they point out that it should be a major concern for the MENA and African regions.

Interestingly enough, it was even a concern before the mass protests broke out. Regional IMF officials Ratna Sahay and Alan MacArthur gave a presentation on January 23rd, "Challenges for Egypt in the Post Crisis World," at the Egyptian Center for Economic Studies in Cairo (h/t WSJ). Protests would begin a few days later. Here's a key slide from that presentation:

Part of you may want to immediately start pointing out differences between this country and those. Maybe you are furious at terrible, unresponsive, corrupt governments ignoring the plight of their populations. Maybe you think that if these countries only had neoliberal, "flexible" wage contracts and a leakier safety net like we have in the United States, then unemployment would be much better.

You may then head over to our monthly unemployment numbers and note that American youth unemployment is in the same ballpark as these MENA countries.

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I've taken numbers from the IMF presentation slide above and compared them to the United States' youth unemployment averages from October 2010-October 2011 from the BLS's CPS data:

I can't find what constitutes "youth" for "youth unemployment" in the IMF's definition, and I'm not even sure if it is consistent across the different countries they estimated. As such, I'm including ages 16-19 and ages 16-24, though I believe they are looking at 16-24. For the 16-19 age group, we are at the same level of unemployment as Egypt and well above the region as a whole. At the broader 16-24 range, we are above Syria and Morocco, which both saw large-scale movements in the Arab Spring.

One potential explanation for the high level of youth unemployment in MENA countries is that they have huge demographic issues to deal with -- they have a massive wave of people under 35 years of age to assimilate into their economies. What's our excuse, other than confidence fairy terror spells and a desire to go after public sector workers? And given this, how could we ever say youth unemployment in the United States' Lesser Depression isn't a "time bomb"?

I have to admit I'm a bit hardened to the various charts I'm able to put together from the Bureau of Labor Statistics' data, but this graph of the employment-to-population ratio for 16-24-year-olds going back to 1948 floored me:

Remember that the increase from the 1950s onward reflects women entering the labor force. And notice how it doesn't improve after the early 2000s recession. Every age group has seen a substantial drop in the employment-population ratio, but no other group I've seen comes close to this plummet. For the first time in half a century, a majority of young people aren't working.

Mike Konczal is a Fellow at the Roosevelt Institute.

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The Veterans of the 99%

Nov 11, 2011Reese Neader

Our veterans fight for our country overseas. They shouldn't have to fight for a job when they come home.

It's Veterans Day 2011, and the Great Recession continues. Just as in years past, American veterans from the wars in Iraq and Afghanistan are coming home to a country that cannot provide them the basic dignity of having a job or a place to live. But this year something is different: they are marching for justice.

Our veterans fight for our country overseas. They shouldn't have to fight for a job when they come home.

It's Veterans Day 2011, and the Great Recession continues. Just as in years past, American veterans from the wars in Iraq and Afghanistan are coming home to a country that cannot provide them the basic dignity of having a job or a place to live. But this year something is different: they are marching for justice.

The status quo is grim. The unemployment rate among veterans of Iraq and Afghanistan is 12 percent, even higher than the unacceptable national average of 9 percent. In 2009, over 130,000 U.S. vets spent at least one night in a homeless shelter. Our veterans should be coming home to a country that honors and respects their sacrifice. Instead, our country's largest banks, including JP Morgan, Bank of America, and Wells Fargo, have been accused of overcharging them on their mortgages.

Now veterans across the country are joining the Occupy movement to protest economic inequality, denounce corporate greed, and demand jobs. Many of these brave heroes have also challenged law enforcement in their local communities for attacking unarmed civilians. But some of these veterans have also been attacked by police for exercising their own freedom of speech.

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When Scott Olsen, an Iraq War veteran and Marine, demonstrated at an Occupy rally in Oakland, he was shot with a tear gas canister and sustained severe head injuries. In response, hundreds of veterans marched silently through lower Manhattan (from Vietnam Veterans Park to Zuccotti Park) to protest his mistreatment and show solidarity for the Occupy movement. Since then, another veteran has been hospitalized in Oakland, this time with a ruptured spleen from being beaten by the police. Despite this backlash, the Occupy Veterans movement is growing as men and women who have served in our armed forces continue their fight on behalf of American citizens and their constitutional rights.

Some progress has already been made. The Move Your Money campaign is taking money away from the multinational corporations that are putting our veterans out in the street and redirecting it to credit unions that will invest in our communities. A proposed Veterans Jobs Bill would provide tax breaks for companies that hire jobless veterans and veterans with service-oriented disabilities. But there is much more to be done. While we take today to honor veterans' service, we must remember that we cannot tolerate a financial and economic system that leaves them broke, homeless, and in debt.

Reese Neader is the Roosevelt Institute | Campus Network’s Policy Director.

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Arizona Puts Profit Over Prisoners' Progress With New Fee

Nov 10, 2011May Mgbolu

prison-wall-150Families already struggle to visit incarcerated loved ones, but a new charge will make it harder and further isolate inmates.

prison-wall-150Families already struggle to visit incarcerated loved ones, but a new charge will make it harder and further isolate inmates.

Imprisonment has always generated invisible inequalities. But new legislation in Arizona now forces families and friends of inmates to bear an extra burden and will end up creating more barriers to reentry for inmates after they leave the system.

As of July 20th, Arizona became the first state to pass a "background check fee" that charges adults a one-time fee of $25 to visit any of the 15 prison complexes that house state prisoners. While the legislation was instituted under the pretext that the profit would be used to support the administration of background checks, Wendy Baldo, chief of staff for the Arizona Senate, has explained that the earnings will fund prison maintenance and repairs. However, prison maintenance and repairs is the least of concerns among prisoners and visitors.

Instead, the legislation imposes unusual punishment on the prisoners' family and friends. This fee directly penalizes the family of inmates for the simple reason that their loved ones are in prison and they want to visit them while incarcerated.

While $25 may not seem like a huge amount for many Americans, there is a vast economic disparity between the families of inmates and an average two-parent household. Although specific figures on household income of incarcerated parents are not available, a single parent home that loses one parent to the prison system is expected to experience an income drop of an average 41 percent in the first year. Although the majority of families affected by incarceration are often already low-income households, there is evidence that the men within these families are the key contributors to household income. For instance, 54 percent of the men incarcerated reported being the primary financial support in their household, with an average of 61 percent of fathers employed full-time and 12 percent of employed part-time.

The magnitude of the destabilization of a family struggling financially before an incarceration only demonstrates the declining probability of a family being able to make ends meet in a single household. Arizona's fee simply adds another cost for the family. It comes on top of acquiring the funds necessary to maintain contact with their loved ones such as having to take time off of work and travel to the desolate areas where prisons are often located. It should come as no surprise, then, that this fee is likely to reduce the frequency of visits and cut off inmates' connection to their loved ones and the outside world.

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While prison maintenance is important to the functions of Arizona's Department of Correction, prisoners, their families, and the law has the potential for long-lasting negative effects on prisoners. Importantly, the new law may put a key goal of our criminal justice system in jeopardy: rehabilitating and integrating formerly incarcerated people back into society.

With this fee forcing families to shoulder greater expenses, the Arizona Department of Correction undermines their mission of "successful community reintegration." It discourages visits from wives, husbands, children, and many loved ones that play a vital part in keeping prisoners on a straight and narrow path. While others programs, such as Florida's Department of Correction, create strategies to decrease recidivism through visitation programs, Arizona's Department of Correction chooses to discount the importance of visitation. The PEW Center and the National Prison Project of the American Civil Liberties Union have stated that prison visitation has a positive impact on inmates socially and psychologically, deterring them from potentially bad influences that could lead to reincarceration. Adding a price tag to an important factor in an inmate's ability to avert reincarceration defeats the purpose of the prison system.

This fee may be the first of many to be seen among state correction departments looking to join the national trend of "prisons for profits" and decrease the state's cost of incarceration. While the politics of prisons for profit are anything but new, such policies continue to be a strong determinant of the future of the impoverished communities victimized by the hardships related to incarceration. We need to reconsider the goals and values of our criminal justice system so they are not just about how they save money and make profits.

Barrett Marson, the spokesman for the state Department of Correction, explained that Arizona receives over 30,000 applications to visit prison inmates each year and expect to generate at least $750,000 a year with this fee. But it will undeniably challenge families' of inmates access to visitation, reduce prisoners' chances of adequate rehabilitation and reintegration, and instead encourage the revolving door of prison's release and reentry in order to generate less then 1% of Arizona's Department of Correction's $1 billion budget. As a nation we need to understand the destructive implications of such policies. Is this income worth the greater price tag?

May Mgbolu is the Senior Fellow for Equal Justice at the Roosevelt Institute | Campus Network and a senior at the University of Arizona.

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Message from Mississippi Personhood Defeat: Americans Don’t Want to Criminalize Women’s Personal Choices

Nov 9, 2011Ellen Chesler

Due to grassroots organizing and education, the amendment went down to decisive defeat. Politicians take heed.

Due to grassroots organizing and education, the amendment went down to decisive defeat. Politicians take heed.

Yesterday's solid defeat of the Mississippi Personhood amendment is a victory against extremism and for women's health and rights, but it is also a big win for progressive political organizing. Voters in the state that Gallup ranks as the most conservative in the nation soundly rejected the move to grant legal status to embryos from the moment of fertilization. The law would have banned abortion without exceptions and directly challenged Roe v. Wade, but it also threatened some forms of birth control and emergency contraception that may result in the loss of embryos, as well as infertility treatments that make use of them.

What's most interesting about this win is that just ten days ago polls projected exactly the opposite outcome. That was before the Mississippians for Healthy Families Coalition, a local campaign supported strategically and financially by the Planned Parenthood Action Fund and the ACLU, hit the ground. (Full disclosure: I am a member of the PPFA board.) According to Planned Parenthood, the campaign raised $1.5 million dollars, opened four offices across the state, deployed 50 full-time staff, and recruited nearly 1,000 volunteers, most of them in a classic get out the vote operation that made more than 400,000 phone calls and knocked on some 20,000 doors. This tireless effort closed a 31-point gap in just 10 days of active campaigning, possibly establishing a record for voter turnaround in this country.

When it was all over, even outgoing Republican Governor Haley Barbour, a reliable conservative, expressed misgivings about the amendment as government gone too far. (Though in what is now becoming classic behavior for GOP officials and candidates confused about how much they must pander to the party's rightwing, he then reversed himself and said he would vote for it.) The state's voters, and especially its women, were smarter. Once they understood that the law would have threatened birth control and mandated government intervention in decisions that ought to be personal, including the right to end a potentially life-threatening pregnancy, wise citizens of all political stripes simply voted against it.

The Mississippi victory ought to be viewed as an omen for next year's presidential and congressional campaigns. For years it has been perfectly clear that a sizable majority of Americans don't want to criminalize abortion or compromise access to contraception and sensible sex education. But unlike the determined minority of anti-choice and puritanical extremists on the other side, these folks have never privileged social concerns in the voting booth. Perhaps understandably, what's mattered more to them are economic issues or considerations of national security, and they have moved back and forth between Democrats and Republicans depending on which party's leadership inspired the most comfort in these zones.

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At a briefing in Washington last week I was privy to early polling by the Obama campaign, which has uncovered an important shift, especially among voters between the ages of 30 and 49, who supported the president in the last election but are now abandoning him out of frustration over failed promises and disappointing economic policies. While they also express little confidence in Republican alternatives on these matters, they are deeply concerned by the party's apparent capitulation to its base of right-wing social extremists. The decision by Congressional Republicans early this year to defund Planned Parenthood is wildly unpopular and apparently registered an astonishing 85 percent disapproval, giving Obama a big opening to win back this group.

Planned Parenthood has shared its own polling with supporters, which demonstrates a solid 65 percent overall approval rating for the organization across the country. And these numbers simply leap off the charts when sorted by age, race, or gender. Support from women, minorities, and young people registers over 80 percent. This is not surprising, since they are the principal beneficiaries of the organization's services in 800 health centers in all 50 states and online, where some 2 million users now visit the PPFA website each month. One of every five women in America has or will use its services at some point in her lifetime. And beyond the healthcare it provides, the organization's Political Action Committee is demonstrating its effectiveness. (Which, of course, only makes anti-choice Republicans even crazier.)

No surprise then that the Obama administration and Democrats in general have suddenly found religion on matters of women's health. With his now famous "nope, zero" response, the president simply shut down John Boehner's effort to sacrifice public funds for family planning as part of the deal to reduce the federal deficit and prevent a government shutdown last spring. All of the Republican presidential hopefuls this year, however, have since taken the money back out of their proposed budgets in order to curry favor with conservatives who care about these issues and vote on them in Republican primaries. And all of them supported the Mississippi Personhood amendment. When it comes time for a general election, whoever wins the primary will have a lot of explaining to do.

Dare I say that on this particular "morning after" our erstwhile Republicans, ironically enough, may finally be seeing the value of a "Plan B" that can make the consequences of impulsive, unwise behavior simply disappear?

Ellen Chesler is a Senior Fellow at the Roosevelt Institute and author of Woman of Valor: Margaret Sanger and the Birth Control Movement in America.

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Pre-Occupied with Fairness: The Moral Crisis of Modern Capitalism

Nov 9, 2011John Paul Rollert

occupy-journalThere's no good explanation for why Wall Street continues to suck up vast amounts of money except that there is a flaw in the system itself.

occupy-journalThere's no good explanation for why Wall Street continues to suck up vast amounts of money except that there is a flaw in the system itself.

The Occupy Wall Street protesters were not immune to the news of Steve Jobs's passing. "A ripple of shock went through our crowd," Thorin Caristo, a leader of the movement's web outreach, told the Associated Press. He later called for a moment of silence from the stubborn assembly at Zuccotti Park, and the 99% paid tribute to an exceptional member of the other club.

The gesture failed to move some. National Review's Daniel Foster envisioned "viscera of a thousand heads exploding from the sheer force of cognitive dissonance," while conservative columnist Michelle Malkin said that the protesters honoring Jobs's life and work "without a trace of irony" provided the "teachable moment of the week." The lesson, it seems, is that one cannot critique capitalism without also rejecting every single capitalist, a conclusion that is not only logically flawed but one that was famously rejected by William F. Buckley, Jr., the ideological avatar of the modern conservative movement and a founder of the National Review.

In a column written just a few years before his death, Buckley condemned what he called the "institutional embarrassments" of capitalism, CEOs whose enormous compensation packages defy the gravitational pull of poor stock performance. Buckley was no equalitarian, and he drew a contrast between the "executive plunder" reaped by certain CEOs and the allowances that may be made for the likes of a Thomas Edison. Were such a person alive today, he said, "it would be unwise to cavil at any arrangement whatever made by a company seeking his services exclusively."

Unwise, but more importantly, unwarranted, for at the heart of Buckley's argument is an appeal to fairness. It does not seem unreasonable that a Thomas Edison, or a Steve Jobs, be paid a lot more than the rest of us. But when it comes to people who not only fail to create value, but actually supervise its destruction, it seems outrageous that they should make more over a long lunch than most people make in an entire year. Or, as Buckley puts it, "What is going on is phony. It is shoddy, it is contemptible, and it is philosophically blasphemous."

To be clear, were he still with us today, Bill Buckley would not be occupying Wall Street. His aim was to save capitalism from itself, and he would likely chide the protesters for trying to save us from capitalism. Still, the sense of moral outrage that infuses his column -- aptly titled "Capitalism's Boil" -- is not altogether different from that expressed by the weather-weary demonstrators. Doubtless, there are some who want to uproot capitalism altogether and replace it with some other system for distributing scarce goods, but one suspects that most who have turned out are simply looking to air the familiar grievances of the financial crisis (joblessness, soaring poverty, crushing debt) and shame those on Wall Street who cashed in on a crisis they helped create.

The same may be said with even greater confidence for the support the movement is enjoying across the country. It is not the case that a nation of closet communists has finally found a voice; rather, the protesters have come to embody a common sense that something is wrong with American capitalism -- that the system simply isn't working. In this respect, the focus on Wall Street is both apt and overbroad. Overbroad because, if you brush the complex instruments that precipitated the financial crisis, you won't find the fingerprints of every banker on Wall Street. Apt because the success of the financial sector as a whole not only defies the experience of the last few years, but the story of the American middle class for over three decades.

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Paul Krugman has famously called this period The Great Divergence. "We're no longer a middle-class society, in which the benefits of economic growth are widely shared," he said in the inaugural post of his New York Times blog. "Between 1979 and 2005 the real income of the median household rose only 13 percent, but the income of the richest 0.1% of Americans rose 296 percent." During the same period, the percentage of the nation's wealth held by the top 1% grew from 20.5% in 1979 to 33.8% in 2007. These trends have helped to set the U.S. apart from other developed countries in terms of wealth inequality. According to the C.I.A World Fact book, the U.S. currently ranks 39th in unequal wealth distribution, edging out Cameroon and Iran but just behind Bulgaria and Jamaica. By contrast, the UK comes in at 91st place, with Canada 102nd and Germany 126th.

The financial sector doesn't tell the whole story of growing inequality, but it certainly plays a central role. As Simon Johnson described its meteoric rise in a 2009 essay for The Atlantic:

From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.

The inequality within the financial sector is more striking still, with the most successful managing directors taking home enough to buy and sell a brace of lowly associates. Again, the numbers speak for themselves: In 1986, the highest paid CEO on Wall Street was John Gutfreund of Salomon Brothers, who made $3.1 million. In 2007, the CEO of Goldman Sachs, Lloyd Blankfein, made just short of $68 million.

To be sure, Americans have always had a high tolerance for economic inequality, particularly compared with their European peers. The quintessential American tale is still the rags to riches story, and for Democrats and Republicans alike, 'class warfare' is an accusation to be rebutted, not an open call to arms. Indeed, as the unlikely tribute to Steve Jobs attests, even for those who are willing to roundly object to the growing gap between the very rich and the rest of us, the problem is not inequality per se, but giving a satisfactory account for it. As Bill Buckley well understood, economic systems have to give a moral account of who wins, who loses, and why, particularly insofar as those systems are shaped by democratic choices. It is not hard to give a compelling account for why someone like Steve Jobs grows far richer than the rest of us -- his success tends to vindicate capitalism, not undermine it -- but the same may not be said for the financial sector in general. The problem isn't that the average banker doesn't work hard (the hours are grueling) nor that his work isn't essential to helping maintain a modern, civilized society (it is); the problem is that the same may be said for an ER nurse or a sixth grade teacher, and it isn't immediately clear why one should make 10 times as much as the other.

Buckley said of the CEO pay packages he so despised that "extortions of that size tell us, really, that the market system is not working," meaning that the free market, left to its own devices, does not allow for such gross distortions. This is certainly the account conservatives prefer when they try to explain Wall Street's inordinate success. According to them, anti-competitive regulations, cheap money from the Fed, and the cozy relationship between the big banks and Washington have allowed the financial sector to prosper not because of capitalism, but despite it.

To liberals, this sounds ridiculous. After 30 years of lower taxes, freer trade, weaker unions, and a general trend toward deregulation, the idea that growing inequality and Wall Street's exceptional success somehow defy the natural tendencies of capitalism is an astonishing exercise in wishful thinking. The forces of the free market alone may not explain these trends, but they seem hardly at odds.

Increasingly, the Occupy Wall Street movement has been faulted for not taking explicit sides in this dispute, but like Buckley in his column, the aim of their protests is not policy prescription, but moral persuasion. When your house is on fire, you don't stand around wondering whether faulty wiring or an arsonist is to blame. You raise a hue and cry until your neighbors fill the street.

John Paul Rollert is a doctoral student at the Committee on Social Thought at the University of Chicago. His essay, "Does the Top Really Support the Bottom? - Adam Smith and the Problem of the Commercial Pyramid," was recently published by The Business and Society Review.

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Pipeline Unveils Inaugural Class of Fellows

Nov 9, 2011

So you've heard of the Roosevelt Institute | Pipeline, and you've heard that it selects a group of young progressives doing exciting and important work to participate in the fellowship program each year. But who were this year's picks? The wait is finally over. The identities of the inaugural class of Fellows were revealed to the world at Roosevelt Rising this past Monday, a day-long event with exciting panels and distinguished speakers. You can meet the new Fellows by watching this video:

So you've heard of the Roosevelt Institute | Pipeline, and you've heard that it selects a group of young progressives doing exciting and important work to participate in the fellowship program each year. But who were this year's picks? The wait is finally over. The identities of the inaugural class of Fellows were revealed to the world at Roosevelt Rising this past Monday, a day-long event with exciting panels and distinguished speakers. You can meet the new Fellows by watching this video:

The event itself was a huge success, introducing the Fellows and launching the work they will focus on over the next year. It kicked off in the morning with a panel on how to envision a new economy for Millennial America with Pipeline Fellows Joe Shure, Darius Graham, Kristen Tullos, Suzanne Kahn, and Roosevelt Institute Fellows Mike Konczal and Sabeel Rahman. The panel was followed by a luncheon introducing all of the Fellows and a presentation from Dr. Paul Farmer, who awarded the first annual Rising Leader Award to Naomi Rosenberg. The day concluded with a panel discussion of citizenship in Millennial America with Pipeline Fellows Jack Madans, Minjon Tholen, Caitlin Howarth, and Nick Santos, moderated by Roosevelt Institute Senior Fellow Mark Schmitt.

Those who couldn't attend the event can watch the full video of it here:

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2012: 1932 Redux?

Nov 8, 2011David B. Woolner

 

If Congress continues to obstruct efforts to revive the economy, today's incumbents may suffer the same fate as Herbert Hoover.

The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something. The millions who are in want will not stand by silently forever while the things to satisfy their needs are within easy reach.

 

If Congress continues to obstruct efforts to revive the economy, today's incumbents may suffer the same fate as Herbert Hoover.

The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something. The millions who are in want will not stand by silently forever while the things to satisfy their needs are within easy reach.

We need enthusiasm, imagination, and the ability to face facts, even unpleasant ones, bravely. We need to correct, by drastic means if necessary, the faults in our economic system from which we now suffer.

-Franklin D. Roosevelt, May 22, 1932

Seventy-nine years ago today, on November 8, 1932, the people of the United States elected Franklin D. Roosevelt President of the United States.  No one was absolutely sure what FDR would do as president, but everyone understood that the United States -- and much of the rest of the world -- was in deep trouble.

Since the start of the Great Depression three years earlier, unemployment had climbed above 20 percent, average annual family income had fallen by 40 percent, and thousands of banks had closed their doors, wiping out the savings of 9 million individual bank accounts. Roughly half of all the home mortgages in the United States were in default, with another 1,000 homes going under every day. American industry had all but collapsed. To take but one example, in 1929 United States Steel Corporation had 225,000 full-time employees; by the end of 1932 it had no full-time employees save its corporate officers and a mere handful of part-time workers. The same was true in the financial sector, where overall stock market values had declined by 85 percent since their high in September 1929.

The human side of this story is even more distressing. In its November 1932 issue, The Nation estimated that approximately 20 million Americans -- one sixth the total population -- were at risk of starvation during the coming winter. By the end of the year, more than 2 million homeless people were roaming the streets looking for work or relief, of which approximately 200,000 were children -- mostly boys under the age of 14. In the coal mining regions of West Virginia and Kentucky, over 90 percent of the young were already suffering from malnutrition, as were more than 160,000 young people in New York City.

In the face of such a devastating crisis, FDR came to the conclusion that the forces of the market place had failed to deliver basic economic security to millions upon millions of Americans. He rejected the laissez-faire ideology that dominated the 1920s and understood that the forces of greed and avarice -- led by what his cousin Theodore Roosevelt called "the malefactors of great wealth" -- had created such an imbalance in our economic system that without immediate, significant reform, the U.S. might find itself in the throes of a revolution. This became all too clear with the rise of fascism and other forms of totalitarianism in parts of Europe and Asia.

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In essence, FDR believed that for democracy to work, capitalism had to work -- not for the few, but for all. He dedicated himself to the idea that against the forces of "economic tyranny" that had brought about this great crisis, "the American citizen could only turn to the organized power of government."

It was out of this basic conviction that FDR launched the New Deal, not to destroy the free market system, but to save it. Under his guidance the American people embraced the notion that in a complex modern industrial society the government can and must serve as the primary instrument of social and economic justice. It was this simple philosophy that brought us Social Security, unemployment insurance, banking and financial reform, the minimum wage, the right of labor to organize, and a host of other reforms that fundamentally altered the relationship between the American people and their government. The New Deal also offered millions of unemployed the dignity of work -- the chance for the laborers, architects, artists, and engineers of this great nation to build much of the economic, artistic, and environmental infrastructure that we still enjoy today.

Above all, FDR understood -- as he said in his first inaugural -- that "this nation asks for action and action now." Thanks to the support he enjoyed among most congressional Democrats and a significant number of liberal Republicans, he was able to push through the most significant slate of legislative reforms in our nation's history. In doing so, he not only helped alleviate a great deal of economic suffering but also restored the American people's faith in democratic government.

There is no question that a good share of the support FDR received in his campaign for the White House in 1932 stemmed from his repeated calls for action and his criticism of the lack of initiative on the part the Hoover administration to meet the economic crisis. After more than two years of unemployment at or above 9 percent, the mood of the electorate today is not all that different than it was in 1932. Polls show a mixture of anxiety, despair, and frustration at Congress's refusal to pass common sense measures -- like President Obama's jobs bill -- that would offer some relief to the millions of unemployed Americans.

To date, the deficit hawks in Congress seem unconcerned about the cost of their obstructionism, but if 1932 is any guide, this may prove a risky strategy for the coming election. To paraphrase FDR, the American people may tire of a "hear-nothing, see-nothing, do-nothing government" -- except that this time they may take out their frustration not on the president, but on Congress.

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute. He is currently writing a book on U.S.-UK economic relations in the 1930s, entitled Cordell Hull, Anthony Eden and the Search for Anglo-American Cooperation, 1933-1938.

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