Memory Lane

As we await tonight's speech, here are a couple other Presidential moments that Obama would do well to emulate.

Bill Clinton Address On Health Care Reform, September 1993.

Though eventually the reform failed, this speech was so successful that Clinton's approval ratings soared. If it had come near the end of the debate, as Obama's will, instead of right at the beginning, maybe Clintoncare would have had a chance. He put the choice on health care in very moral terms, challenging the Congress to get it done. And he framed the concept of health care as a choice for security - the peace of mind knowing that you will not go broke if you or a member of your family gets sick, and you will be able to find the care you need at an affordable cost. This is some great rhetoric:

And now it is our turn to strike a blow for freedom in this country, the freedom of Americans to live without fear that their own Nation's health care system won't be there for them when they need it. It's hard to believe that there was once a time in this century when that kind of fear gripped old age, when retirement was nearly synonymous with poverty and older Americans died in the street. That's unthinkable today, because over a half a century ago Americans had the courage to change, to create a Social Security System that ensures that no Americans will be forgotten in their later years.

Forty years from now, our grandchildren will also find it unthinkable that there was a time in this country when hardworking families lost their homes, their savings, their businesses, lost everything simply because their children got sick or because they had to change jobs. Our grandchildren will find such things unthinkable tomorrow if we have the courage to change today.

This is our chance. This is our journey. And when our work is done, we will know that we have answered the call of history and met the challenge of our time.

Then there's this speech: Lyndon Johnson's Special Message to the Congress: The American Promise, March 1965.

This came at the beginning of Johnson's first full term, and he started with "I speak tonight for the dignity of man and the destiny of democracy." Faced with a southern flank that wanted no part of civil rights, Johnson spoke eloquently about the need to solve "an American problem" with honesty and respect for individual rights. It's an amazing speech:

The issue of equal rights for American Negroes is such an issue. And should we defeat every enemy, should we double our wealth and conquer the stars, and still be unequal to this issue, then we will have failed as a people and as a nation.

For with a country as with a person, "What is a man profited, if he shall gain the whole world, and lose his own soul?"

There is no Negro problem. There is no Southern problem. There is no Northern problem. There is only an American problem. And we are met here tonight as Americans--not as Democrats or Republicans-we are met here as Americans to solve that problem.

This was the first nation in the history of the world to be founded with a purpose. The great phrases of that purpose still sound in every American heart, North and South: "All men are created equal"--"government by consent of the governed"--"give me liberty or give me death." Well, those are not just clever words, or those are not just empty theories. In their name Americans have fought and died for two centuries, and tonight around the world they stand there as guardians of our liberty, risking their lives.

Those words are a promise to every citizen that he shall share in the dignity of man. This dignity cannot be found in a man's possessions; it cannot be found in his power, or in his position. It really rests on his right to be treated as a man equal in opportunity to all others. It says that he shall share in freedom, he shall choose his leaders, educate his children, and provide for his family according to his ability and his merits as a human being.

To apply any other test--to deny a man his hopes because of his color or race, his religion or the place of his birth--is not only to do injustice, it is to deny America and to dishonor the dead who gave their lives for American freedom.

These two knew how to put their opponents up against a rhetorical wall. I hope we see some of that tonight.

Alternatively, Obama could just crib from Robert Reich on the public option. 2:30 of brilliance.

One Too Many Deals?

Robert Reich has an interesting thesis:

Right now, Obamacare is at war with itself. Political efforts to buy off Big Pharma, private insurers, and the AMA are all pushing up long-term costs -- one reason why Douglas Elmendorf, head of the Congressional Budget Office, told Congress late last week that "the cost curve is being raised." But this is setting off alarms among Blue Dog Democrats worried about future deficits -- and their votes are critical.

Big Pharma, for example, is in line to get just what it wants. The Senate health panel’s bill protects biotech companies from generic competition for 12 years after their drugs go to market, which is guaranteed to keep prices sky high. Meanwhile, legislation expected from the Senate Finance committee won't allow cheaper drugs to be imported from Canada and won't give the federal government the right to negotiate Medicare drug prices directly with pharmaceutical companies. Last month Big Pharma agreed to what the White House touted as $80 billion in givebacks to help pay for expanded health insurance, but so far there's been no mechanism to force the industry to keep its promise. No wonder Big Pharma is now running "Harry and Louise" ads -- the same couple who fifteen years ago scared Americans into thinking the Clinton plan would take away their choice of doctor -- now supportive of Obamacare. Private insurers, for their part, have become convinced they'll make more money with a universal mandate accompanied by generous subsidies for families with earnings up to 400 percent of poverty (in excess of $80,000 of income) than they might stand to lose. Although still strongly opposed to a public option, the insurance industry is lining up behind much of the legislation. The biggest surprise is the AMA, which has also now come out in favor -- but only after being assurred that Medicare reimbursements won't be cut nearly as much as doctors first feared.

But all these industry giveaways are obviously causing the healthcare tab to grow. And as these long-term costs rise, the locus of opposition to universal health care is shifting away from industry and toward Blue Dog and moderate Democrats who are increasingly worried about future deficits. My sources on the Hill tell me there aren't enough votes in the House to get either major bill through, even with a provision that would pay for it with a surcharge on the richest 1 percent of taxpayers. House members don't want to vote for a tax increase before their Senate counterparts commit to one. Yet the Senate continues to be in suspended animation because Max Baucus and his Senate Finance Committee still haven't come up with a credible way of paying for health care. In his testimony last week, Elmendorf favored limiting tax-free employer-provided health benefits, but organized labor remains strongly opposed.

I think this is very, very right, and I've been noticing that the deals made with stakeholders were beneficial to them compared to what Congress and the White House could have imposed. And while I'm not sure they've added significantly to the cost of the bill, they have restricted the cost controls that would make the bill easier to swallow for moderates and Blue Dogs.

This is the new debate, and time is running out. Obama has made deals to buy off everyone associated with health care, and now the fiscal scolds won't eat the costs. But any effort at controlling the costs will scuttle many of the deals. Labor won't allow touching the employer deduction, empowering MedPAC would probably flip providers from supporters to opposers, and going after other internal system costs would face resistance from pharmaceuticals. The coalition-building at work here certainly got health care reform this far, but it's starting to strangle it.

It doesn't mean that the President can't ram this thing through anyway. But it makes it harder when all these artificial walls have been set up.

Reich Calls It A Depression

Thanks for blowing my whole weekend, Robert Reich.

The March employment numbers, out this morning, are bleak: 8.5 percent of Americans officially unemployed, 663,000 more jobs lost. But if you include people who are out of work and have given up trying to find a job, the real unemployment rate is 9 percent. And if you include people working part time who'd rather be working full time, it's now up to 15.6 percent. One in every six workers in America is now either unemployed or underemployed.

Every lost job has a multiplier effect throughout the economy. For every person who no longer has a job and can't find another, or is trying to enter the job market and can't find one, there are at least three job holders who become more anxious that they may lose their job. Almost every American right now is within two degrees of separation of someone who is out of work. This broader anxiety expresses itself as less willingness to spend money on anything other than necessities. And this reluctance to spend further contracts the economy, leading to more job losses [...]

This is still not the Great Depression of the 1930s, but it is a Depression. And the only way out is government spending on a very large scale. We should stop worrying about Wall Street. Worry about American workers. Use money to build up Main Street, and the future capacities of our workforce.

I agree with Tim Fernholz - this whole notion that employment is a "lagging indicator" of the economy is dangerously out of balance. 663,000 people had their lives turned upside down in the last four weeks. Fixing their situation and getting them working again is actually the MEASURE of the economy, in my opinion.

So how do we do it? Obviously, the stimulus funds already in the pipeline and just starting to make their way out to the public will help. But Reich argues we'll need much more. Brad DeLong has some macro-economic ideas, including additional government spending, central banks buying government bonds, and boosting financial asset prices. I don't know exactly what needs to be done, and I'm willing to wait to see how this initial stimulus affects employment before calling for a new one. But this is a very tough time in the economy, and with the lack of retirement savings leading our elderly to the want ads, I'm just very worried about how we're going to come back.

Demand-Side Economics

Robert Reich, who I'm glad to have in the room advising President-Elect Obama during the transition, has written a piece about what he calls the "Mini-Depression" and how we can best undo it. The first thing is to understand the nature of the problem.

First, understand that the main problem right now is not the supply of credit. Yes, Wall Street is paralyzed at the moment because the bursting of the housing and other asset bubbles means that lenders are fearful that creditors won't repay loans. But even if credit were flowing, those loans wouldn't save jobs. Businesses want to borrow now only to remain solvent and keep their creditors at bay. If they fail to do so, and creditors push them into reorganization under bankruptcy, they'll cut their payrolls, to be sure. But they're already cutting their payrolls. It's far from clear they'd cut more jobs under bankruptcy reorganization than they're already cutting under pressure to avoid bankruptcy and remain solvent.

This means bailing out Wall Street or the auto industry or the insurance industry or the housing industry may at most help satisfy creditors for a time and put off the day of reckoning, but industry bailouts won't reverse the downward cycle of job losses.

The real problem is on the demand side of the economy.

Consumers won't or can't borrow because they're at the end of their ropes. Their incomes are dropping (one of the most sobering statistics in Friday's jobs report was the continued erosion of real median earnings), they're deeply in debt, and they're afraid of losing their jobs.

Introductory economic courses explain that aggregate demand is made up of four things, expressed as C+I+G+exports. C is consumers. Consumers are cutting back on everything other than necessities. Because their spending accounts for 70 percent of the nation's economic activity and is the flywheel for the rest of the economy, the precipitous drop in consumer spending is causing the rest of the economy to shut down.

I is investment. Absent consumer spending, businesses are not going to invest.

Exports won't help much because the of the rest of the world is sliding into deep recession, too. (And as foreigners -- as well as Americans -- put their savings in dollars for safe keeping, the value of the dollar will likely continue to rise relative to other currencies. That, in turn, makes everything we might sell to the rest of the world more expensive.)

That leaves G, which, of course, is government. Government is the spender of last resort. Government spending lifted America out of the Great Depression. It may be the only instrument we have for lifting America out of the Mini Depression. Even Fed Chair Ben Bernanke is now calling for a sizable government stimulus. He knows that monetary policy won't work if there's inadequate demand.

This doesn't mean we don't bail out the auto companies, but that we focus our efforts on the demand side of the equation for once. If we can use government to create jobs and raise income, consumer spending will rise, and then investment will rise, etc. Now, saving the auto industry might be part of that - after all, the carmakers and their parallel industries employ 3 million people. But to meet the scope of the problem we're going to have to do much more - probably spending up to 4% of GDP. And paradoxically, we're going to have to spend on things that work at cross purposes with selling more inefficient automobiles; things like transportation infrastructure.

The answer to the second question is mostly "infrastructure" -- repairing roads and bridges, levees and ports; investing in light rail, electrical grids, new sources of energy, more energy conservation. Even conservative economists like Harvard's Martin Feldstein are calling for government to stimulate the economy through infrastructure spending. Infrastructure projects like these pack a double-whammy: they create lots of jobs, and they make the economy work better in the future. (Important qualification: To do this correctly and avoid pork, the federal government will need to have a capital budget that lists infrastructure projects in order of priority of public need.)

Government should also spend on health care and child care. These expenditures are also double whammies: they, too, create lots of jobs, and they fulfill vital public needs.

Which is why an auto industry bailout must be tied to fuel economy, because otherwise, you're funding new, fast, efficient means of transport that would reduce greenhouse gas emissions AND the old model of 20 mpg and under gas guzzlers. Chris Dodd said yesterday that the votes aren't there for an auto industry bailout in the lame duck session of Congress. If the guarantees on efficiency are made, I think the votes could be there in January.

But the big emphasis here is on the new energy economy. There can't be a better way to reindustrialize America with jobs that can't be shipped away. I know that some believe industrial output has been rising due to productivity, but if you go into the numbers that only holds among a couple sectors - basically, if it wasn't for the computer we would hardly have any industrial output at all. And so building out a new energy grid that can transmit wind and solar power to anywhere in the United States, building high speed rail that runs on clean electricity, building new renewable facilities, all of these will create jobs that spur demand, and raise wages by giving job-seekers an option outside of the dead-end service sector. The fact that the EPA rightly blocked the new production of coal-fired power plants makes this a practical necessity.

And yes, health care is a part of this. There was hastily dismissed talk of adding health care to the stimulus package yesterday. As Reich says, it's a double whammy - you create jobs, and fulfill public needs.

Reich finishes by pre-empting the neo-Hooverist argument:

Expect two sorts of arguments against this. The first will come from fiscal hawks who claim that the government is already spending way too much. Even without a new stimulus package, next year's budget deficit could run over a trillion dollars, given the amounts to be spent bailing out Wall Street and perhaps the auto industry, and providing extended unemployment insurance and other measures to help those in direct need. The hawks will argue that the nation can't afford giant deficits, especially when baby boomers are only a few years away from retiring and claiming Social Security and Medicare.

They're wrong. Government spending that puts people back to work and invests in the future productivity of the nation is exactly what the economy needs right now. Deficit numbers themselves have no significance. The pertinent issue is how much underutilized capacity exists in the economy. When there's lots of idle capacity, deficit spending is entirely appropriate, as John Maynard Keynes taught us. Moving the economy to fuller capacity will of itself shrink future deficits.

The second argument will come from conservative supply-siders who will call for income-tax cuts rather than spending increases. They'll claim that individuals with more money in their pockets will get the economy moving again more readily than can government. They're wrong, for three reasons. First, income-tax cuts go mainly to upper-income people who tend to save rather than spend. Most Americans pay more in payroll taxes than in income taxes. Second, even if a rebate could be fashioned, people tend to use those extra dollars to pay off their debts rather than buy new goods and services, as we witnessed a few months ago when the government sent out rebate checks. Third, even when individuals purchase goods and services, those purchases tend not to generate as many American jobs as government spending on the same total scale because much of what consumers buy comes from abroad.

We have had 28 years of supply-side economics, and it has gotten us precisely to this crisis. Shifting this to job creation and wage increases, demand-side economics, would be maybe a quiet revolution for the cable news gasbags who focus on personality, but a revolution nonetheless. And to quote Dick Cheney, not a noted economic scholar but in this case appropriate, "This is our due."

Economic Royalists Still Dismissive Of Average American's Struggles

Two moments on the Sunday sows yesterday typified why a Democratic takeover of the Presidency and additional gains in Congress are nearing so close to reality - Republican spinners remain in total denial about the impact of failed conservative economic policies.

In an eye-popping statement on ABC's This Week, George Will told us that we're all doing much better than we were eight years ago, and shut up-a-you face, nervous ninnies, and let the free market do its job and reap untold fortunes (for a select few, of course). The astonishing transcript:

REICH: I don’t think you can separate economic security from national security. This is why I find John McCain’s position so interesting, because he wants to and needs to separate himself from Bush, a failed presidency, particularly if you look at the polls. And yet, on Iraq and on the economy, he is going beyond what George Bush has done. I mean, his tax cuts are beyond anything that –particularly for the wealthy—beyond anything that George Bush has proposed or did implement.

WILL: But Bob, today we have a bifurcated economy. The export sector is doing wonderfully, it’s pulling the country along, and the Democratic Party is raising doubts about its commitment—indeed, it’s affirming its lack of commitment—to free trade.

Now it is true that I think there is a disjunction in the public mind without precedent in 200 years of American history. We’ve always assumed that the very process—the dynamic market capitalism—produces increased national wealth simultaneously produced increased family and individual security. Now the doubt is that today’s capitalism on steroids, if you will, globalized capitalism increases national wealth, but undermines family and individual security which will produce a great flinch from free economics.

REICH: That’s exactly the point. That’s exactly the problem, George. Americans now have lost their faith in free trade; they’ve lost their faith in economic growth because they haven’t seen the benefits of it. It’s all gone to the top. That’s why Obama’s tax cuts for the middle class and for the poor are so critical for this campaign.

WILL: Because friends like you are misinforming the country by saying that they have not seen benefits. Even housing, Bob, housing today after the big decline, the average American house is worth a third more than it was in 2000.

REICH: George Will, you tell average Americans that they are better off today than they were in 2000-2001…

WILL: I will.

REICH: …and they will not believe you.

It's almost not worth arguing this point. Just let George Will on a national speaking tour telling everybody in the country how well they're doing, empirical evidence notwithstanding. I'd be willing to bankroll that tour if I weren't an American trying to pay for $4.50 a gallon gas and seeing my home value and purchasing power shrink.

(Will is also lying about so-called "free trade" - its benefit on prices is only on relative prices, good for people who buy things but bad for people who make things. And while America is moving toward a model of only buying things, it's beyond obvious that such a model is unsustainable.)

But for those who think that it must be only Will who is overlooking stagnant wages, growing unemployment, flat investment portfolios and inflation on necessities, let me direct you to another high-profile confab from yesterday:

WILLIAMS: One last point on this economic thing. I think if you say to most Americans that the tax cut is going — is simply a matter of not continuing President Bush’s tax cuts in 2010, they don’t view that as raising taxes.

That’s the wealthy who might say that, but it’s not on average people who are feeling higher gas taxes. It’s not on average people who have to pay more for food.

It’s almost like you guys are out of touch with what ordinary Americans are going through in this country at this time. People want government to respond to need and not simply to talk about more tax breaks for the rich and for big corporations.

HUME: (sarcastically) That’s what McCain’s doing, for sure. He’s saying, I want more tax cuts for big corporations, and I want the rich to get richer off the tax code. Oh, what baloney. That’s not what it’s about at all.

WILLIAMS: Well, where’s the pro-growth? If we have 5 percent –the other day we had the biggest jump in unemployment in this country in 20 years.

HUME: Juan, right. You know what that came from? People coming out of school for the summer, and they’re going into the job market.

WILLIAMS: Oh, come on.

HUME: We’re at 5.5 percent unemployment.

WILLIAMS: Right.

HUME: By historical standards, that is remarkably low. The growth policies and particularly the tax cuts that were passed in this administration have, I think, unquestionably helped this economy through some severe blows — 9/11, Hurricane Katrina, and so forth — to the point now where despite a predicted recession the economy is still managing to eke out a little bit of growth.

That’s a strong economic performance, on balance, and not a particularly good argument for allowing the tax cuts that were…

WALLACE: All right.

WILLIAMS: Nobody’s saying that. Justice Hume thinks that ordinary Americans aren’t feeling any pain.

WALLACE: I’m going to gavel you down.

WILLIAMS: Please.

Chris Wallace must have heard the shouting from the IFB in his ear to cut off the economic royalist telling them that the sky is actually red and the grass is blue.

Out of touch is an understatement. Americans are not so studious in tax policy that conservatives can't get away with telling some sweet little lies, like the pervasive statement that America "has the world's 2nd-highest corporate tax rate," which ignores all of the tax credits and deductions that makes the effective corporate tax rate the 4th-lowest among industrialized nations (and don't get me started about the offshore tax havens - in 2000 61% of corporations paid NO TAXES AT ALL).

But when you try to use the big lie - that actually the economy is going quite swimmingly and nobody's feeling any pain - that's where conservatives run into the brick wall of their own failed policies. You can't tell someone who has to stretch his budget more for basics that they're doing just fine. You can't tell someone who's home is in foreclosure that the fundamentals are strong. You can't look at the significant upsurge in bank robberies this year and make no connection to the broader economy.

And since royalists are wired to believe that what's good for the rich is good for everyone, since they are so convinced of conservative myths like how lower taxes equals increased revenue, or how the wealthy always convert their tax breaks into job creation and not trust funds, they're going to keep throwing out these fictions. They're going to keep telling Americans to their face that their empty bank accounts are actually full.

And Robert Reich is correct - "they will not believe you."

Unity Is The Great Need Of The Hour

Count me as someone slightly worried about the endorsements of bipartisan hacks David Boren and Sam Nunn for the Obama campaign. They wisely focused on foreign policy, where Nunn at least is on sturdier ground, but this is basically the remnants of Unity '08. I'm hoping this is their effort to remain relevant, and certainly Obama is in no position to deny their endorsements, but it gives me the willies. I think Obama's conception of "unity," which is about unifying class under a progressive banner, is far different than the false Broderism that Nunn and Boren profess. Still, hmm....

Although I do have to give Michael Bloomberg, who I often knock, some props for this line:

During a question-and-answer session, Bloomberg said he will not have to agree on all matters with whomever he ultimately endorses for president.

"I'm looking for a candidate that is willing to face reality and say, 'We can't have everything and there are costs and we've got to make choices.'"

The billionaire media mogul added, "Some of the things they will be in favor of I will agree with, some of the things they will be in favor of I won't. But at least we'll have an adult in office who can lead and can accomplish something."

Heh.

(I'm a bit happier with the Robert Reich endorsement.)