A Missed Opportunity

Here's a report from the Inspector General for the TARP program saying that Treasury lied to get money into the hands of the banks.

The inspector general who oversees the government’s bailout of the banking system is criticizing the Treasury Department for some misleading public statements last fall and raising the possibility that it had unfairly disbursed money to the biggest banks.

A Treasury official made incorrect statements about the health of the nation’s biggest banks even as the government was doling out billions of dollars in aid, according to a report on the Troubled Asset Relief Program to be released on Monday by the special inspector general, Neil M. Barofsky [...]

Mr. Barofsky’s office also says that regulators were wrong to tell the public last year that the earliest bailout recipients were all healthy.

Former Treasury Secretary Henry M. Paulson Jr., for instance, said on Oct. 14 that the banks were “healthy,” and that they accepted the money for “the good of the U.S. economy.” The banks, he said, would be better able to increase their lending to consumers and businesses.

That was George Bush's Treasury Department. And this practice of private equity companies and Wall Street investment firms looting the Simmons Bedding Company through borrowing the company into debt and taking out profits, is a fairly common practice. Neither should be intimately associated with the Obama Administration. Neither should the TARP program, initiated by Henry Paulson and the Bush White House. And yet, these revelations are happening on a Democrat's watch. And Chris Bowers is absolutely right to note that the bailout has constrained Obama's moves on the economy and threatened the Democratic majority for years to come.

The $810 billion Wall Street Bailout is a loadstone hanging around the neck of the Democratic Party. It thwarting what should have been a realigning moment in American electoral politics. Upon regaining control over the federal government following the 2008 elections, Democrats should have been able to cement their image as, in the words of Al Gore, "the people versus the powerful." Instead, we have become complicit in perpetuating a federal government that is more responsive to the wishes of powerful moneyed interests at the expense of the vast majority of Americans. And so, our chances at realignment are slipping away [...]

Maybe it wasn't possible to pass a $1.2 trillion stimulus in early 2009. However, this was due as much to Congress passing a $700 billion Wall Street bailout in October 2008 as it was to anything else. From October 2008 through February 2009, Congress did actually pass more than $1.2 trillion in economic stimulus. The problem was that, in the form of the Wall Street bailout, most of that money went to the same people financial institutions who caused the economic meltdown.

Perhaps the distinction between the stimulus and the bailout is clear in the minds of most economists and policy wonks, but it is not clear to many Americans. As such, passing the Wall Street bailout imposed a huge opportunity cost on the amount of money the Obama administration could realistically ask for in the February stimulus / jobs package. If they had not asked for $700 billion to hand over to Wall Street, they might very well have been able to ask for, and pass, the $1.2 trillion needed in the stimulus package.

Again, the bailout began prior to Obama's election, but Democrats in Congress held the majority when it passed, Obama endorsed it, and he even started pressuring members of his own party about it. He clearly had no problem with it, and yet it has narrowed his options on a sagging economy that has not seen much of a comeback on the jobs front. As Paul Krugman notes today, Christina Romer knew that the stimulus package would need to be twice as large as it ultimately became, but Larry Summers didn't even offer that as an option for political reasons. They didn't think they could move a $1.2 trillion dollar stimulus. So Summers talked himself into calling the stimulus “an insurance package against catastrophic failure,” admitting its lack of sufficiency. And the bailout contributed to that. Bowers is right that people don't make the distinction between the bailout and the stimulus in their minds; to them it's all government spending. And the right has used this skillfully, taking advantage of the anxiety people feel with job loss and financial insecurity to advance a kind of right-wing populism that ultimately serves corporate interests as much as the bailout did. As a result the teabaggers are gaining the upper hand in this debate:

Having said all that, there is great, HUGE value in this movie as an emotional, populist polemic for the left, something I've been screaming about since the beginning of the financial crisis. It's extremely disheartening to see the administration and so many Democrats in congress completely ignore the political and policy ramifications of failing to engage in fundamental financial reform and fiery populist rhetoric at a time like this. This teabagger movement is happening in a vacuum created by a lack of interest in this topic by liberals who are so enamored of being members of the new "creative class" and the like that they aren't paying attention to the cynicism and anger that's reaching critical mass among average working stiffs out there. It's easy to dismiss it, but very, very foolish. The issues Moore raises in this film will be answered on the right with authoritarianism, militarism, immigrant bashing and violence. It's a recipe for disaster unless the left takes this on in direct, political terms.

It's all there in Ryan Lizza's beat sweetener on Larry Summers and the Obama economic team. Fairly or unfairly, they are being tarred as corporate sellouts and tagged as the ones who ushered in the bailout. What that really suggests is that the parties in this country are interchangeable in the face of corporate hegemony, where powerful interests can write the laws no matter which party nominally controls the government. Right now, that's being proven by an economy working only for the banks and not regular people. And the Democrats are in power at this moment.

This is a dangerous time, where a party at near-historic lows in the public consciousness could actually rise to power, because they can credibly claim the mantle of being the party of the people. If the Democrats don't show Americans they are on their side, that's exactly what will happen.

Ruled By Neo-Hooverists

What leaped out of last Friday's pathetic jobs report for a lot of people was the significant drop in employment for government workers, particularly at the state and local level:

The latest jobs numbers from the Labor Department are out. In the past, we’ve noted the protected status of government workers. While private sector payrolls were falling like a stone, government employment at every level was growing. In recent months it had been falling slightly, but still remained above its pre-recession levels.

No more. In September, state and local government payrolls fell below the levels of December 2007, when the recession began. The declines indicate the pain that state and local governments are feeling from severe budget shortfalls, despite the $787 billion stimulus package last winter.

There's a very good reason that the stimulus package failed to avert this drop in state and local government payrolls. During the stimulus debate, Presidents Ben Nelson and Susan Collins decided to drop $40 billion dollars in state-based aid that would have gone directly to saving these jobs. Presumably faced with no choice to clear the 60-vote cloture hurdle, Democrats and the Administration went along, and that state aid vanished. So unsurprisingly, as a result, state worker jobs have vanished right along with it. That translates to hundreds of thousands of jobs all over the country that would have meant hundreds of thousands more consumers with spending money, hundreds of thousands more people off the unemployment insurance rolls and contributing to state budgets rather than taking from them, hundreds of thousands more people providing help and aid to others who have trouble getting it due to scaled-back state workforces.

It was a terrible, terrible idea. Especially because the woes for state budgets are only beginning, and what aid did come with the stimulus will probably run out before state economies recover.

History suggests it could take six or more years for sales and income taxes — which make up roughly two-thirds of states' revenue — to return to pre-recession levels. That augurs deeper cuts to state jobs and services in order to maintain funding for core programs such as public schools and Medicaid.

What's different from the three previous recessions, which took states three to five years to recover from, is that employment and consumer spending aren't expected to bounce back as quickly.

To balance their budgets in the meantime, states are likely to further raise taxes on the money people earn and spend; increase college tuition; reduce funding for the arts and other cultural programs; and push costs into the future by delaying pay raises for employees and repairs of government buildings. Some states, including Massachusetts, Missouri and Arizona, already are making or considering fresh cuts just months after lawmakers agreed on new budgets.

I would say that $40 billion dollars in direct aid could have gone a long way right now and in the future. But instead, we are ruled by neo-Hooverists.

Obama's Approval Ratings And Jobs

John Judis has a compelling piece up arguing that the fortunes of Barack Obama relies entirely on the fortunes of the economy, and specifically the jobless rate. Judis shows a direct correlation between the approval ratings of past Presidents and the jobs number.

When Roosevelt took office in 1933, unemployment was almost 25 percent, but, during his first term, it fell steadily-- to less than 14 percent in November 1936. The economy, in other words, seemed to be healing. Gallup wasn't measuring presidential approval then, but FDR's rising popularity was evident in election results: Democrats picked up congressional seats in 1934 and 1936, despite already enjoying huge majorities; and, in 1936, Roosevelt won in a landslide, carrying the Electoral College by the largest margin ever.

The arc of Reagan's popularity illustrates the same phenomenon. In July 1981, when unemployment stood at 7.2 percent--what it had been at the end of Carter's presidency--only 28 percent of Gallup's respondents disapproved of Reagan. But, by January 1983, after unemployment had risen to 10.8 percent the previous month, Reagan's disapproval rating was a whopping 54 percent. In November 1982, even a crippled Democratic Party had been able to win seats in the House and Senate. During the same time, Reagan benefited politically from surviving an assassination attempt, got Congress to approve his signature tax and budget programs, and certainly didn't make egregious political errors. What mattered, finally, was the economy. And, as the economy turned around, so did the GOP's political prospects. By November 1984, unemployment had dropped back to 7.2 percent, and only 30 percent of respondents disapproved of Reagan. In that month's election, he claimed a landslide victory over Walter Mondale.

Today, we see that joblessness has risen under President Obama, and his approval ratings, while still decent, have softened (they've picked back up in recent weeks). The economy may be improving under various statistics, but until people are working again, Obama will not be credited for it. It's hard to argue with Judis' charts. With the exception of goodwill toward Bush 43 after September 11, approval ratings and job loss have followed the same trajectory in most recent years.

Judis offers some thoughts about Obama's options:

So what can Obama do? It's easy to say what would really help: rapid job growth, the revival of the housing market, transit systems that aren't breaking down, the reinstitution of after-school programs, crowded shopping malls and auto showrooms--the kind of things that go with a robust economic recovery. But the U.S. economy isn't going to morph overnight from its current woeful condition to a state of buoyant full employment. In a September 14 speech, Janet Yellen, president of the Federal Reserve Bank of San Francisco, warned of a "tepid" recovery that is "vulnerable to shocks" and an "unemployment rate [that] will remain elevated for a few more years."

What Obama and the Democrats have to hope for, then, is not a full recovery, but sufficient improvement in jobs, wages, and public services to convince voters that the economy is on the mend. That's what helped Roosevelt and Reagan keep their majorities--and, in Roosevelt's case, what lay the basis for nearly four decades of Democratic hegemony. With the Republicans in disarray and demographic trends favoring the Democrats, an uptick in the economy for which voters credit Obama could lay the basis for a new Democratic majority. But, to accomplish this, Obama must promote programs that visibly and immediately provide economic relief.

I think passing a health care bill will give some relief, but with most of the provisions delayed until 2013, this cannot be the end of it all - the political impact of health care may be long-term rather than short-term. Subsequent bills in the end of this year and 2010, job-creating bills, need to be put into effect. The stimulus package has a lot more room to run, with hundreds of billions left to be allocated. This should not only be managed well but expanded, even if it means more deficit spending in the short term.

Moreover, to avoid what marred Roosevelt's second term--the precipitous double-dip in the depression that occurred in 1937–1938--Obama should turn a deaf ear to those who are calling for fiscal responsibility. He should keep pouring money into jobs and into the pockets of people who will spend until the unemployment rate begins going down and wages begin going up. That may mean a second stimulus (despite the current hostility toward spending in Congress) would be worth pushing. He might also be wise to follow Reagan's example and get tough with foreign competitors who are using import barriers, export subsidies, and currency manipulation to inflict large trade deficits on the United States. And, whatever he does to try to mend the economy, Obama should never stop loudly trumpeting his efforts--so that he is able to reap the credit when improvements occur.

In the absence of efforts like this, I shudder to think what will happen, not only to the Democratic majority, which is a lesser concern, but to the landscape of the workplace. Millions and millions of jobs are unlikely to ever be replaced by private industry. And continued joblessness, along with option ARMs recasting, will lead to the higher foreclosure rates we keep seeing, leading to job losses in the construction sector, leading to more risk of foreclosures, leading to more job loss.

People are starting to believe more strongly in the stimulus as a job creation engine. But it's probably going to take more than that to get the kind of tangible recovery needed, not just for Obama and the Democrats, but for the fortunes of regular people.

Falling Down On Making The Argument For Good Government

I think this post from John Aravosis is a little bit unfair, but only a little. The White House has soft-pedaled their defense of the stimulus package, but really with the jobs picture as it is, it was always going to be a hard sell to tell people who are losing their job that the stimulus prevented things from getting worse. The problem lay in the lack of job creation in the stimulus itself, rather than job saving. Those who follow these things closely understand that the stimulus really saved us from a deep recession if not a depression. But we also know it didn't go far enough to truly bring about recovery. Those who look at their own lives and don't pay attention to the day-to-day debate only see that they and their colleagues can't find work.

I think the White House will eventually get some credit for the inevitable recovery, but only if it includes jobs. A second stimulus simply won't happen now, and we're basically at the mercy of large firms and when they decide to hire at this point, which isn't likely in the near term if they can increase productivity without bringing anyone back.

That said, when the White House goes out and defends the stimulus, the least they can do is defend the underlying ideology. This AP "fact check" on the stimulus is fairly ridiculous, more a nitpick than a fact check, but assuming they quoted Biden right, this is terrible:

Biden exercised some restraint in his praise for the stimulus' impact. He took a more cautious approach, for example, when asked if his declaration of stimulus success means Americans can now rethink the common view that government is wasteful and inefficient.

"I think it's too early to make that decision, to be very blunt about it," he said.

No, it's not too early to make that decision. The point of stimulus is to get money out quickly and into people's hands. If anything, Biden and his team are being too deliberate about that, to keep away the newspaper headlines of wasteful spending. Pro Publica, for example, needs to blow it out their ass. Anything that creates jobs is stimulus, people. Pro Publica tries to catch Biden in a lie by claiming that money isn't flowing to hard-hit communities, when Biden was clearly talking about increased unemployment benefits and food stamps and help for all low-income Americans. It's hoops like this which modern Presidencies have to jump through that create such a "common view" about inefficient government.

But Biden needs to attack that. The fact of the matter is that public investment creates jobs and saves people's lives. It's OK to state that aggressively. If he doesn't, Republicans certainly won't. And they'll continue to demonize government.

The Administration is in a tough rhetorical spot, considering the jobless recovery. But that's not a time to give ground.

Jobless Recoveries Aren't Recoveries

The President's poll numbers, which haven't slipped as much as has been reported if you take away crazy Zogby Internet polls (42%? Really, Zogby?), have little to do with his policies and much to do with the economy. Most political leaders are falling right now as the economic slump continues to worsen. The "recovery" that we're seeing is really more of a case of getting worse more slowly. The so-called "liberal interventions" that Obama has made in the economy clearly staved off a deep depression. Virtually everyone who's studied the issue would agree. But it's hard to prove a negative, and this is the source of Obama's troubles right now. For example, Joe Biden is right to say that the stimulus is working, but this is a difficult concept for people to wrap their heads around:

"The recovery act has played a significant role in changing the trajectory of our economy, and changing the conversation in this country," Biden said. "Instead of talking about the beginning of a depression, we are talking about the end of a recession."

Absolutely true, but if there are still no jobs, this won't register. People feel that the recession is still happening because, for their personal lives, it is. The rates of job loss have slowed but remain negative. That means less people working. That means less money available to spend. That means lower consumer spending. And so retailers feel the pinch, individuals feel the pinch, and even with economic growth, everyone feels like they're in a recession.

Jobs lag a recovery, so there's a chance for the White House to break out of this. But in recent times, the jobless recovery has become more and more prevalent. Know this - an economic "revival" which benefits elites and not the overall public will not be looked upon favorably. In fact, people will blame the President for failing to turn things around. You can put together all the white papers you want about the recovery meeting benchmarks, or whatever. But the only answer to the economic troubles are JOBS. If we don't value work over wealth in this country, we will not sustain an economic future.

...Biden's speech on the Recovery Act actually does some good message-building about the economy and the need for public investment, which is key.

We're also investing what everybody knows is necessary to build a 21st century economy. I have people sometimes say, aren't you guys doing too much? You know, Presidents in the past have been able to -- and I've been here for eight of them -- they've been able to take the problems that they have and segregate them -- said, we're going to take these two first. We'll put these other four or six or five aside, and we'll get to them next, because they know the status quo ante will pertain. But name me one problem that landed on the President's desk that allowed him to say, no, no, we're going to focus on this, and then in three years we'll get to this?

I say to my friends, does anybody think we can lead in the 21st century without a radically altered energy policy? Does anybody think we can sustain our position in the world without a radically altered education system, where we're no longer 17th in the world in the number of college graduates we graduate? Does anybody think we can sustain without radical change in the cost of health care in this country, and bending that curve? [...]

To state the obvious, we will emerge from this great recession. And I believe that is only -- that's necessary but not sufficient. We have to emerge better positioned to lead the world in the 21st century as we did in the 20th century.

Where the last cycle generated billions of dollars -- billions from investments made via high-speed trades, this cycle needs to make real investments in high-speed rail.

In the last cycle, "innovation" meant bundling and selling subprime mortgages. In this one, our innovations will bundle and sell technologies to produce clean, efficient, renewable energy.

Where the benefits of productivity have not grown in the past, from 2000 and 2007, productivity grew 20 percent; yet the middle-income households fell 3 percent, their income. In this cycle, we're determined to make sure that productivity doesn't elude the poor and the middle class. And this cycle must be one in which, once again, American workers get his or her fair share of the wealth they helped produce.

Um, The Stimulus Is Working

Conservatives very smartly conflated the bailout and the stimulus in people's minds, and traded off public anger with one to demonize the other. They're still doing it, too, with Eric Cantor today suggesting to cancel the rest of the stimulus and "pay off the debt." Most of the debt comes from Bush-era policies, so this is nonsense. It's also wrong to state that the stimulus should be cancelled because it's not working. In fact, Rupert Murdoch's Wall Street Journal tells us the opposite today:

The U.S. economy is beginning to show signs of improvement, with many economists asserting the worst is past and data pointing to stronger-than-expected growth. On Tuesday, data showed manufacturing grew in August for the first time in more than a year. "There's a method to the madness. We're getting out of this," said Brian Bethune, chief U.S. financial economist at IHS Global Insight.

Much of the stimulus spending is just beginning to trickle through the economy, with spending expected to peak sometime later this year or in early 2010. The government has funneled about $60 billion of the $288 billion in promised tax cuts to U.S. households, while about $84 billion of the $499 billion in spending has been paid. About $200 billion has been promised to certain projects, such as infrastructure and energy projects.

Economists say the money out the door -- combined with the expectation of additional funds flowing soon -- is fueling growth above where it would have been without any government action.

Many forecasters say stimulus spending is adding two to three percentage points to economic growth in the second and third quarters, when measured at an annual rate. The impact in the second quarter, calculated by analyzing how the extra funds flowing into the economy boost consumption, investment and spending, helped slow the rate of decline and will lay the groundwork for positive growth in the third quarter -- something that seemed almost implausible just a few months ago. Some economists say the 1% contraction in the second quarter would have been far worse, possibly as much as 3.2%, if not for the stimulus.

The recovery is still jobless thus far, which means it's not a real recovery yet. And the White House made two mistakes - one, they soft-pedaled the recession, claiming that unemployment would not go above 9% or so, leaving them susceptible to the charge that the stimulus isn't working; and two, they put too much of the stimulus into tax cuts instead of the public investment that would have made it even more successful, particularly on the jobs front.

But without the public investment the stimulus has thus far provided and will continue to provide, we'd be mired in more negative growth and a near-depression. That's the reality.

The President has actually tried to talk up the benefits of the stimulus, but not in a forceful way. As a result, the conservative conflation has led to a souring on government, directly attributable to a lack of leadership and messaging.

Paul Krugman argued recently that Obama hadn't effectively used the bully pulpit to slay "government-is-bad fundamentalism." This is only one poll, but it's fair to ask whether these numbers bear that out.

Obama's poll slide has prompted some to ask whether his presidency might fall short of the transformative moment many expected. I think it's too early to reach a conclusion on this. If Obama pulls out a health care victory, everything will shift again.

But for a time it seemed like shattering the government-is-bad paradigm was distinctly within Obama's reach. General confidence in the government's ability to secure the public's well being seems like pretty good number to keep an eye on when gaming out the potential for transformation of this moment, and of this presidency.

This has mostly resonated in the health care debate, with insurance companies inexplicably getting somewhat higher marks now than government as a health care provider, despite the fact that the groups with the highest satisfaction with their health care are seniors (government-provided single-payer system), and veterans (government-run NHS-style system).

Politics is about storytelling. Obama during his campaign actually started to tell a pretty decent story about government as a guarantor of basic rights, which can equalize opportunity and give everyone a shot. He told a story of community, where we take care of each other and use government as a means to do so.

That's basically gone. And as a result, the public investment program that averted a depression is considered a failure.

Very dangerous.

Has Obama's Post-Katrina Gulf Coast Recovery Plan Been Sufficient?

As we live through another anniversary of the man-made disaster on the Gulf Coast and the shocking lack of a federal response that caused thousands to die needlessly, thoughts turn again to whether anybody remembers New Orleans and its environs, and whether the proper resources are being deployed to rehabilitate the region. If you listen to the President, of course, his Administration is doing a heckuva job down there. Lots of cabinet members have visited the region, to be followed by the President later this year. The White House has untangled some bureaucracy to allow for more federal assistance to reach the Gulf Coast, and the stimulus has enhanced recovery efforts. And even some local Republicans have praised his approach, particularly the renewed sense of confidence in FEMA.

But that's the White House's spin. And not everyone agrees with it. The Institute for Southern Studies has reported on coalition groups blasting the Army Corps of Engineers for their slow response to restoring the natural barriers - wetlands, marshes, and barrier islands - that could help prevent future hurricanes. New Orleans resident Harry Shearer has more on that. To their credit, the White House has created a federal task force to speed up coastal restoration projects. But on other issues, the ISS has given the Administration low marks.

The Institute of Southern Studies recently released a report that assesses how Washington has handled the storm's aftermath. The ISS asked 50 community leaders to grade the Obama administration's Katrina recovery efforts: Obama got a D+, and Bush was given a D-. If graded on an E for effort curve, Bush probably would have gotten the edge given his authorization of millions in Gulf Opportunity tax credits and bonds, and an extension of time under which developers could use them.

Meanwhile, Obama has done little in seven months beyond distributing $50 million in housing vouchers. Unfortunately, families either won't be able to use them because there aren't enough houses built yet, or the vouchers will be of little use because they only cover a fraction of rents, which have risen substantially since Katrina. He's also instituted a plan to sell FEMA mobile units to families for $1 or $5, but many of those trailers are toxic from formaldehyde leaks.

The American Recovery and Reinvestment Act (ARRA) did little for recovery and reinvestment in the Gulf Coast area that needed it the most. Since calculations were made based off current population numbers -- many displaced people throughout the country are still waiting to return -- fewer ARRA dollars reached these congressional districts. ARRA's tax credit exchange program, which cashes in states' low income housing tax credits, also excluded the Go Zone tax credits, leaving over 17,000 housing units hanging in the balance.

The Lower Ninth Ward, already struggling prior to the flood, has been particularly slow to return to stability. Only 20% of its residents have returned full-time, and the area has lagged far behind the tourist spots and the Garden District.

The neglect of the Gulf both during and after the storm will not get turned around quickly or easily. I'm tempted to cut the White House a little slack on this one. But on the current trajectory, New Orleans is looking more and more in the post-Katrina period like a restored home for the rich and connected, and a nightmare for the voiceless. And given the moral outrage that the response to the storm correctly engendered, that is unacceptable. We have an obligation to those who were left to rot in the fetid waters, not just to give them a return to the same inequality, but a chance at a better life. Should Obama visit the city before the year ends, he shouldn't go to Bourbon Street, but the Lower Ninth, and he should not just tell them what he will do, but back it up.

Japanamania!

Japan is often referenced when talking about their "Lost Decade" in the 1990s, a time when growth stagnated and economic activity flatlined. For ten years. And after that, the ruling party was STILL in power. So when the opposition party actually captures control of the government in the Land of the Rising Sun, it's a big deal.

Japan's opposition swept to a historic victory in elections Sunday, crushing the ruling conservative party that has run the country for most of the postwar era and assuming the daunting task of pulling the economy out of its worst slump since World War II.

A grim-looking Prime Minister Taro Aso conceded defeat just a couple hours after polls had closed, suggesting he would quit as president of the Liberal Democratic Party, which has ruled Japan for all but 11 months since 1955.

"The results are very severe," Aso said. "There has been a deep dissatisfaction with our party."

Unemployment and deflation — and an aging, shrinking population — have left families fearful of what the future holds.

Fed up with the LDP, voters turned overwhelmingly to the opposition Democratic Party of Japan, which ran a populist-leaning platform with plans for cash handouts to families with children and expanding the social safety net.

"This is a victory for the people," said Yukio Hatoyama, leader of the Democrats and almost certainly Japan's next prime minister. "We want to build a new government that hears the voices of the nation."

The new party plans for real economic stimulus and appears to be far more interested in reversing the effects of climate change. It looks like the Democratic agenda includes practically everything but the kitchen sink, so there are bound to be disappointments. But they actually have a two-thirds majority needed in their lower House to pass bills (I'm thinking about Japan's perpetual economic troubles, and the similarity to California, based mainly on that process obstacle).

Meanwhile, here's a look at Japan's health care system, among the best in the world (though lifestyle plays a big role in that).

...interesting op-ed from the likely new Prime Minister Yukio Hatoyama, arguing for a new progressive economic structure and not "unrestrained market fundamentalism and financial capitalism, that are void of morals or moderation, in order to protect the finances and livelihoods of our citizens."

Cash For Clunkers, Consumer Savings, Increased Fuel Efficiency And Jobs

With the cash for clunkers program winding down, we can start to measure its effectiveness. And guess what, it was effective! The program sold almost 700,000 cars, many of which would not have otherwise been sold. It saved consumers money in both purchasing the automobile and long-term gasoline costs. Dealers who were facing hard times due to the Chrysler and GM bankruptcies will now have a boost to get them through. Third-quarter economic figures expect to have a .3-.4 increase in growth (from just a $3 billion outlay). And despite naysayers like Edmunds.com, the most tangible impact of the program is the 39,000 jobs it created:

One auto analyst called the program a success, if only because his research showed that it was responsible for saving 39,000 jobs that otherwise would have been eliminated.

"It's really more substantial than we had thought in terms of stimulus," said David Cole, chairman of the Center for Automotive Research. "This is companies putting people back to work."

General Motors announced last week that it will reinstate 1,350 workers and add overtime for about 10,000 at three plants, as the automaker replenishes inventory sold during the government program. Honda also said it will increase U.S. production.

The other big winners in the program were Asian automakers. Eight of the top 10 new cars purchased through the program came from Honda, Hyundai, Nissan and Toyota, which claimed the top spot with its Corolla. The Corolla, Honda Civic and Ford Focus are manufactured in the United States.

I don't know how anyone in their right mind could find the program to be anything other than a fantastic success.

...Joe Romm concurs.

Rubber, Meet Road

We know that the entire conservative movement is laboring tirelessly to block meaningful health care reform this year. They are armed with lies, false outrage, and the ability to whip their supporters into a frenzy with carefully deployed buzz-words. And this goes too for those pretending to engage in bipartisan talks in the Senate Finance Committee's Baucus caucus:

Mike Enzi, one of three Republicans ostensibly negotiating health care reform as part of the Senate's "Gang of Six," told a Wyoming town hall crowd that he had no plans to compromise with Democrats and was merely trying to extract concessions.

"It's not where I get them to compromise, it's what I get them to leave out," Enzi said Monday, according to the Billings Gazette.

Enzi found himself under attack at the town hall simply for sitting in the same room as the three Finance Committee Democrats. Republicans in the crowd called for him to exit the talks. He assured conservatives that his presence was delaying health care reform.

"If I hadn't been involved in this process as long as I have and to the depth as I have, you would already have national health care," he said.

"Someone has to be at the table asking questions," Enzi said. "If you're not at the table, you're on the menu."

His alibi for being in the same room as Democrats is that he's there to block reform. So with each day Baucus and Kent Conrad and Jeff Bingaman stay in that room, they enable this obstruction.

I've been saying this for months, but you don't have to wonder any more about the GOP's role in health care reform. And I mean the whole GOP. They exist solely to block it. So if the Democrats actually want a bill, they'll have to get it over, around and through Republicans, not with them. Thinking anything different is just living in a dreamworld.

This comes back to the leadership of the President. This WaPo story is on a completely different subject, but it gives voice to the frustrations of millions upon millions of Obama supporters. They're wondering whether their President bears any resemblance to their candidate.

In recent weeks, as even staunch supporters of the Obama administration's $787 billion two-year stimulus package have questioned the program's lagging pace of job creation, a small but increasingly restive group of African American municipal officials in Southern states have complained that not enough money is reaching communities like those found in the chronically impoverished Delta. Their ranks include (Greenville, MS mayor) Hudson, who frequently encounters constituents steadfastly loyal to Obama but nonetheless asking when help from his administration is coming.

Hudson's life has changed significantly since the president's election. The White House Office of Intergovernmental Affairs has made her a regular participant in conference calls with other mayors and leading county officials. But with her new access to the powerful in Washington have also come reminders of the expectations that follow any charismatic figure entrusted with the presidency. "I know things have been a little slow for some people," she says. "People see me in our Wal-Mart here and ask, 'We have a new president: When is it all going to get started? When are there going to be jobs?' . . . People here were anticipating that there was going to be a big package of jobs and money with a wrapped bow signed 'Obama' at the bottom."

In other parts of the rural South, local government representatives have also given voice to the mounting frustrations of their communities. The objections are wide-ranging -- everything from stories of confounding red tape in the stimulus program's application process to a general lament that federal officials have sometimes overlooked small communities devoid of the kinds of staffing, computer resources or technical expertise needed for preparing sophisticated grant proposals.

People may not know the ins and outs of the legislative process, but they know they voted for hope, and they want help. Some of the calls may be impractical or rushed, but people thought they were voting for a new era of leadership, and seven months in, they're waiting for that leadership to take hold. In a sense, Obama is a slave to a legislative process that resists change in very significant ways. At the same time, he is not impotent. He can forcefully rebut the fiscal scolds who use every opportunity to argue against something new, whether the economy is booming (don't mess with a good thing) or in crisis (don't add a burden now). He can figure out the legislative means to navigate the bottlenecks of the Congress, bypassing committees or using reconciliation or breaking filibusters.

Nobody says it'll be easy. But at this point, failure to pass anything will demoralize the base and leave progressive change in the waiting room for perhaps another generation. From a political perspective, the Democrats have no choice. And they have no partner on the other side of the aisle. They're going to have to take the leap themselves - and given that, they'd better make any reform the best it can be, or even passage won't save them.

Wildly Successful Government Program To End Monday

The Cash For Clunkers program will wrap up on Monday, a couple weeks ahead of schedule, after fueling a buying boom worth close to $15 billion dollars in sales during late July and August, and leveraging a 5:1 stimulus effect into industrial and local economies, so much so that GM has started to hire back workers. Dealers are complaining that they haven't received their money yet, but that's simply a testament to an unexpectedly successful program.

Critics have complained of administrative confusion and haste in committing the money, and some dealers have expressed concern that they were not being reimbursed quickly enough.

But the White House argued that the speed with which the money has been committed is a measure of the program's popularity.

"This is actually a high-class problem to have -- that we're selling too many cars too quickly and there's some backlog in the application process," President Barack Obama said Thursday during an interview on a nationally syndicated radio show.

I'm sure the dealers liked it better when they went a week without anyone coming on their lots. I'm sure they were thrilled with the status quo of playing Minesweeper for 8 hours a day while trying to figure out how to pay the rent. Manufacturing actually rose in July, thanks to this program.

Government stimulus works. It's as simple as that.

They Call It Stimulus

The government institutes a program to encourage the sale of fuel-efficient cars, and factories have to build more fuel-efficient cars.

Higher sales from the government's Cash for Clunkers program have prompted General Motors Co. to boost production at several of its factories, according to company and union officials.

The increases include an extra day of work at the Lordstown, Ohio, assembly plant and increased hours at a factory in Orion Township, Mich., said the union officials, who asked not to be identified because the announcement, expected Tuesday afternoon, had not been made.

The Lordstown plant, which makes the Chevrolet Cobalt and Pontiac G5 small cars, is now running at one shift for 10 hours per day from Monday through Thursday, but the company will add the next two Fridays to the schedule, one union official said. Plant spokesman Tom Mock confirmed the increase.

Clearly this is the work of evil government to take over your lives by creating more jobs and boosting manufacturing production. Those miserable, miserable people.

If there in fact is a second stimulus, it all needs to go toward programs like this, with tangible benefits for consumers and workers. The initial stimulus is getting a bad reputation because the "nudge" of adding a few bucks into worker paychecks isn't reaching the consciousness of most workers. Give people something they can touch and feel.

Cash For Clunkers Extension Sails Toward Senate Passage

A rare bit of good news from the Senate, as an extension of cash for clunkers looks primed for passage.

The Senate will approve another $2 billion for the popular "cash for clunkers" program, probably by the end of the week, confident Democrats predicted Tuesday as Republican efforts to block the funding faded.

"We'll pass cash for clunkers. Before we leave here," said Senate Majority Leader Harry Reid, D-Nev. "The vast majority will be voting for this," added Sen. Carl Levin, D-Mich. The Senate is scheduled to begin a month-long summer recess Friday.

Many Republicans, realizing that constituents and auto dealers were pushing hard to continue the program, reluctantly agreed.

"I don't get a sense anyone will block it," said Sen. Judd Gregg, R-N.H., the top Republican on the Senate Budget Committee.

I don't know who would stand in the way of a wildly successful economic program and the first sustained benefit to the manufacturing base of this country in over 30 years. And the statistics on fuel economy are far, far better than anybody thought they would be. Sure, this is not the entire answer to the climate crisis. That's not its intention. The intention is to leverage $5 billion dollars into the economy, and extending the program would leverage another $10 billion. The fuel efficiency issue concerns adding 10mpg to a not-all-that-trivial 750,000 cars. But that was never the main goal.

The country needs a stable economy and job creation. This program provides it, with a reduction in foreign oil as a side benefit. Win-win.

Playing Defense vs. Playing Offense

Joe Biden took to the pages of the New York Times to defend the stimulus package on Sunday.

The single largest part of the Recovery Act — more than one-third of it — is tax cuts: 95 percent of working Americans have seen their taxes go down as a result of the act. The second-largest part — just under a third — is direct relief to state governments and individuals. The money is allowing state governments to avoid laying off teachers (14,000 in New York City alone), firefighters and police officers and preventing states’ budget gaps from growing wider.

And those hardest hit by the recession are getting extended unemployment insurance, health coverage and other help to get through these tough times. The bottom line is that two-thirds of the Recovery Act doesn’t finance "programs," but goes directly to tax cuts, state governments and families in need, without red tape or delays.

As for the final third, the act is financing the largest investment in roads since the creation of the Interstate highway system; construction projects at military bases, ports, bridges and tunnels; long overdue Superfund cleanups; the creation of clean energy jobs of the future; improvements in badly outdated rural water systems; upgrades to overtaxed mass transit and rail systems; and much more. These investments create jobs today — and support economic growth for years to come. Far from being a negative, the wide array of these investments is needed given the incredible diversity of the American economy.

Projects are being chosen without earmarks or political consideration, and many contracts have come in under budget. More than 30,000 projects have been approved, and thousands are already posted on recovery.gov — providing a high level of transparency and accountability. Taxpayers should know that we have not hesitated to reject proposals that have failed to meet our merit-based standards.

None of this is false - in fact, some of us objected to spending so much of the Recovery Act on non-stimulative tax cuts, which some, though not all, of the tax cuts in the package are. But when faced with an economy like this, you can do one of two things. You can defend the actions taken to this point, or you can look at the economic picture as it is, and make changes based on those evolving conditions. This would require admissions that the package may have been too small, but it's better than the alternative, defending a faulty program while unemployment heads into double digits. That's why it's sad to see Nancy Pelosi tossing aside talk of a second stimulus. By the time people realize something has to be done, it'll be too late to do it.

I recognize the political difficulty in getting another round of stimulus passed, but it becomes impossible if nobody is willing to say what needs to be said.

Also, Mr. Vice President, a little less emphasis on projects coming in "under budget" when the whole point is to get as much money out into the economy as possible would be helpful.

70 Cents An Hour

As the final phase from a bill passed back in 2007, today the federal minimum wage rises to $7.25 an hour from $6.55 for workers across the country. This brings the federal minimum wage, adjusted for inflation, back to where it was in the 1990s. It's hard to determine how many minimum-wage employees there are out there, but the best guess is that five million people get a raise today. Here's one of them.

While those workers include thousands of financially secure students still living with Mom and Dad, they also include thousands of the most impoverished and vulnerable members of the workforce – those who sink further into debt each month as ordinary expenses outweigh their meager paychecks.

April Greer, 36, is one of them.

Her troubles began in December, when her husband was sent to prison for a parole violation, leaving her the sole provider for her three teenage children who live with her.

In January, she was fired from her job at a cellular provider. She said she was late for work because her sister-in-law commandeered her car.

She spent early spring trawling East Dallas for a new job, but, like millions of Americans, she found none.

In early May, Greer's electricity provider finally turned out the lights. A few days later, her landlord changed the locks. She and her children crowded into the South Dallas bungalow of her husband's parents.

She finally caught a break two months ago, when a nonprofit agency helped her land a part-time, minimum-wage job at T.J. Maxx, taking home about $800 a month.

Two weeks ago, after she started having dizzy spells at work, she collapsed and spent two days in the hospital.

Doctors aren't sure what's wrong with her. Maybe diabetes. Maybe her heart. Maybe just stress.

Greer knows she can't afford $434 a month for the medication her doctor says she needs. She can barely afford the $100 a week she's been paying her in-laws to cover their ballooning utility bills.

She wants to find a second job, but doesn't know if her body can take it.

"Since I'm the only one right now for my kids, I have to take care of my health," she said.

Those with the lowest incomes are often those who have the most health issues. That comes from stress, overwork, the lack of a nutritious diet, living in low-income environments where more pollution exists, and a variety of other factors. In this most cruel of American landscapes, the poor and the sick often are the same person.

But what we'll hear today is how adding 70 cents an hour will bankrupt businesses. In actuality it will act as a mini-stimulus, giving the poor about $28 more a week for necessities that will almost certainly get spent and cycled into the economy.

What we certainly won't hear about is how the struggle of these minimum-wage workers fits into the health care debate. Many are probably already on Medicaid, but a provision in the bill would limit out-of-pocket costs for everyone, and expanding access would help make sure nobody who needs health coverage slips through the cracks. The air-blown press corps may have thought Obama's press conference was bor-ring, but the issues discussed directly affect the lives of people like April Greer. It would be nice if they could take up the debate with some inkling of concern for her, rather than acting like theater critics critiquing how folsky or animated the President was during his press conference.

Republicans and fiscal scolds say we just cannot afford to help someone like April. She ought to just get a job with the government. But Krugman says something important today - contrary to conservative belief, access and cost control are complementary.

Why does meaningful action on medical costs go along with compassion? One answer is that compassion means not closing your eyes to the human consequences of rising costs. When health insurance premiums doubled during the Bush years, our health care system “controlled costs” by dropping coverage for many workers — but as far as the Bush administration was concerned, that wasn’t a problem. If you believe in universal coverage, on the other hand, it is a problem, and demands a solution.

Beyond that, I’d suggest that would-be health reformers won’t have the moral authority to confront our system’s inefficiency unless they’re also prepared to end its cruelty. If President Bush had tried to rein in Medicare spending, he would have been accused, with considerable justice, of cutting benefits so that he could give the wealthy even more tax cuts. President Obama, by contrast, can link Medicare reform with the goal of protecting less fortunate Americans and making the middle class more secure.

As a practical, political matter, then, controlling health care costs and expanding health care access aren’t opposing alternatives — you have to do both, or neither.

April Greer probably just wants the peace of mind that she can get treatment when she needs it, without going deeply and overwhelmingly into debt in the process. Long-term budgetary constraints and bending cost curves matter less to her. But Krugman is right that the two are not in conflict, and must be packaged together.

I'm happy April is getting a small raise for her troubles today. I want her to get a health care system that honors her struggle and provides her security. But Senators need a three-week recess, so she'll have to wait.

The Larger Context

California's troubles have been well-documented. But as I've said on multiple occasions, while we may be an acute example of the problems with state budgets in an economic downturn, we are not alone. And the decisions, some forced, some unforced, of the nation's governors in responding to these challenges are unquestionably threatening economic recovery.

It’s easy enough, of course, to mock state governments nowadays, what with California issuing I.O.U.s to pay its bills and New York’s statehouse becoming the site of palace coups and senatorial sit-ins. But the real problem isn’t the fecklessness of local politicians. It’s the ordinary way in which state governments go about their business. Think about the $787-billion federal stimulus package. It’s built on the idea that during serious economic downturns the government can use spending increases and tax cuts to counteract the effects of consumers who are cutting back on spending and businesses that are cutting back on investment. So fiscal policy at the national level is countercyclical: as the economy shrinks, government expands. At the state level, though, the opposite is happening. Nearly every state government is required to balance its budget. When times are bad, jobs vanish, sales plummet, investment declines, and tax revenues fall precipitously—in New York, for instance, state revenues in April and May were down thirty-six per cent from a year earlier. So states have to raise taxes or cut spending, or both, and that’s precisely what they’re doing: states from New Jersey to Oregon have raised taxes in the past year, while significant budget cuts have become routine and are likely to get only deeper in the year ahead. The states’ fiscal policy, then, is procyclical: it’s amplifying the effects of the downturn, instead of mitigating them. Even as the federal government is pouring money into the economy, state governments are effectively taking it out. It’s a push-me, pull-you approach to fighting the recession.

The stimulus package provided some money for state fiscal stabilization, but that turned a package designed to create jobs and circulate money into the economy into simply a life raft. The states have both sucked up some of that money and directly counteracted it through their actions, so that an already too-small stimulus shrinks even further. State and local governments are 1/8 of our total GDP, and their fiscal austerirty in the midst of crisis has a very damaging economic effect.

In this article, James Surowiecki argues that federalism is starting to crack in the face of extreme economic calamity. Some of the elements of the stimulus that are national priorities - high speed rail, a smart national power grid - must be funneled through an inefficient and often dysfunctional state and local process. It simply makes things difficult to have so much decentralization in projects designed to move across state lines. So what can be done? We can move big items like Medicaid under federal control with local administration. Or we can set up a permanent federal fiscal stabilization fund, maybe kicked off in a second stimulus, to massage the states through tough times. It's almost a rainy day fund at the federal level.

But something must be done. We are destroying ourselves from within by leaving things as they are.

The Fiscal Conservative Twins

Funny how these right-wing governors have trouble holding to their principles.

Mark Sanford and Rick Perry held a "Tea Party II" a couple months ago, where they came out against stimulus spending and for fiscal responsibility. That was then, and this...

In March, Texas Gov. Rick Perry rejected $555 million in federal stimulus money that would have expanded unemployment benefits for Texans. Perry argued at the time that accepting the stimulus dollars would force the state to expand eligibility to include thousands of low-wage workers — including part-time employees like single mothers, college students and senior citizens — which Perry bemoaned would burden tax payers with “higher taxes and expanded obligations.” When explaining the decision, Perry told Fox News, “this was pretty simple for us.” But now Perry is reversing his decision. Texas has asked the federal government for a $170 million loan to ensure the state is able to continue paying out unemployment benefits.

...is now:

South Carolina Gov. Mark Sanford shed his fiscal conservatism on several taxpayer-funded international trips, including a South American jaunt that included time with his mistress, choosing expensive first-class or business-class seats while his aides sat in coach.

Sanford, who once criticized other state officials for costly travel, charged the state more than $37,600 for one first-class and four business-class flights overseas since November 2005, expense records show. Other state employees flew in the back of the plane at a fraction of the price, according to the documents.

The Republican governor, who balked at taking federal stimulus money after arguing it was an unwise use of taxpayer funds, charged the state $8,687 for a Delta Airlines trip to Brazil last year that included a leg in business class, state expense records show.

I really can't listen any more to these privileged men talking about being good stewards of taxpayer money and then treating themselves to perks, or talking about rejecting a handout from Washington and then asking for a bigger handout.

Throwing Elbows

This was a nice little move by the White House against blowhard Jon Kyl and St. McCain:

On ABC’s This Week with George Stephanopoulos this past Sunday, Sen. Jon Kyl (R-AZ) argued that the $787 billion stimulus package “hasn’t helped yet. … What I proposed is, after you complete the contracts that are already committed, the things that are in the pipeline, stop it.”

The next day Arizona Republican Gov. Jan Brewer received letters from four Obama administration officials — Secretary of Transportation Ray LaHood, Agriculture Secretary Tom Vilsack, Department of Housing and Urban Development Secretary Shaun Donovan and Secretary of the Interior Ken Salazar — pointing out the billions headed for Arizonans. LaHood wrote:

"The stimulus has been very effective in creating job opportunities throughout the country. However, if you prefer to forfeit the money we are making available to your state, as Senator Kyl suggests, please let me know."

Sen. John McCain (R-AZ) quickly fired back on Tuesday, saying that he “strongly support the comments of Senator Kyl and call[s] on the administration to retract its threat against the citizens of Arizona.”

What McCain calls a threat I call "asking the Governor of Arizona if she wants to do what her junior Senator suggests." In other words, following right-wing policies is a threat against American citizens. Now I agree with that, but it's funny for John McCain to agree.

If Republicans want to say that all government spending is bad they should be able to live with the consequences. But they never do, of course. Good for Obama and the White House for pushing back.

...Here's another Democrat, Bernie Sanders, forcing Republicans, including John McCain, to confront their own rhetoric.

Sanders: I don't want to shock anybody here, and have people dashing out of the room, but the VA is a socialized health care system, right Mr. McCain? That's what it is. That's not public insurance, but socialized medicine.

McCain: Not exactly my description, but...

Sanders: OK. And, you know, the VA has its problems, we all know that. But by and large, I think it's fair to say, when we go home, we talk to our veterans, you know what, they feel pretty good about the VA [...] All right, that's socialized medicine in the United States of America, anyone want to bring an amendment up to eliminate the VA? I would suggest the chairman accept that amendment. I don't hear too many people.

Beautiful.

Stimulus As Self-Preservation

I've seen enough polls showing a small but demonstrable downtick in President Obama's approval rating that I think it can be pegged as a trend. Polling expert Mark Blumenthal attributes this fall to the concurrent fall in economic indicators:

While the significance of the shift among independents may vary, depending on what poll you look at, the decline in Obama's numbers during June and July has a clear culprit: A spate of bad economic news over the last 10 weeks.

Read more from Mark Blumenthal on the economy's effect on President Obama at Pollster.com.
Obama's ratings fell in June and July after remaining mostly flat during the spring. Our Pollster.com trend estimate, a composite of all public polls, had shown Obama's job approval rating at a fairly consistent 59 to 60 percent during March, April and May. His approval percentage fell roughly 5 percentage points during June and the first week of July, however, and as of this writing, stands at 55 percent [...]

We can see the effect clearly thanks to a new question tracked since December by the Pew Research Center's News Interest Index surveys. Once a month, they ask Americans if they are "hearing mostly good news about the economy these days, mostly bad news about the economy or a mix of both good and bad news." Back in December, four out of five respondents said they were hearing mostly bad news. Early this year, that number steadily declined, bottoming out at 31 percent in mid-May. As Pew reported last week, however, perceived bad news has once again increased, to 37 percent in mid-June and 41 percent in the first week of July.

The chart below compares the trend in perceived bad news to Pollster.com trend estimates for both the Obama job rating and a question asked in many national polls about whether the country seems to be "headed in the right direction" or "off on the wrong track."

Not surprisingly, the "right direction" and "heard mostly bad news lately" trend lines are mirror images of each other. And while Obama's approval number held mostly steady from March through May, the chart strongly implies that the recent bad economic news has taken its toll.

The President is starting, as expected, to own the economy, as his decisions take prominence over those of his predecessor. And with the jobless rate, by Obama's own admission, likely to tick up over the next several months, in addition to the crisis of the underemployed (as much as 1 in 4 workers in some states), this is likely to continue and further drag on both the economy and the President's approval rating. Therefore he has a responsibility for his own self-preservation to turn the economy around for working people, and that means at least preparing for the eventuality of another round of stimulus, even if it's not needed. Even Mark Zandi, one of John McCain's economists during the campaign, admits that:

It is premature to conclude one way or another if the economy needs another dose of fiscal stimulus. The current stimulus has not had a sufficient opportunity to work, and while it has already provided some benefit to the economy -- the downturn would be even worse without it -- its benefit won't be fully felt until later this year. A reasonable judgment regarding the need for more stimulus should wait until year's end.

Planning now for another round of stimulus is prudent, though, given that the economy remains in an extraordinarily severe downturn and the risks are decidedly to the downside. If additional stimulus is needed, then it probably should include more aid to hard-pressed state governments, whose budget woes are intensifying, more aid to stressed households hammered by what will be double-digit unemployment, an expansion of the housing tax credit to stem the ongoing slide in house prices, a delay in legislated increases in marginal personal tax rates in 2011, and perhaps even a payroll tax holiday.

I'd tend not to include additional tax cuts, which have been revealed not to work as stimulus. Because of the lag time with getting infrastructure projects and other federal monies into the hands of communities, most of the stimulus money currently in the economy comes in the form of tax cuts. And it has had little stimulative effect.

Oberstar defended the $27 billion in the stimulus for highway and bridge projects as the right amount to help the economy during the next year. However, he said that more transit money in the stimulus would have been helpful to an economic recovery over the next three years, rather than the nearly $300 billion in tax cuts.

“Not many people realize they got a tax cut,” Oberstar said. “I have not received a single e-mail, phone call, snail mail, personal comment from anybody since we enacted this bill, since the end of February, saying, ‘I got my tax’ or ‘Thanks for the tax cut’ or ‘I hardly noticed it’ or anything.

“But I have had people saying, ‘I’m back at work because of the funding in the surface transportation program.’”

I know the fiscal scolds don't want to hear about another stimulus and additional federal debt. But Robert Reischauer has a decent compromise proposal to "time-release" deficit reduction measures in tandem with stimulus funding:

[A]ny "Son of Fiscal Stimulus 2009" should include a significant "time released" package of deficit-reduction measures. While these tax increases and spending cuts shouldn't begin phasing in until 2013 or 2014, when the economy has recovered, we need to send a strong signal to our creditors that, notwithstanding our addiction to another shot of fiscal stimulus, we will soon be on the recovery road to fiscal responsibility. If we don't, the nation could face a more serious economic collapse in the not-too-distant future -- without an ability to borrow to finance needed fiscal stimulus.

That would certainly achieve the goal of ensuring the most stimulative actions stay in the bill, while allaying concerns about debt (which aren't entirely off-base).

Talk To Us Like Adults

The President returned from his overseas trip and came out fighting by defending the recovery package amidst signs that Republicans would attack it as a failure.

Nearly six months ago, my administration took office amid the most severe economic downturn since the Great Depression. At the time, we were losing, on average, 700,000 jobs a month. And many feared that our financial system was on the verge of collapse. The swift and aggressive action we took in those first few months has helped pull our financial system and our economy back from the brink. We took steps to restart lending to families and businesses, stabilize our major financial institutions, and help homeowners stay in their homes and pay their mortgages. We also passed the most sweeping economic recovery plan in our nation's history.

The American Recovery and Reinvestment Act was not expected to restore the economy to full health on its own but to provide the boost necessary to stop the free fall. So far, it has done that. It was, from the start, a two-year program, and it will steadily save and create jobs as it ramps up over this summer and fall. We must let it work the way it's supposed to, with the understanding that in any recession, unemployment tends to recover more slowly than other measures of economic activity.

And it's fine for him to defend that action - I generally agree with his assessment that it's ramping up, that unemployment lags behind economic growth, that this summer and fall should see more stimulus money pumped into the economy, that the package was necessary and even proper. It's fine for the White House to wrestle control of the debate away from Republicans on that score. But this does not address at all those critics who found the stimulus package too small, and who continue to find shortfalls in demand that need to be filled by public spending.

Last December the Obama administration to be decided on a fiscal stimulus package which they believed would have minor effects on the economy in the first two quarters of 2009 and major effects--would push unemployment down below what it would other wise have been by more than half a percentage point--starting in the third quarter of 2009. They believed that the economy was not that weak, and that with the fiscal stimulus package taking effect unemployment would be peaking now at a rate of 7.9%.

Instead, unemployment is now probably in the 9.5-9.7% range--and without the stimulus package it would right now have turned out to be above 10%:

The financial crisis of last fall hit the economy's levels of production, spending, and employment much harder than people thought at the time. If we had known then what we know now, it would have been prudent then to propose twice as large a fiscal stimulus program as the Obama administration in fact did propose.

It is interesting and important to note that the excess unemployment now forecast over 2009 relative to last December's forecast is of the same magnitude--1.2%--as the deficiency in real GDP [...] If I were running the government, I would be trying to make up that GDP shortfall right now: I would be rushing a clean $170 billion--$500 per citizen--aid-to-states-that-maintain-effort package through the congress this week. It would seem the right and the obvious thing to do.

The White House is simply not speaking straight with the public on this one. They have every right to defend their actions, but the evidence clearly shows that they did not go far enough back in February. That's an intellectually consistent stand, rather than this mish-mosh of "we misread how bad the economy was, but we would have done the exact same thing if we knew and it's working great." Continuing that incoherent course risks a loss of credibility.