by Zach Carter, Media Consortium MediaWire Bloggger
Since the U.S. is officially in a recession, and the Congressional Budget Office has predicted the worst economic downturn since the Great Depression, just about everybody acknowledges that times are tough. Everybody, that is, except the National Republican Congressional Committee. Talking Points Memo's David Kurtz caught the Republican fundraising operation spouting some embarrassing doubletalk on their website earlier this week, including the proud declaration that "the U.S. economy is robust and job creation is strong."
In fact, job creation is non-existent. The U.S. economy is losing over half a million jobs every month and even optimistic Wall Street economists expect unemployment to keep rising for at least another year.
Tough times call for unity, and President Barack Obama dedicated much of his inauguration speech to working together to usher in a "new era of responsibility." Obama's sentiment is essential—there is no way we can limit the damage of this recession without a massive collective commitment.
The problem is, we all know how we got here, as Jose Garcia points out at The Progressive. Reckless bank lending, lax government oversight and insufficient social safety nets combined to saddle consumers with unaffordable levels of debt and directed family savings into completely irrational home values. "Yes, we all need to pitch in, but above all the private sector and government regulators need to act responsibly," Garcia writes.
The surge in U.S. consumer debt over the past twenty-five years has been accompanied by stagnant wages and deceptive loan contracts. People often rely on credit to meet basic needs, Garcia notes, and bankers routinely do not disclose how much those loans will cost borrowers. Banks rewarded loan officers and mortgage brokers for pushing unaffordable loans, and a recent study by the Center for Responsible Lending revealed that most people do not understand the fine print on their credit cards. Let's be clear, then: Collective responsibility means overhauling Wall Street regulations and not holding the plight of working Americans hostage to banker bonuses.
Collective responsibility also means making sure that everyone has an affordable place to live. The Bush administration supported unregulated subprime mortgages and a totally disregarded rental housing programs. That approach was misguided. Renting is the only realistic housing option for the least well-off swath of the U.S. population, and affordable housing is supposed to help that demographic. Inattention to the rental market has created serious imbalances for low-income Americans. Adam Doster highlights some frightening statistics in a piece for The Nation, noting that a full-time worker would have to earn $17.32 an hour to afford the average rent on a two-bedroom apartment, well over double the minimum wage.
But there is evidence that Obama's economic recovery package signals an end to an era of neglect. Fresh from being named one of the 25 most influential liberal voices in U.S. media by Forbes Magazine (read: the bad guys are afraid of him), Kevin Drum emphasizes the important health care provisions and expanded unemployment benefits in stimulus bill in a blog for Mother Jones. Key measures in the plan include an immediate $450 increase in benefits for the blind, disabled and elderly, along with expanded Medicaid funding and more food stamps for the 30 million Americans currently receiving them. "With this plan, the new government confirms that it has some responsibility for providing a safety net for its poor and disabled, its children and elderly," Drum writes.
For those of you interested in tracking the stimulus plan as it develops, make sure to check out StimulusPlan.NewsLadder.Net, which features the best independent reporting and analysis of this bill.
Over at The American Prospect, Ezra Klein--another blogger whose name strikes terror in the hearts of Forbes editors everywhere--offers some insight on bank nationalization. Nationalization is a major step, but the terms of former Treasury Secretary Henry Paulson's bailout operation are actually more suspect. Paulson's plan only nationalized private-sector losses, while allowing bank shareholders to enjoy any profits stemming from public help. The result? Backward incentives for bank executives and a waste of taxpayer dollars.
Once the government allows banks—or any companies—to become too big to fail, incentives for excessive risk-taking become standard fare. Does anybody seriously believe that Bank of America would have gobbled up Merrill Lynch in weekend merger negotiation if it did not think that government support would always be available, even in a worst-case-scenario? If taxpayer largess is always on the table, then meaningful consequences should accompany it. If a bank would not be viable without the collective support of taxpayer, and it remains in the collective interest to keep the bank in operation, then the government should nationalize it, kick out the management team and wipe out the shareholders. Going halfway and simply nationalizing the losses does nothing to discourage bad management behavior.
Unfortunately, however good Obama's recovery package may be, both his administration and Congressional leaders are sending signals that we will not see anything resembling reasonable financial policy in the near future. Truthdig posts some comments from Vice President Joe Biden and House Speaker Nancy Pelosi indicating that much more money than the original $700 billion bailout outlay could be coming down the pipe.
It is more important than ever to have a strong voice heading the Labor Department to make sure the administration does not lose focus on the nonfinancial economy. Hilda Solis, President Obama's nomination for Labor Secretary, is just such a voice, as Kim Bobo argues in an op-ed for In These Times. She has been a staunch defender of organized labor throughout her political career. Senate Republicans are stalling her nomination citing her support for the Employee Free Choice Act, a bill that would allow workers to unionize once a majority of employees at a workplace agree. The business exec lobby is already spending big bucks to spread misleading information about the legislation, saying it would mean an end to "secret ballots" in union elections, when in fact the bill would simply allow workers to enter a union without first holding an election. Those elections are frequently subject to intimidation from employers. We are not taking collective responsibility when we allow our workers to be threatened by their bosses when they ask for decent pay and benefits.
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