Failure

An unmitigated failure. The Bush administration was a disaster for our nation...unless you were the beneficiary of those massive tax cuts:

Thursday's annual Census Bureau report on income, poverty and access to health care-the Bureau's principal report card on the well-being of average Americans-closes the books on the economic record of George W. Bush.

It's not a record many Republicans are likely to point to with pride.

On every major measurement, the Census Bureau report shows that the country lost ground during Bush's two terms. While Bush was in office, the median household income declined, poverty increased, childhood poverty increased even more, and the number of Americans without health insurance spiked. By contrast, the country's condition improved on each of those measures during Bill Clinton's two terms, often substantially.

[...]

So the summary page on the economic experience of average Americans under the past two presidents would look like this:
Under Clinton, the median income increased 14 per cent. Under Bush it declined 4.2 per cent.

Under Clinton the total number of Americans in poverty declined 16.9 per cent; under Bush it increased 26.1 per cent.

Under Clinton the number of children in poverty declined 24.2 per cent; under Bush it increased by 21.4 per cent.

Under Clinton, the number of Americans without health insurance, remained essentially even (down six-tenths of one per cent); under Bush it increased by 20.6 per cent.
Adding Ronald Reagan's record to the comparison fills in the picture from another angle.

Under Reagan, the median income grew, in contrast to both Bush the younger and Bush the elder. (The median income declined 3.2 per cent during the elder Bush's single term.) When Reagan was done, the median income stood at $47, 614 (again in constant 2008 dollars), 8.1 per cent higher than when Jimmy Carter left office in 1980.

Such is the result of a deliberate effort to shift money away from social spending and give it back to the already wealthy, combined with a general inattention to and disinterest in the well-being of our nation (beyond torturing terrorists and launching wars of aggression.) There should be retribution for such awful stewardship, but the only punishment being meted out is to you and me.

The story on unemployment

Adam and I were talking about this yesterday, about how real unemployement isn't being reported in most news outlets. The most-quoted figure I've seen is the 9.5% seasonally adjusted U-3, and when a number is that qualified you know it's not quite natural. I just looked up the U-6 measure (the most inclusive measurement) in the current statistics. The percentage of all employable people not working full-time jobs is 16.8%. The U-6 includes part-timers who are looking for full-time work as part of the figure, which is reasonable because a lot of them are part-time because of the economy. The number being reported in the news is the 9.7% U-3, which as you can see is a much more limited measurement.

Now, one thing to note is that the difference between June '08 and June '09 using these two indices tell two different stories. From June '08 to June '09, the U-3 went from 5.7% to 9.7%, a 4% change. The U-6 changed from 10.3% to 16.8%, a change of 6.5%. So the net change in employment is also worse than is being reported. Some of this is people being shunted into part-time jobs, but the U-1 is a measure of how many people have been unemployed more than 15 weeks or longer, and that has risen from 1.8% to 4.8%. Jobs have really just vanished.

The question is, even when the economy starts growing again, how many full-time jobs are going to come back for people? Even when the economy was supposedly so great back in the Bush years (coming off the Clinton high, that is), people were struggling. Just read Nickel and Dimed by Barbara Ehrenreich. Actually I think I've blogged on that subject plenty of times. We keep hearing about how the recession is supposed to end this year or that we may already be at the tail and the economy is starting to recover; we hear that jobs lag behind the economy in general. Either of these things may be true; neither of them means that Americans will be getting well-paid full-time jobs with benefits. Is there any way to change that?

I don't know the answer to that, but it lies in what industries are going to make the biggest turnaround. I honestly don't think that even if the automakers come around and turn profitable, they'll end up re-hiring a lot of people. They're cutting back as much as possible and if their salvation lies in competing with the foreign auto makers, they're going to be making more of fewer kinds of vehicles, which means less workers. America needs growth industries that we can take the lead in. We need to invest in an infrastructure to produce new kinds of goods and services that other countries can't compete with. Things like clean energy, health care and medicine, or eco-science, that the world needs but which can also be profitable industries. It's time to do something new.

Update: Xanthippas just let me know about this article, pointing out estimates of the real number of unemployed, which is well above even the U-6. Read the article for an explanation of how these numbers are arrived at:

By adding these folks back in, William's SGS-Alternate Unemployment Measure rose to a jaw-dropping 20.6%. Separately, the Center for Labor Market Studies in Boston puts U.S. unemployment at 18.2%. Any way you cut the numbers, the situation is very bad. According to David Rosenberg, one-in-three among the unemployed have been looking for a job for more than six months and still can't find one.

That's about 1 in 5 employable people either unemployed or underemployed. This recession is far from over.

Saturday Morning Round-Up

1. A story in yesterday's Washington Post reveals that the Obama administration is considering drafting an executive order asserting the President's authority to detain terrorist suspects indefinitely without any judicial process. The White House denies that a draft order exists (via John Cole) thought there is no denial that they are considering such a move. I found this quote from the Post article to be particularly odd:

"...one administration official suggested that the White House is already trying to build support for an order. "Civil liberties groups have encouraged the administration, that if a prolonged detention system were to be sought, to do it through executive order," the official said.

First of all, I would like this official to find me one civil liberties group that has argued for such a thing. Perhaps what he/she meant is that they'd rather have an executive order than a Bush-like assertion of authority that merely cites the Constitution, but there's essentially no difference between the two approaches legally. Also, they are arguing that such an order would permit them to get Congress' acquiescence in the closing of Guantanamo, an effort stymied by the various Democratic and Republican bed-wetters on the Hill. Which basically would amount to Obama saying to Congress "I double-pledge to hold terrorists forever if you will please let me shut down Guantanamo." But it seems to me like sending them Bermuda an the South Pacific was working out alright.

2. Gays and Lesbiasn are-rightly-angered as well at the Obama administration's shuffling approach towards gay rights. Don't Ask, Don't Tell, remains in place, the Obama DOJ is arguing before the courts to retain DOMA, and Obama's decision to extend federal benefits to domestic partners was praised until advocates realized that those benefits didn't include health care (doubly ironic, considering the President's present political battle over a national health care plan.) Arnold King, while not citing specifically to the administration's approach to gay rights, makes the point that the Obama administration has many agendas, but appears satisfied to half-ass meeting their goals on any of them.

3. For some conservative Christians, Sanford's weeping and rending of garments is enough for them to get over his infidelity and bizarre behavior. I'm sure the fact that he's a Republican politician has absolutely no bearing on their attitudes. But stories like this make it clear that for all of Sanford's talk, he was determined to continuing playing his own staff, his own state, and especially his own wife, until he got caught. Politically connected religious leaders and politicians may be quick to forgive, but other conservatives? Not so much.

4. Bob Herbert takes a look at the economy and calls a spade (a jobless recovery) a spade (no recovery at all.)

5. The Iranian government appears to be gaining the upper-hand against the protesters, though it also seems clear that the massive protests have revealed divisions in the leadership that may indicate long-term change.

6. Upon the news of Michael Jackson's death, I found myself wondering what condition his estate was in and upon whom would fall the unfortunate task of trying to sort it out. It appears he had at least one will, though no one knows it's contents yet. I predict there will be a gargantuan battle over his estate given the value still attached to his name and his music and the massive debt attached to much of his property, but I doubt it will interest the public as much as Anna Nicole Smith's highly publicized probate did, what with the absence of a childhood custody dispute. There can be no doubt though of Jackson's status as a mega-star, as the reaction to his death was almost more than the internet could bear.

7. You might've missed this news, but Wednesday the United States pulled off a shocking upset and defeated the number one team in the world 2-0 to advance to the final game of the Confederations Cup. Spain is praised for their ability to possess the ball, and it was expected that the U.S. would entrench upon defense and wait for their opportunities to counter. Instead, Spain committed uncharacteristic errors as the U.S. went with a strategy of heavily pressuring the ball and looking for quick counters, and remaining incredibly well-organized (and frankly, a little lucky) on defense. The strategy paid off with huge dividends; quick movement up the field led to a goal by Jozy Altidore, and a Spanish turnover led to a goal by Clint Dempsey. Altidore (after keeper Brad Guzan) was clearly man of the match. No telling if his outstanding play makes him the future of American soccer or another Eddie Johnson, but American soccer fans will take what they can get. The United States plays Brazil tomorrow, a team they already lost to in the first round, but against whom they might have a better chance if they play as decisively as they did against Spain.

8. I thought this article about Grandparents University at UNT was interesting. Grandparents and their grand-children apparently spend a weekend at the school's dorm and taking classes together, in a program designed to give young teenagers and tweeners a taste of college life, and some bonding time with their grand-parents.

UPDATE: Spencer Ackerman finds at least one civil libertarian to whom the Obama administration official might be referring with the above quote from the Post story; Kate Martin of the Center for National Security Studies:

Martin thinks that established law holds that the administration doesn't require any additional legal authorization to hold anyone captured on the battlefields of Afghanistan without charge until the end of hostilities -- that comes from the September 2001 Authorization to Use Military Force, as does dispensation for the 9/11 plotters -- but would need to charge or release any detainee picked up outside either Afghanistan or Iraq. Martin thinks the reported executive order might be the only thing standing in the way of an even broader congressional effort of the sort seen in the war supplemental that Daphne critiqued yesterday. Martin has expressed her organization's longstanding perspective on detainee matters to the administration's detentions task force.

So Martin supports it, but only to the extent that something from Congress might be worse. Given the way Congress has handled the possible closing of Gitmo this may be true, though I happen to think that Congress should be forced to craft an indefinite detention policy if that's what they want in exchange for closing Gitmo.

Glenn Greenwald has more though, as I've pointed out once before, he has a tendency to criticize the "many defenders" of Obama on various issues where Obama replicates Bush doctrines, without actually linking to or naming any of these defenders. Greenwald is a very thorough blogger, which is why I don't understand why he so eagerly reaches for the "some say" approach to blogging.

Friday Round-Up

Some reading for your Friday afternoon:

1. Ayatollah Khamenei escalates the rhetoric and says opposition leaders will be responsible for "bloodshed and chaos" if the protests continue (a possibility that members of hard-line militias may seek to ensure becomes a reality.) He denies that Iran's election was rigged, though he's contradicted by what evidence is available. Roger Cohen lauds the protesters, and says Obama should be more firmly on their side. I disagree. I think Obama has struck the proper tone of concern and and caution. Were it not for our history of meddling in Iran's internal affairs, I might think otherwise.

2. More details on Obama's new financial regulations plan. Changes no doubt, but maybe not the sweeping kind that we need, according to Paul Krugman. The bad news on the economy in general has slowed, but Martin Wolf says we shouldn't be too hasty about thinking we're out of the woods yet. Certainly some (like small businesses) are having a very rough time of it.

3. Check for flying pigs outside your window, because today Ken Starr has come out in support of of Sonia Sotomayor.

4. John Shalikashvilli, chairman of the Joint Chief of Staffs under Clinton, says that arguments against gays in the military are poorly reasoned and insupportable.

5. Egypt shocked Italy 1-0 in Confederations Cup play yesterday, a result that perhaps shouldn't be so surprising given their play against Brazil. Fortunately for the U.S. this means that a win against Egypt tomorrow means the US will make it out of the first round. Unfortunately, the fact that Egypt is playing so well against the giants makes such a victory highly unlikely.

6. Today is Juneteenth round these parts, a celebration of the day that slaves were liberated in Texas.

Wednesday Morning Reading

Some things for you to ponder this morning:

1. A senior cleric in Iran comes out against the election results. But were they rigged? Critics say yes.

2. Some analysis of Netanyahu's announcement that Israel would consider recognition of a Palestinian state. A step forward, but still balking on other important considerations like settlement expansion.

3. A Presidential election and some new laws, but the end result is the same; you can't trust the NSA not to spy on the American people.

4. Speaking of intelligence agencies, the CIA is fighting the release of it's own internal reports regarding interrogations of "high-value" detainees. Obviously, there's something in embarrassing in them.

5. Speaking of detainees, here are some people who don't wet their pants at the thought of being responsible for them.

6. Obama will announce that the federal government will extend benefits to the domestic partners, including same-sex partners and spouses, of federal employees.

7. The Obama administration is proposing regulatory changes that will broaden government oversight of banks and the financial markets.

8. And lastly, another great column of David Leonhardt at the New York Times. This time he takes on the scare word "rationing" and explains how health care is already rationed ineffeciently and unfairly everyday in America.

Obama Backs Credit Card Industry Reform

Progress on the credit card reform front: The House Rep. Carolyn Maloney's Credit Cardholders' Bill of Rights (which I first wrote about back in September of last year) has cleared the House Financial Services Committee. The Senate is presently working on a similar bill sponsored by Chris Dodd and Charles Schumer. And President Obama has signaled that he supports such reform efforts:

President Obama is making clear to credit card executives today that he intends to back efforts to crack down on what lawmakers consider to be deceptive practices, even as the industry criticizes legislation in the House of Representatives as dangerous to the nation's hopes for an economic recovery.

[...]

This afternoon, senior executives from 13 companies -- including Gordon Smith, chief executive of Chase Card Services for J.P. Morgan Chase & Co.; Paul Galant, chief executive of N.A. Cards for Citi; and Richard Struthers, president of Global Card Services for Bank of America -- are meeting with Obama and his top economic aides at the White House. Edward L. Yingling, president and chief executive of the American Bankers Association, was also scheduled to participate. The president was to be accompanied by Treasury Secretary Timothy F. Geithner, top economic adviser Lawrence Summers, chief economist Christina Romer and senior adviser Valerie Jarrett. Aides said Obama will make clear that the power of the White House will be behind the legislation.

"The President believes new rules of the road for the credit card industry are needed and he looks forward to having an open and productive conversation tomorrow with the representatives of the credit card industry about the impact of the current crisis on consumers," Obama aide Valerie Jarrett said in an e-mail sent late yesterday.

[...]

Obama is expected to tell the executives today that he wants to go further than the House bill without specifically endorsing all of the provisions of Dodd's bill. Administration officials confirmed that the president will push for stronger rules in some areas than those proposed in the legislation but is "broadly supportive" of the bills working their way through Congress.

Also today, U.S. Sen. Charles E. Schumer (D-N.Y.) and Senate Banking Chairman Christopher J. Dodd (D-Conn.) called on federal regulators to implement an emergency freeze on interest rates tied to existing balances on credit cards. The Federal Reserve's new rules would limit such rate increases, but not until July 2010.

No word on how that last proposal will go over. But it's always a pleasure to see businesses prevented from ripping customers off.

Wednesday Morning Links

1. Gay marriage activists hope the Vermont legislature's decision to legalize gay marriage will provide impetus to other states to do the same. This is true at least in D.C., which voted to recognize gay marriages in other states. On the other side of the world though in Iraq, gays and lesbians find that their lives are endangered because of their sexuality.

2. Small towns, suckered by investment bankers who sold them risky municipal bond derivatives.

3. Peru's Ex-President Alberto Fujimora is convicted and sentenced to twenty-five years in prison for human rights abuses that occurred during the war against Maoist rebels Shining Path.

4. More details on the prosecutorial misconduct that undid the Ted Stevens prosecution. And McClatchy has another article on Judge Emmett Sullivan, who has "declared war" on what he sees to be a rising tide of government prosecutorial secrecy, incompetence and malfeasance.

5. Texas Republican lawmakers find themselves at odds with Gov. Rick Perry over a number of issues beyond stimulus funding. Texas Republicans are apparently not as receptive to marching orders as Congressional Republicans were during the Bush administration.

6. Former Australian government officials and academics applaud Obama's commitment to rid the world of nuclear weapons.
Anne Applebaum says there are other more important priorities that Obama should focus on, but it seems to me that getting rid of nuclear weapons never seems to be worthwhile until somebody's threatening to use one. Why wait until we reach that point?

7. Michael Gerson, being a moron again, characterizes Obama as "the most polarizing President" in history. In fact, Obama is a broadly popular President among Americans, and is most vociferously opposed by a loud minority contingent of right-wing lunatics and Republicans who think the key to electoral victory is saying no to everything Obama proposes.

8. Al Franken emerges victorious in the re-count, but Coleman signals further appeals are on the way.

9. Student loan defaults are surging, which may increase calls for a student loan "bailout."

10. American intelligence officials warn that the United States' electrical grid has been infiltrated by hackers from China and Russia who may be looking to launch cyber attacks against the United States infrastructure in the event of military conflict. I remember a 2003 Frontline special warning of this very thing, a warning that appears to be coming true.

Morning Links

Stuff you should be reading this morning:

1. Iraq: another article on the gradual upswing in attacks, and the largely unabated violence in one of the last bastion's of the insurgency, Diyala Province.

2. Congressional watchdogs lament the lack of transparency and oversight regarding the handout of TARP funds. Economist Joseph Stiglitz condemn's the Obama administration's approach to the crisis on Wall Street, characterizing it as "ersatz capitalism, the privatizing of gains and the socializing of losses." Paul Krugman's saying the same, of course.

3. In a surprise move, AG Holder dismiss the Stevens indictment and says there will be no new trial. The Stevens conviction has fallen apart in the face of allegations of prosecutorial misconduct.

4. The World Health Organization warns of an impending "explosion" in cases of drug-resistant tuberculosis.

5. Michael Gerson at the Washington Post says Obama is losing Catholics over the issue of abortion, but unsurprisingly fails to note that American Catholics are as divided on the issue of abortion as non-catholics. As is typical among media pundits (especially those of the conservative ilk) an entire group is said to be represented by it's conservative members.

6. ADP, a payroll processor, reports that 724,000 jobs were lost in March.

7. The Economist opens it's new theme park, Econoland (h/t Josh Berthume.) All the horror of the modern world, only funnier.

8. In honor of the day, the top 10 greatest April Fools pranks in modern history.

9. The tabletop wargame Battletech celebrates it's 25th anniversary. Not that that's anything special to us, ahem.

A Second World Economy

More evidence to bolster Matt Taibbi's conspiracy theory; the foxes are in charge of the henhouse, and our "reform" efforts largely mirror that of the oligarchical nations of Russia and Argentina:

Does anyone really doubt any more that the predominant characteristic of our political culture is "the incestuous relationship between governments and large [] corporate conglomerates"? Yet another former Goldman Sachs official and long-time derivatives advocate who played a major role in the repeal of key banking regulations, Gary Gesner, is now poised to become Obama's chief of the Commodities Futures Trading Commission, the body charged with regulating commodities and financial futures. The sleazy, central role Goldman Sachs has played in the events of the last six months -- from their current CEO's still-unexplained presence with Paulson (its former Chairman) and Geithner (protegé of its other former Chairman, Robert Rubin) as the AIG bailout was designed to the massive government windfalls that firm has received (including from that very AIG bailout) -- is merely illustrative of how our Government has long functioned and continues to.


Yves Smith last night noted the rather extraordinary (though unsurprising) development that the very institutions that played such a critical role in the crisis -- Citibank and Bank of America -- are now using TARP funds they received not to extend more loans (the ostensible purpose of the bailout), but rather, to buy up more and more of the very distressed assets that Geithner insists they need to be relieved of, because they now know that, under Geithner's plan, they will be able to sell them at a substantial profit courtesy of public funds (i.e, the Government will buy those crippled assets at well above their current market price). As Smith puts it: "So not only are they seeking to extract far more than was intended even with the already generous subsidies embodied in this program, but this activity is also speculating with taxpayer money. . . .Welcome to yet more looting."

We don't need reform. We need a scourging.

More Recommended Reading

End of the day links for your edification:

1. John Gray reviews Margaret Atwood's Payback: Debt and the Shadow Side of Wealth, in which Atwood takes something of a meta-view of debt. In essence our profligate ways with our own money reflect our attitudes towards the capital that is our planet, but that the Earth will not be so kind as the present crisis when it's time to pay it back.

2. U.S. officials accuse Pakistan's ISI of supporting Taliban attacks in Afghanistan in a very direct manner, with ISI agents going so far as to strategize with the Taliban about attacks on American forces. Meanwhile, former members of the Taliban say that talks with the Taliban are a possible route to peace, though one says of American forces: "They have a right to ensure that there is no danger to them from Afghanistan...[but] That is the limit of their rights in this country."

3. An aging Dalai Lama concedes that his strategy of engaging the Chinese leadership on Tibet has failed not only to gain traction for Tibetan autonomy, but to slow down the Chinese makeover of the country. China's response to any burgeoning demonstrations of Tibetan independence is met only with repression and violence, but alternative strategies are wanting.

4. Benjamin Netanyahu, Israel's Prime Minister-delegate, insists that Israel is a "partner for peace" while at the same time he's making backdoor deals to expand Israeli settlements in a particular part of the West Bank, a move that the U.S. government has long opposed as an impediment to peace.

5. In an op-ed for the WSJ, three former Presidents of Latin American countries argue that the "war on drugs" is a dismal failure, and it's time for a new course of action.

"The BIg Takeover"

Matt Taibbi says the honchos on Wall Street are robbing us blind and laughing at us while they do it:

As complex as all the finances are, the politics aren't hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.

The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. When challenged, they talk about how hard they work, the 90-hour weeks, the stress, the failed marriages, the hemorrhoids and gallstones they all get before they hit 40.

"But wait a minute," you say to them. "No one ever asked you to stay up all night eight days a week trying to get filthy rich shorting what's left of the American auto industry or selling $600 billion in toxic, irredeemable mortgages to ex-strippers on work release and Taco Bell clerks. Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?"

But before you even finish saying that, they're rolling their eyes, because You Don't Get It. These people were never about anything except turning money into money, in order to get more money; valueswise they're on par with crack addicts, or obsessive sexual deviants who burgle homes to steal panties. Yet these are the people in whose hands our entire political future now rests.

Matt Taibbi can never be accused of moderation of language, but strip it down and it doesn't sound any better. The people who spent billions making sure that their complex financial transactions stayed out of the cross hairs of federal regulators, are now receiving trillions for their failing companies from the federal government in the form of shadowy and unaccountable loans and payments, at the behest of men who ostensibly work for the government but once hobnobbed with these captains of finance. In response, they patronize and condescend to anyone foolish enough to second guess their methods, insist that they are integral to the recovery process, celebrate when the government agrees to hand over more money, and bitch and moan about "misdirected" public anger over all of this. An optimist might be inclined to think that the Obama administration is on top of all this, like they say they are. A cynic might just be inclined to believe Taibbi's version, that we're all suckers and in the end the rogues on Wall Street who caused this mess will still be in charge, still raking in millions, while people like you and me are looking for jobs. These days, it's very hard not to be a cynic.

This Cannot Be A Good Idea

We're going to buy condoms from these people? The same people who gave us tainted formula, poisoned pet products, and now bad drywall(!)? If you're lucky, you'll only manage to get someone pregnant or get a minor STD when the condom fails.

The Big Picture

Via Kevin Drum, Felix Salmon on the present public mood:

In one corner are the technocrats not only in finance but also in government and the media: people who can understand the importance of distinguishing between a $250,000 base salary, a $2.5 million bonus, a $250 million bonus pool, a $2.5 billion bonus pool, a $250 billion bailout package, a $2.5 trillion monetary stimulus, and so on.

In the other corner are the real people, the angry people, the unemployed people -- and with them their elected representatives in Congress. They're not interested in such distinctions any more, they're not interested in what's fair or what's sensible. They saw their real wages stagnate for decades as the orgy of plutocratic self-congratulation reached obscene levels only to keep on growing. All they ever had was the American Dream: the idea that they, too, might one day become dynastically wealthy and join the overclass.

Now, of course, that dream is shattered -- and, what's worse, it turns out that very overclass is responsible for the working classes' own present straits. While the talking heads in New York and Washington throw around their millions and billions and trillions before commuting home to their comfortable middle-class-and-better lifestyles, the rest of the country is mad as hell, and ain't gonna take it any more. They're not interested in constructive solutions or in leveraging private capital or in the sanctity of contracts: fuck that shit. Those days are over. They want to see jail time, confiscatory policies, and worse.

How accurate is Salmon's perception? I don't know. But people do seem awfully mad these days. I know I am. I joke about pitchforks and torches because I don't think that'll happen, but I know that when people get mad they don't often distinguish between policies that'll see that fairness and justice are done, and policies that just punish the people that they think are to blame. 

Student Loan Forgiveness

Apparently a minor movement has been building to forgive (to one degree or another) that tens or hundreds of thousands of student loan debt that many college and professional students have incurred (via Allahpundit):

Student loan repayment can be difficult for young people starting off their careers and has become even more challenging now with the economic downturn, as recent graduates lose their jobs or struggle to land one. Groups like Applebaum's on Facebook, and other organizations such as StudentLoanJustice.org, are part of a new movement advocating for an overhaul of the country's troubled student loan system. Frustrated with often unaffordable monthly payments, loans that are nearly impossible to discharge, and restrictive loan repayment plans, student borrowers are pushing the government and private loan companies to devise new solutions.

Allahpundit has this to say:

Unfair to those who repaid their loans or didn’t have loans in the first place? Sure — but no more so than dumping oceans of TARP cash on the banks that created the crisis. And if, if the stimulus effect of loan forgiveness is as profound as these guys think, taxpayers would be repaid in the form of a quicker economic rebound. One question, though: Why do they assume forgiven debtors would spend the savings instead of pocketing them or using them to pay off other debt a la tax rebate checks? The answer, maybe, is the sheer amount of money we’re talking about. In my case, forgiving federal loans would save me north of $8,000 a year; toss private loans in there and it’s a cool ten grand. I’d sock some of that away, but with tens of thousands dollars suddenly freed up, I’d also start looking at home prices in the area. Stimulating! Exit question: Who’s onboard?

I'd be lying if I said I don't think something similar. Now I certainly do not believe that for most graduates the slate should just be wiped clean. But to me there is no doubt that many students incurred debt with the expectation that they'd be able to repay that debt by virtue of the jobs that their college and professional degrees would permit them to obtain. Graduates were already finding themselves severely disappointed (and severely in debt) well before the present economic crisis began, but the situation is now dramatically worse for those who find themselves graduating into an economy where opportunities are far and few between. Were they irresponsible to incur debt to attend college? Hardly, in my opinion, given that most young people are told that college or a professional degree is more than worth the debt incurred obtaining their degree (and until tuition began to rise dramatically in the last decade or so, going to college didn't require incurring so much debt.)

How difficult would it be to expand on programs that permit students to defer debt, or lower their interest rates, or get some measure of debt forgiveness in exchange for public service? I don't know. Not that difficult I would think, and maybe somebody should be looking into that.

News of the Day

Things I'm reading about, but don't have much input on right now.

1) The Obama administration's bank rescue plan: Wall Street loves it. Liberal pundits hate it. Between the two whose opinion are you inclined to value? Yeah, me too.

2) Iraq: I missed my chance to post on the sixth anniversary of the invasion on Friday, but I found this article on the vast disconnect between what the Iraqis think of the war and what American perceive from half a world away, starting with the very name of the conflict, as very instructive. And whereas the war seems to have dropped off the radar screens of most Americans, Iraqis are worried that the conflict is nowhere near being played out. They have reason to be worried; the insurgency has never been entirely stamped out in Mosul, an ethnic flashpoint, a streak of large-scale suicide bombings has erupted since the beginning of the month, and Sunni fighters are fuming over what they see as the Iraq government's broken promise to employ them. The Iraq war is far from over. 

3) Afghanistan: the Afghan government has opened up negotiations with the branch of the Taliban commanded by Jallaludin Haqqani. President Obama, appearing on "60 Minutes", stated clearly that “Making sure that Al Qaeda cannot attack the U.S. homeland and U.S. interests and our allies" is our nation's number one priority in Afghanistan.

In The Category of Empty Rationales

I'm trying not to get too entirely caught up in the ranting surrounding the AIG bonus debacle, but this is too amusing/maddening not to mention. From Andrew Sorkin's column in the NY Times yesterday:

Now we can debate why A.I.G. felt it necessary to guarantee seven executives at least $3 million apiece when the economy was clearly on shaky ground. Perhaps we will find out these contracts were a bit of sleight of hand to enrich executives who knew this financial Titanic had hit the iceberg. But another possible explanation is that A.I.G. knew it needed to keep its people.

That is the explanation offered by Edward M. Liddy, who was installed as A.I.G.’s chief executive when the government effectively nationalized the company last fall. (He is being paid $1 a year.)

“We cannot attract and retain the best and brightest talent to lead and staff” the company “if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he said.

And in the NY Times this morning:

The bonuses that the American International Group awarded last week were paid to 418 employees and included $33.6 million for 52 people who have left the failed insurance conglomerate, according to the office of the New York attorney general.

Really, there's nothing I can add to that.

UPDATE: I blogged too soon. David Leonhardt asks whether retention bonuses are even necessary to retain talent at firms like AIG. The answer, according to his research, appears to be no. Also, in general, Leonhardt's column is a good kickoff for a conversation we really ought to be having about executive compensation at large corporations. You may recall that we already had a national conversation about this earlier this decade, but the collapse of various individual corporations apparently was not painful enough to prompt serious reform. Of course, things are slightly different this time around.

Leonhardt says something else worth nothing:

The larger question is how to change the rules on corporate pay to reduce the odds of future crises. Throughout this crisis, policy makers, starting with President George Bush and Ben Bernanke and now including President Obama, have been a bit too deferential to Wall Street. That deference has fed populist anger, which threatens the political viability of the necessary continuing bailout of the credit markets.

The bonus scandal offers Mr. Obama and Mr. Bernanke a chance to get ahead of the curve — so long as they come up with changes that extend well beyond A.I.G.

I think Leonhardt is on to something here. This mess with AIG has damaged the credibility of the Obama administration, but it also presents an opportunity for the administration to use the populist anger it's generated to build political momentum for real reforms. The administration's handling of Wall Street thus far hasn't inspired any confidence in me that they'll recognize or seize this opportunity, but it's there for the taking nonetheless.

AIG Bonuses

Do you know what's most infuriating about this AIG bonuses debacle? That much of the anger directed at AIG and the executives and traders who will receive this money will spill over on the Obama administration. And deservedly so, in my opinion, as the Treasure Department "reluctantly" approved the bonuses even before news of them became public, and Obama himself apparently didn't become outraged about them until yesterday even though the Treasury Department has known for months that the bonuses would be an issue. And now Obama has ordered Treasure to "pursue every single legal avenue to block these bonuses" but the only plan proposed thus appears-ridiculously-to be a plan to "recoup" the bonus payments with future bailout money! It is not possible to overstate how weak it makes the Obama administration look that they cannot prevent the payout of egregious bonuses to the very people who produced the present crisis at AIG, even as the administration is lining up to give AIG another $30 billion. This will damage not only future efforts to contain the credit crisis on Wall Street (though who even knows what those efforts are yet?) but also efforts to get future stimulus legislation through Congress if and when it becomes necessary. What's truly angering is that this all appears to be an entirely self-inflicted wound. Had the Geithner and the Obama administration anticipated this crisis, they could've pressured AIG quietly in advance to ditch the bonus idea or forfeit the possibility of future bailout money. Now, they can only make a half-assed effort to get money back that's already been paid out, and run the risk of looking completely impotent in the face of AIG executives whose company is on the public dole. Unbelievable.

UPDATE: And now members of the Obama administration are trying to throw Sen. Chris Dodd under the bus, blaming him for a provision in the American Recovery and Reinvestment Act that allowed AIG to hand out bonuses last Friday (via Glenn Greenwald.) Except oops...that's not true. As Jane Hamsher explains, Dodd actually pushed for a provision that would've prevented such bonuses, and was talked back from it by-can you guess?-Geithner and the Treasury Department.  So to recap...the Treasury Dept. approves the bonuses, is caught off guard by popular outrage, then tries to blame Sen. Dodd for the mess (counting on useful idiots in the media and right-wing blogs) then Obama gets "outraged" yesterday, and now in Washington there is much weeping and gnashing of the teeth as Americans go hunting for their pitchforks and torches. All for $165 million, a pittance compared to the vast sums spent so far trying to repair our damaged economy. Well done fellas. Well done. 

Texas Worst Place for Homeless Children

Pretty soon I'm going to need a "worst at" label for stories about the ways Texas is failing its citizens (h/t Adam):

A study by the National Center on Family Homelessness released Tuesday placed Texas 50th — last of all states — in how homeless children fare.

The ranking considered four areas: the percentage of homeless children; their overall well-being; risk factors for homelessness, such as poverty and foreclosure rates; and what the state is doing to address the problems.

Dr. Ellen Bassuk, president of the national center that produced the report, said the child poverty level in Texas is 23 percent, compared to 18 percent nationwide.

"You're a big state, you've got a significant problem," said Bassuk, who also is an associate professor of psychiatry at Harvard Medical School. "Texas needs to respond."

[...]

The center estimates that 1.5 million children nationwide experienced homelessness at least once in 2005-2006. The states that fared best were Connecticut, New Hampshire, Hawaii, Rhode Island and North Dakota. At the bottom were Texas, Georgia, Arkansas, New Mexico and Louisiana.

Texas has more than 337,000 homeless children — just over 5 percent of all kids living in the state, according to the study. It noted, however, that number may have been temporarily inflated by families who lost their homes during the hurricanes Rita and Katrina in 2005.

Bassuk said that while Texas has a trust created to provide low-income housing — something a lot of states don't have — it has no statewide plan in place to address homeless issues.

Across the U.S., the study found that one of every 50 kids are homeless each year. The rate in Texas is probably a bit higher.

And with the way the economy is going, that rate will only increase. Such is the nature of these things; just as people need more help, the state has less money to spend. Which is why Governor Perry's grandstanding on the stimulus package seems even more ridiculous in light of reports like this one.

Moral Obligation

Megan McArdle explains why she thinks that people do-to some degree-have a moral obligation to repay their debts (lengthy excerpt warning):

Four weeks ago, I bought a grill on my credit card. It was not the best grill Home Depot had--indeed, because I am cheap, and also have never longed to rotisserie in my very own back yard, it was the cheapest grill they had in stock, except for tiny tabletop camping models.

It's a nice grill. But I've since realized that our landlords have an old, broken grill that we might have been able to repair with enough duct tape, saving me almost $200. Meanwhile, I've discovered that I can't sell the grill for a profit, because Home Depot seems to have a large number of very similar grills in stock which they are willing to offer to buyers for a mere $200. For that matter, I can't even sell it for the value of the loan with which I financed it. The equity in my grill has dropped by about 50%. Given all that, I don't see why I should be required to pay back the credit card company. After all, they knew when they loaned me the money that I might not pay it back, and I suspect they also knew that I might not like my grill as much as I expected to. Hell, the dirty bastards may well have known that I was going to end up underwater on my grill loan. I don't see why I have any obligation to repay them.

This seems to me to be approximately the logic behind the people saying that folks who took out stupid loans don't have any sort of moral obligation whatsoever to make good their debts. The loan company didn't have your best interest at heart, the logic goes, so why should you take care of them at any cost to yourself?

Well, imagine you're the one I borrowed the grill money from. I doubt almost anyone reading this would be plunged into bankruptcy by the loss of $200. So why should I pay it, when you knew just as well as I did that the grill would depreciate and I might be better off without it?

Call me bourgeois, but I think that when you sign your name to a document promising to repay money you've borrowed, you have an obligation to repay the money you've borrowed.

{...}

Undoubtedly many of my readers think that that sort of thing is different because we don't have a moral obligation to repay our debts to corporations the way we do to people. This strikes me as fundamentally wrongheaded in two ways. First, the bourgeois belief that an honorable man repays his debts if he is able is one of the unnoticed underpinnings of a stable, prosperous democracy. Countries that believe that one can pick and choose whom one is obligated to repay on the basis of how good a person the lender is, how tight their relation to you, or whatever, are low-trust societies with extremely high transaction costs and underdeveloped markets. If you think you're only obligated to repay regular folks like yourself, then no one but your close friends and family will lend you money. This makes capital formation tricky.

She makes a reasonable argument, but there are a few things I think she's missing. First of all, her personal experience is not really analogous to a homeowner handing over their keys and walking away from their home and whatever debt they have remaining on their mortgage. Obviously, someone may opt to pay for a $200 grill they don't really need, whereas a home mortgage payment can be a crushing burden on a family's finances, especially when the interest rate has shot up or the home's value has declined dramatically. But let's leave that aside and take her argument at face value; that there is a moral obligation, at least to some extent, to repay one's debts. This is actually not a proposition that I disagree with completely, though I don't think I've been clear about that in the past. It's clear that many or most people feel some compunction to repay their debts as a matter of principle, or honor. After all, few things seem as irresponsible or dishonorable as borrowing money from someone in good faith and willfully failing to pay that money back.

But the reason I've been so opposed to speaking of a moral obligation to repay debt is because the obligation to behave morally or honorably only ever seems to be imposed upon the debtor, and not the lender. McArdle misses this when she argues that there should be no distinction between paying back debts to corporations and debts to family or friends. The existence of a moral obligation to pay is not premised on who the lender is; it's premised on how the lender behaves towards you. That's why most of us would make every effort to repay family and friends, who we can presume will for the most part lend to us and treat us in good faith. But you can expect no such treatment from a bank or corporation, which not only will hound you for your debt to them if you fall behind (as they are legally entitled to do) but also alter the terms of your agreement, slash your credit limit, raise your interest, and report various sundry things to the credit reporting bureaus and then take their time correcting what they've wrongly reported (among other things.) This is why it seems so strange to impose upon debtors a moral obligation that doesn't exist for lenders; if we're talking about obligations that go beyond something other than a straight business transaction, then there should be reciprocity, right?

Second, I think McArdle gives too much credit to this obligation as a means to keep the credit economy flowing smoothly. What really keeps credit flowing are the legal obligations that bind those who enter debtor-creditor relationships. Yes, most of us feel some moral obligation to repay our debts, but we also know that if we don't, our lender will send us nasty letters, call us repeatedly, report our late payments to the credit bureaus, and they may even sue us for the debt. Since most people want a good FICO score on their credit record, don't want to be called at all times of day, and don't want liens imposed on their property, they'll continue to pay even if they feel no moral obligation to do so. Of course people in worse financial circumstances may decide for whatever reason that they'd rather face these consequences than attempt to keep paying on the debt. They may even enter bankruptcy at some point, despite the fact that most people are still embarrassed and/or ashamed of admitting that they can't pay their debts. And it's true that some people will decide that-even if they can pay the debt-they simply don't care about their credit score, don't mind the phone calls and nasty letters, or have no property to speak of that they're worried about losing. But such is the system of incentives, not obligations, that lies at the heart of our credit economy. Lenders-for the most part-have incentives to lend and to treat their customers/borrowers decently, so that those people (and businesses) will want to lend again from them in the future.  Borrowers have incentives to pay their debts back in a responsible and timely manner, so they can borrow again in the future and so they can avoid the negative consequences of failing to pay back their debts. 

Liberals like myself would like to see a more balanced system of incentives, so that the lender's incentive to treat their borrowers decently is roughly equal to the borrower's incentive to pay that lender back. To us this means mostly balancing the playing field between lenders and borrowers, such that both enter a credit transaction as something approaching equals and will have an incentive to fulfill meet the obligation to each other they've both contractually assumed. This is why talk of a moral obligation that somehow is imposed only on one party in the transaction is annoying and frustrating to me. Such an obligation is an impediment to a business relationship between equals and-more frequently-is used as a rhetorical tool by people on the right who want mostly to protect the interests of corporations that have no desire to level the playing field or let people off the hook for even unconscionable debts.

And beyond that, it just seems silly to start talking about anybody's obligation to do anything by anybody in our present economy, where home lenders fudged numbers to produce more loans, banks sold bad mortgage-backed securities left and right,  credit ratings agencies rated themwilly-nilly, and execs at giant financial institutions pay themselves billions in bonuses with taxpayer money. Compared to that, the morals of credit cardholders and homeowners seems a small concern.

Stimulus Not Enough

While Republicans and their useful fools in the media elite are busy complaining about "pork" that might possibly arise to single-digit percentage points of the total stimulus package, economists are worried that the stimulus package isn't doing enough to boost the economy. Paul Krugman:

To see how bad the numbers are, consider this: The administration’s budget proposals, released less than two weeks ago, assumed an average unemployment rate of 8.1 percent for the whole of this year. In reality, unemployment hit that level in February — and it’s rising fast.

Employment has already fallen more in this recession than in the 1981-82 slump, considered the worst since the Great Depression. As a result, Mr. Obama’s promise that his plan will create or save 3.5 million jobs by the end of 2010 looks underwhelming, to say the least. It’s a credible promise — his economists used solidly mainstream estimates of the impacts of tax and spending policies. But 3.5 million jobs almost two years from now isn’t enough in the face of an economy that has already lost 4.4 million jobs, and is losing 600,000 more each month.

There are now three big questions about economic policy. First, does the administration realize that it isn’t doing enough? Second, is it prepared to do more? Third, will Congress go along with stronger policies?

Krugman said the stimulus package wasn't enough when it was first proposed, and he's hardly changed his view now, with the economy worsening at a faster clip than predicted and job losses so vast that it appears an economic restructuring is taking place. But he's not alone. Here are a few other opinions from this Washington Post article:

Analysts increasingly view the administration's actions so far as insufficient given the scope of the problem. The stimulus package was designed to "save or create" 3.5 million jobs, according to the administration. But the nation has already lost 4.4 million jobs since the start of the recession. Many banks and other financial institutions, whose health is critical to the economy, are teetering, and the Treasury Department has yet to finalize the details of its plans to remove from their balance sheets the toxic assets dragging them down.

"It's premature to say we need another stimulus, but the economy is performing much worse than when [the law] was signed, and the odds are increasing that we'll need a bigger policy response," said Mark Zandi of Moody's Economy.com, who has advised Democratic lawmakers. "What we've learned is policy has been a step behind this whole downturn. It's important to get a step ahead."

The International Monetary Fund yesterday urged governments worldwide to consider additional fiscal stimulus, noting that the public sector must help prevent a collapse of confidence.

[...]

Regulators...are conducting "stress tests" of major banks so that the Treasury Department can better determine what kind of financial support they might need. Those tests assume that, in a particularly bleak scenario, the unemployment rate will average 8.9 percent this year and 10.3 percent next year. But if the government projections on unemployment turn out to be too rosy, officials could underestimate the trouble banks are in. A higher unemployment rate means greater losses for banks because more people default on their loans.

The worsening employment picture, meanwhile, could also create a hole too big for the stimulus package to fill.

As a result, government needs to step up and do more, said Heather Boushey, senior economist with the liberal Center for American Progress.

"It's not going to be enough, folks. I hate to break it to you," she said.

To be fair, not all economists believe that the stimulus package will actually achieve its intended purpose. And others are concerned about the massive debt we are incurring in our efforts to shore up the economy. No doubt I've lambasted the Bush administration on their complete lack of fiscal discipline (or more accurately, the politicization of budgetary policy) but it's hard to argue against even more bold action when we appear not to have even hit bottom yet.