The Republican Primary’s Parallel Universe

In case you couldn’t tell from the 20 debates, constant news coverage and firehose-like flow of ads, there’s a Republican presidential primary underway. But to listen to the candidates—particularly on the economy—you’d think they were running for president of a different planet, one eerily like ours but facing totally different problems.

Let us count the ways that the Republicans’ economic conversation is totally out of touch with actual reality here on Earth.

Clap louder, Mitt.

  • Jobs. At Wednesday’s debate, the word “jobs” was uttered hardly at all, and zero times by candidate Rick Santorum. In a larger sense, when these candidates talk about “creating jobs” they mean one thing: directing more money to the very wealthiest and to big corporations—through tax cuts or through removing regulations designed to protect consumers and workers. This might make a little bit of sense if the biggest problem facing the economy were corporations not having enough money. It’s not. The problem is a lack of consumer demand, because too few people have jobs and wages are falling behind.

  • Debt and Deficits. These aren’t the most important economic issue we face—continued too-high unemployment is. But by the standards of the Republicans’ own rhetoric, they’re important enough to serve as the basis for attacks and talking points. So it seems strange that the plans proposed by Romney, Santorum and Gingrich would increase the debt—and, more specifically, increase the debt by more than Obama’s proposals would. And they don’t build up this debt by investing in long-term needs: they do it by demolishing revenue through massive tax cuts aimed mostly at the wealthiest. Which brings us to…

  • Taxes. The public consensus is overwhelmingly clear—to afford the things we need, we should be able to ask a little bit more from the very richest than the current historic low rates. All of the Republican plans do exactly the opposite. For example, Romney’s plan would deliver a $264,000 tax cut to the top 0.1%. As economist Justin Wolfers noted, “Romney’s new tax plan is massively regressive relative to current code. Most of the spoils are going to the rich” – and the same is true of the other Republican candidates. And even as they propose these massive tax cuts for the wealthy, they propose devastating cuts to Medicaid and other programs that working-class people rely on. It’s redistribution, upwards.

  • Housing. In many ways this is the most baffling omission of all. In recent days, Republican candidates have been avoiding the subject entirely even as it’s clearly one of the most important factors in the financial crisis. A few months back in Nevada, Romney offered up “let it run its course and hit the bottom” as his solution to the foreclosure crisis (the housing version of “let Detroit go bankrupt”), though he softened how he talked about it in Florida a few weeks later. But mostly it’s been crickets and tumbleweeds. Forgive me if I’ve missed this, but has any Republican candidate, or even any Republican in Congress, weighed in on the mortgage-fraud settlement or the underlying issue of mass abuse of the foreclosure process?

Let’s not get into issues like the minimum wage, rebuilding infrastructure, keeping teachers in classrooms or protecting the freedom to form a union and collectively bargain—all issues that matter to our economy. We’d be naïve to expect this batch of Republican candidates to say anything constructive.

During Republican primaries, the candidates are pitching to a small audience, and their proposals are kept in line by harshly ideological enforcement mechanisms like talk radio’s Rush Limbaugh and the Wall Street-funded Club for Growth. But with their pledges and proposals now, they’re committing themselves to a totally fictional vision of the economy in the fall.

Out in the real world, Working America staff talk to around 20,000 people every week in neighborhoods across the country and stay in close contact with our members, so we have a pretty good sense of what a broad group of working- and middle-class people care about in this critical year. They want to make sure they can get and keep a good job, be covered if they get sick, send their kids to good schools, stay in their homes and retire with some security. I don’t know what world the Republican primary is taking place in, but it’s not the one where our members live.

(Image via Gage Skidmore on Flickr.)

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Priorities: The Bad Choices Inside Today’s Payroll Tax Deal

This morning, President Obama signed into law a deal that extends the payroll tax holiday for the rest of the year. With the economic recovery still fragile, it’s good to keep this payroll tax cut in place to help keep a little extra money in working families’ pockets. But the flaws of today’s deal—flaws forced through by Republicans in the House, but passed with big numbers from both parties—really illustrate the cluelessness and callousness of policy-making.

Unemployment Insurance: The compromise does, indeed, renew unemployment insurance, but dramatically cuts back the number of weeks that the jobless can draw on it, to 73 weeks or even fewer in some states. The problem of long-term unemployment is still a serious one, with about 40% of the unemployed out of work for six months or more, so pulling away this lifeline is silly. In addition, the deal imposes humiliating conditions on the jobless before they can draw on the benefits they paid into. The net result will be that far too many people who depend on UI will lose it.

Pensions: One of the ways the deal pays for the UI extension—and another provision to keep Medicare payments to doctors at current levels—was to charge future federal employees more for their pensions. This pits workers against each other—pulling money away from future retirees in order to support unemployed people now. Congress’ willingness to go after these pensions is a bad sign.

Health Care: Another way that the bill is paid for is with a sizable cut to a fund meant to pay for preventative care services under the Affordable Care Act. Preventative care for those who can’t otherwise afford it helps them stay healthier and lowers their longer-term medical costs. Cutting this fund isn’t just morally loathsome; it’s economically short-sighted.

With cuts and new conditions on unemployment benefits, a major hit to the Affordable Care Act and an attack on public-sector workers, it seems like the details of this bill are a big ideological win for the hard-right Tea Party caucus of congressional Republicans. That they’d demand this kind of ransom as the price for passing the payroll tax holiday is infuriating; that so many ostensibly pro-worker members of Congress would let them is just depressing.

When President Obama first offered up the American Jobs Act, it was funded in a popular, common-sense way—with a small surcharge on income over $1 million. It also included a broader set of job-creation components, including investment in infrastructure and support to state budgets for keeping teachers and firefighters on the job. Provisions of this bill were blocked by Senate Republicans because they were not willing to exchange a tiny tax increase on millionaires for literally hundreds of thousands of jobs for working people.

Politics is about priorities. The people we talk to across the country have their priorities: they want to see the very richest pay their fair share and use that money to create jobs and support communities. In Washington—particularly among congressional Republicans—they have their priorities exactly backwards. It’s sick people, retirees and the jobless who have to sacrifice, not those who are already doing well.

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San Francisco Audit Reveals Massive Foreclosure Abuse

San Francisco recently carried out an audit on a number of foreclosures. Their findings were released in a report this week that shows just how rampant mortgage fraud has been. From Reuters:

The audit of almost 400 foreclosures in San Francisco found that 84 percent of them appeared to be illegal, according to the study released by the California city on Wednesday.

Similar studies around the country show comparable results. These numbers are astounding. And worse, they’ve essentially gotten away with it.

In many cases during the housing bubble that burst in 2008, original mortgages were repackaged and sold to so many investors that it is now unclear who actually holds the loans. O’Brien could only find the current owners of the mortgages he studied in 287 out of 473 cases.

In the San Francisco study, which studied properties subject to foreclosure sales between January 2009 to November 2011, 45 per cent were sold to entities improperly claiming to be the owner of the loan.

“It is not impossible that there are homeowners who are alleged to have defaulted on loans to which they never fully agreed to and, further, are being foreclosed upon by lenders that might not even own such loans,” the report stated.

This should be unimaginable. Instead it is chilling – the story of a largely unregulated financial industry gone amuck. The consequences to homeowners and their families is devastating. Of course the most chilling aspect of the whole mess is that the banks have never admitted to any wrongdoing. There have been no prosecutions. No banksters are wearing orange prison jumpsuits as a result of their role in defrauding millions of US homeowners.

Seth is right. The banks did get off too easy in the foreclosure/fraud settlement.

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Cutting taxes does not increase revenue

This tax day, one of the big Republican talking points is that cutting taxes raises revenue. The theory is that if businesses and the wealthy pay less in taxes, they have more to spend on creating jobs.

The trouble with this is that it’s not true.

But even conservative economists have cast doubt on this claim.

“Federal revenue is lower today than it would have been without the tax cuts. There’s really no dispute among economists about that,” said Alan D. Viard, a former White House economist under George W. Bush, in a 2006 Washington Post article.

Robert Carroll, deputy assistant Treasury secretary for tax analysis, also said that no one in the administration believes tax cuts created a surge in revenue. “As a matter of principle, we do not think tax cuts pay for themselves,” Carroll said.

Bruce Bartlett, a Reagan economist who became a strong critic of the Bush administration’s policies, used data from the Office of Management and Budget in a blog post last year to illustrate how “the Bush tax cuts reduced revenue rather significantly.”

Ronald Reagan, in fact, demonstrated how untrue it is that cutting taxes raises revenue:

Reagan enacted a major tax cut his first year in office and government revenue dropped off precipitously. Despite the conservative myth that tax cuts somehow increase revenue, the government went deeper into debt and Reagan had to raise taxes just a year after he enacted his tax cut. Despite ten more tax hikes on everything from gasoline to corporate income, Reagan was never able to get the deficit under control.

(See also here and here.)

Reagan—Ronald Reagan, the icon of today’s Republican party!—realized that cutting taxes decreased revenues and increased the debt. And he responded by raising taxes. He raised them in regressive ways that didn’t fix the mess he had made, but in comparison to politicians like Paul Ryan and John Boehner, whose response to creating a mess is to see if they can’t turn it into a disaster, he was practically a moderate.

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Ryan’s plan to devastate the US economy

The budget plan that Budget Committee Chair Rep. Paul Ryan (R-WI) has put forward for the House Republicans is truly stunning. It takes the war on America’s middle class not to the next level but about three levels down the road.

There’s something we should start with, though, when we think about this budget. And that’s where we are now. Mark Sumner points us to this graph:

That’s the deficit, and that big orange stripe, the one getting wider by the year, is how much of the deficit the Bush tax cuts are creating.

Mark writes:

Not only are billionaires already piling up ever larger heaps of cash under the shelter of the Bush cuts, the deregulation that drove the economy into instability only accelerated the disparity in wealth. Bailed-out Wall Street is again handing out record bonuses, while Main Street is dealing with the effects of budget cuts. The cost of belt-tightening is being borne by the poor and middle class, while the ultra-wealthy increase their dominance.

The nation had a record surplus in 2000. What’s happened since then is not an increase in social programs, EPA funding, or any of the other things on the chopping block in the current budget deal. What’s happened is a massive funneling of cash to the top. Unless that’s reversed, it will be impossible to staunch the flow of red ink.

Any serious fiscal policy will be one that, at a minimum, rolls back the Bush cuts. Any policy that hopes to put the nation on the road to long-term stability must look to repair the damage that’s been done by four decades of fruitless handouts to the wealthy.

But here’s what the Ryan budget does:

Ends Medicare guarantee for seniorsEPI:

The budget resolution eliminates Medicare as we know it, shifting costs onto seniors.

Raises health care costs for seniors CBO:

Under the proposal, most elderly people would pay more for their health care than they would pay under the current Medicare system.

And this:

Gives tens of billions of dollars in tax subsidies to Big OilCenter for American Progress:

House Budget Committee Chair Paul Ryan’s (R-WI) proposed FY 2012 budget resolution is a backward-looking plan that would benefit big oil companies at the expense of middle-class Americans. It retains $40 billion in Big Oil tax loopholes while completely eliminating investments in the clean energy technologies of the future that are essential for long-term economic growth.

Also this:

Cuts education for children and raise college costs for nearly 10 million students - Center for American Progress:

This means a significant cut to federal kindergarten-through-12th-grade education funding is in his sights… In addition to cuts to K-12 education, the Ryan plan would also cut Pell Grants by returning them to pre-stimulus levels. This is a cut of more than $800 in each student’s maximum Pell Grant award, which would impact millions of young Americans who depend on critical financial assistance in order to attend college.

Makes tax cuts for the wealthiest permanent, adding $1 trillion to the deficitPaul Krugman:

The Tax Policy Center finds that the Ryan plan would cut taxes on the richest 1 percent of the population in half, giving them 117 percent of the plan’s total tax cuts. That’s not a misprint. Even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population.

It’s practically impossible to comprehend the devastation Rep. Ryan and his party are trying to inflict on working people—and devastation that’s inflicted on working people is devastation to the nation as a whole.

Half in Ten has a quiz about this budget. Take it and see how much you know about where we are and where this would take us.

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Paying more for less

In an effort to disguise higher food prices, companies are putting less food in the same sized packages. From the NY Times:

One shopper noticed when she made dinner for her 9 kids:

“Whole wheat pasta had gone from 16 ounces to 13.25 ounces,” she said. “I bought three boxes and it wasn’t enough — that was a little embarrassing. I bought the same amount I always buy, I just didn’t realize it, because who reads the sizes all the time?”

Ms. Stauber, 33, said she began inspecting her other purchases, aisle by aisle. Many canned vegetables dropped to 13 or 14 ounces from 16; boxes of baby wipes went to 72 from 80; and sugar was stacked in 4-pound, not 5-pound, bags, she said.

It’s stealth reduction.

In every economic downturn in the last few decades, companies have reduced the size of some products, disguising price increases and avoiding comparisons on same-size packages, before and after an increase. Each time, the marketing campaigns are coy; this time, the smaller versions are “greener” (packages good for the environment) or more “portable” (little carry bags for the takeout lifestyle) or “healthier” (fewer calories).

Marketing strategies are so cynical. They take for granted that we’re too dumb to notice.

This was the paragraph that grabbed me:

Thomas J. Alexander, a finance professor at Northwood University, said that businesses had little choice these days when faced with increases in the costs of their raw goods. “Companies only have pricing power when wages are also increasing, and we’re not seeing that right now because of the high unemployment,” he said.

The unemployment numbers haven’t gone down significantly, but we never hear about the huge numbers of people out of work any more. We never hear about job creation. All we hear about is the deficit, and how dismantling the social safety net is the solution. Even I know that a budget isn’t balanced by cutting alone. We need revenue – the kind created by having a working population.

Food and gas prices are going to continue to rise. This means tougher times ahead for those who are already hurting.

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A New Normal?

I’ve seen a number of bloggers address the home ownership rate, which at 66.5% is down to 1998 levels. But Susie Madrak highlights another number: an 11% vacancy rate. According to the CNBC post she points to:

The number of vacant homes for rent fell by 493 thousand, as rental demand rose. 471,000 homes are listed as “Held off Market” about half for temporary use, but the other half are likely foreclosures. And no, the shadow inventory isn’t just 200,000, it’s far higher than that.

So think about it. Eleven percent of the houses in America are empty. This as builders start to get more bullish, and renting apartments becomes ever more popular. Vacancies in the apartment sector have been falling steadily and dramatically, why? Because we’re still recovering emotionally from the toll of the housing crash.

Younger Americans have seen what home ownership has done to their friends and families, and many want no part of it. Credit has become very nearly elitist. Home prices, whatever your particular data provider preference might be, are still falling.

Like the New York Times article I wrote about yesterday, this is another piece of evidence showing us how profoundly our economy—indeed our country—has been changed by this recession and by the decades of growing income inequality that preceded it.

Enormous income inequality became the new normal. Then came this recession—we haven’t reached a post-recession new normal, but lots of signs suggest that what we’re moving toward is something that just a few years ago seemed unthinkable. That we have unemployment near or over 10% and the government doesn’t treat that as an emergency, that banks are allowed to just throw people out of their homes based on fraudulent paperwork, that the middle class is under a sustained attack.

The question is, where’s the tipping point at which the mass of working people in this country either accept that this is it—that their jobs, health care, and retirement will always be insecure; that they can’t expect to provide a better life for their children—or instead of accepting it, fight back, whatever that fight looks like?

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“Anxiety Lingers” is One Way of Putting It

On my way to work today, I saw a Washington Post headline: Recession is officially over, but anxiety lingers.

To be fair, the Post article offers a few reasons that might be the case, but Atrios gets right to the point:

So the recession was over in June ’09. Huzzah!

I know I’m a broken record on this, but there is no great mystery why the Dems are looking at potentially major problems in November. The economy is truly atrocious and has been for a long time. I remember just before the ’08 election – almost two years ago – betting a friend that unemployment would rise above 7.6%. At the time to many people 7.6% seemed to be a pretty crazy number, even in the middle of the unfolding crisis. Soon after the administration projected that unemployment would peak at 9% from Q1-Q3 2010, and then start declining without any stimulus. It’s now been above 9% since May 2009, including 3 months where it was 10%+. If I had traveled back in time to warn them of this state of affairs, they would have been more likely to believe the time travel part.

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Obama’s America

President Obama gives another great speech—great not just because he’s a compelling speaker but because he’s laying out so much about what’s wrong with the economy.


I ran for President because for much of the last decade, a very specific governing philosophy had reigned about how America should work: Cut taxes, especially for millionaires and billionaires. Cut regulations for special interests. Cut trade deals even if they didn’t benefit our workers. Cut back on investments in our people and in our future -– in education and clean energy, in research and technology. The idea was that if we just had blind faith in the market, if we let corporations play by their own rules, if we left everyone else to fend for themselves that America would grow and America would prosper.

And for a time this idea gave us the illusion of prosperity. We saw financial firms and CEOs take in record profits and record bonuses. We saw a housing boom that led to new homeowners and new jobs in construction. Consumers bought more condos and bigger cars and better TVs.

But while all this was happening, the broader economy was becoming weaker. Nobody understands that more than the people of Ohio. Job growth between 2000 and 2008 was slower than it had been in any economic expansion since World War II -– slower than it’s been over the last year. The wages and incomes of middle-class families kept falling while the cost of everything from tuition to health care kept on going up. Folks were forced to put more debt on their credit cards and borrow against homes that many couldn’t afford to buy in the first place. And meanwhile, a failure to pay for two wars and two tax cuts for the wealthy helped turn a record surplus into a record deficit.

I ran for President because I believed that this kind of economy was unsustainable –- for the middle class and for the future of our nation. I ran because I had a different idea about how America was built.


I believe government should be lean; government should be efficient. I believe government should leave people free to make the choices they think are best for themselves and their families, so long as those choices don’t hurt others. (Applause.)

But in the words of the first Republican President, Abraham Lincoln, I also believe that government should do for the people what they cannot do better for themselves. (Applause.) And that means making the long-term investments in this country’s future that individuals and corporations can’t make on their own: investments in education and clean energy, in basic research and technology and infrastructure. (Applause.)

That means making sure corporations live up to their responsibilities to treat consumers fairly and play by the same rules as everyone else. (Applause.) Their responsibility is to look out for their workers, as well as their shareholders, and create jobs here at home.

And that means providing a hand-up for middle-class families –- so that if they work hard and meet their responsibilities, they can afford to raise their children, and send them to college, see a doctor when they get sick, retire with dignity and respect. (Applause.)

That’s what we Democrats believe in -– a vibrant free market, but one that works for everybody. (Applause.) That’s our vision. That’s our vision for a stronger economy and a growing middle class. And that’s the difference between what we and Republicans in Congress are offering the American people right now.

Complete transcript here.

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To roads being turned to gravel, senior year of high school being made optional, public bus systems being shut down and libraries being closed, add another effect of state and municipal budget crises: firehouse brownouts.

Fire departments that can’t keep all their units open at any one time are instituting “rolling brownouts,” in which today the firehouse down the block from me might be closed and tomorrow it will be open while the one in your neighborhood across town will be closed. According to the New York Times, this is increasingly widespread—the article mentions Philadelphia, Baltimore, Sacramento, San Diego.

Firehouse closures don’t just affect the response time for fires. Increasingly, emergency medical response teams are part of fire departments, so people in cities with brownouts don’t just have to worry about facing a relatively rare fire. Much more common medical emergencies are suddenly a far graver concern: A heart attack, a fall down the stairs, being hit by a car. Or choking:

The risks of cutting fire service were driven home here last month when Bentley Do, a 2-year-old boy who was visiting relatives, somehow got his hands on a gum ball, put it in his mouth, started laughing and then began choking.

“It blocked the air hole,” said his uncle, Brian Do, who called 911 while other relatives frantically tried to dislodge the gum ball. “No air could flow in and out.”

It is only 600 steps from the front door of the neatly kept stucco home where the boy was staying to the nearest fire station, just down the block. But the station was empty that evening: its engine was in another part of town, on a call in an area usually covered by an engine that had been taken out of service as part of a brownout plan.

The police came to the home within five minutes and began performing cardiopulmonary resuscitation, officials said. But it took nine and a half minutes — almost twice the national goal of arriving within five minutes — for the fire engine, with a paramedic and more medical equipment, to get there. An ambulance came moments later and took Bentley to the hospital, where he was pronounced dead.

Maybe that little boy would have died anyway. But wouldn’t you rather the question wasn’t out there? His family would, and they’re publicizing his story to draw attention to the problem.

State and municipal budget crises bring the overall economic crisis into sharp focus. If we can’t look at gravel roads and disappearing public transit and closed libraries and firehouses and see that something needs to be done, will Bentley Do’s story be enough? How much more of this will our government tune out before acting to end the crisis?

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