Progressive Breakfast - 2/2/2009

Senate Debate on Econ Recovery Starts Today. More Infrastructure On Tap?

Call your Senators toll-free at 1-866-544-7573 and demand immediate passage of the American Recovery and Reinvestment Act.

NYT: "Senators of both parties also said on Sunday that they expected a significant amount of additional money -- about $20 billion to $30 billion -- to go toward infrastructure spending on such things as roads and bridges. Senator Schumer also said he supported an additional $5 billion for mass transit spending."

On NBC's Meet The Press, Sens. John Kerry (D-Mass.) and Kay Bailey Hutchison (R-Texas) crystallize the debate between public investment and tax cuts. Guess which is based in reality!

KERRY: We've had eight years of this experiment of massive tax cuts without investing in America's future, and the result is we have gone from fourth in broadband to 17th in the world. The fact is our transportation system is neglected, you can't move products from here to there as effectively as other places. We waste countless hours of American productivity on roads that are clogged with traffic because we don't invest in mass transit. I think the experiment in the last eight years, that's what this election was about. We just had an election. The American people overwhelmingly voted for change.

...

HUTCHISON: It is the tax cuts that caused the economy to start going in the right direction. It was the 15 percent capital gains and dividends break that made people go back into the stock market. It was lowering everyone's tax bracket.

Hutchison also tried to position herself as pro-infrastructure: "I think you should take out the social spending that is not going to create jobs and add to the infrastructure spending which will create jobs."

Conservative Dem Sen. Ben Nelson keeps echoing GOP talking points on "wasteful" spending.

NYT finds lots of shovel-ready projects in financially-distressed California.

Media Matters slaps W. Post editorial board after it pinned blame on Obama for having "controversial provisions removed [from the economic recovery bill], but too late to win over Republicans."

TPM's Josh Marshall nails DeMint for spewing utter ignorance: "I cannot say my expectations were high. But Sen. DeMint (R) of South Carolina does seem to be an even bigger ignoramus than I'd realized. On This Week this morning he actually said: "Let's don't say it's a stimulus when it's a government spending plan." A 'Stimulus plan' is pretty much by definition a spending plan, though of course it can include tax reductions as well ... I'm wowed by the amount of nonsense and lies that are being injected into this debate."

FireDogLake's Jane Hamsher nails DeMint for typical revisionist Reagan history.

FireDogLake's Blue Texan: "Jim DeMint Gets His Ass Handed to Him by Entire Panel on Stimulus Bill"

The Hill: "Some in GOP hint they will back final stimulus measure"

More Debt Is Fiscally Responsible and Manageable

On Meet The Press, Economist Mark Zandi and CNBC's Erin Burnett agree that increased deficit spending is manageable so long as the funds are invested well:

ZANDI: [The debt is] 40 percent of GDP now. If the projections are right, we get to 60, maybe 70 percent of GDP, which is high, but it's manageable ... in our history we've been higher ... moreover, it's very consistent with other countries and their debt loads ... just as important, investors understand this. They know this and they're still buying our debt and interest rates are still very, very low. So we need to take this opportunity and be very aggressive and use the resources that we have at our disposal.

BURNETT: It's true. But you look at 67 percent, that's where Japan was when they did their first stimulus package back in 1989, and then they ended up going, obviously, significantly higher than that ... you're right, it's manageable, other counties are there. But ... if you're not spending that money well, you're going to have to keep spending more and more and more.

HuffPost's Adam Green rips Burnett for defending Wall Street bonuses: "what she's doing here professionally is a real problem, and it's NBC's problem at the end of the day. The public simply can't afford to have economic news given to us by Wall Street 'embeds.'"

Bad Bank Debate Heats Up

President Obama discusses what a "bad bank" would look like on NBC's The Today Show saying "some banks won't make it" and "the government is going to have to support some banks."

PRESIDENT OBAMA: We're not going to be spending $4 trillion worth of taxpayer money. ... it is likely that the banks have not fully acknowledged all the losses that they're going to experience. They're going to have to write down those losses. And some banks won't make it. Other banks [we] are going to make sure that we strengthen. All deposits are going to be safe for ordinary people. But we're going to have to wring out some of these bad assets.

MATT LAUER: Are you going to set up a "bad bank" ... ?

PRESIDENT OBAMA: I don't want to preempt an announcement next week. There's a lot of technical aspects to it. And if I say that we're doing one thing, then the markets might interpret it differently from what it ends up being.

But the basic principle [will be] that we're going to have to see some of this debt written down, that the government is going to have to support some banks, that others that are not viable -- essentially that we're going to have to do something with those assets.

Krugman expresses opposition to a "Bad Bank" without temporary public ownership of rescued banks:

If taxpayers are footing the bill for rescuing the banks, why shouldn’t they get ownership, at least until private buyers can be found? But the Obama administration appears to be tying itself in knots to avoid this outcome.

If news reports are right, the bank rescue plan will contain two main elements: government purchases of some troubled bank assets and guarantees against losses on other assets. The guarantees would represent a big gift to bank stockholders; the purchases might not, if the price was fair — but prices would, The Financial Times reports, probably be based on “valuation models” rather than market prices, suggesting that the government would be making a big gift here, too.

And in return for what is likely to be a huge subsidy to stockholders, taxpayers will get, well, nothing.

...

Saving the economy is going to be very expensive: that $800 billion stimulus plan is probably just a down payment, and rescuing the financial system, even if it’s done right, is going to cost hundreds of billions more. We can’t afford to squander money giving huge windfalls to banks and their executives, merely to preserve the illusion of private ownership.

NYT's Hugo Dixon lays out his criteria: "Whatever version of bad bank is used, the same problems that bedeviled the Bush administration’s plan still need to be addressed. First, assets shouldn’t be insured (or bought) at deliberately inflated prices. That is just a straight handout from taxpayers to bank shareholders. Second, banks should pay a reasonable price for their insurance policy. Third, if they don’t have enough capital to pay for such insurance, they may still need further capital injections."

Puffing Up Housing Bubble?

NYT: " Senator Charles E. Schumer, Democrat of New York, said that Senate Democrats were interested in considering Republican proposals to do more to help the sputtering housing market, including instituting a $15,000 tax credit for all home buyers."

Dean Baker: "For purposes of comparison, [$15,000 is] equal to roughly 5 years worth of a kid's health care under the State Children's Health Insurance Program and three years of TANF checks. It is difficult to see how someone is doing us any favors by buying a house. In many markets, there is still a bubble that has not yet fully deflated."

Less Military Spending?

Newshoggers: "According to Fox News, Obama is proposing a measly 10% cut in the Pentagon's declared budget. Predictably, wingnut heads are exploding" though it would still be higher than 2007 levels.

Time's Joe Klein: "Defense research has spawned great American industries and it should be fed to the max. But the DOD is also the source of some of the government's stupidest, most wasteful spending -- the tens of billions spent on outdated, irrelevant weapons systems, and the unnecessary military bases that survived two rounds at base-closing ... defense spending is no more righteous, and arguably less efficacious in the long-term, than spending on, say, carbon recapture or railroads--which may lead us to decrease our dependence on the Middle Eastern oil that causes us to send our sons and daughters off to unnecessary wars in the first place. Those who supported the $1 trillion expenditure that the war of choice in Iraq has cost us should be a bit more humble when it comes to criticizing government spending on such direct, job-creating programs as day care (which, by the way, is an absolute necessity for most military families)."

Safety Net Officially Shredded

NYT: "Despite soaring unemployment and the worst economic crisis in decades, 18 states cut their welfare rolls last year, and nationally the number of people receiving cash assistance remained at or near the lowest in more than 40 years. The trends, based on an analysis of new state data collected by The New York Times, raise questions about how well a revamped welfare system with great state discretion is responding to growing hardships."

Conservative response from The Heritage Foundation? Let 'em eat cake! “Among those sanguine about current caseload trends is Robert Rector, an analyst at the Heritage Foundation in Washington who is influential with conservative policy makers. He said [welfare reform] had 'reduced poverty beyond anyone’s expectations' and efforts to dilute its rigor would only harm the poor."

Grand Bargain?

W. Post front pager says that "Obama and his allies nonetheless have said that they view a grand bargain as a political imperative," and implies that such a grand bargain entails, "Democrats agreeing to trim costly social programs and Republicans acquiescing to a major tax hike."

But there is no actual reporting to support that's what Obama means to accomplish.

In addition, Dean Baker in Beat The Press flays the Post: "The Washington Post continued its practice of placing editorials on the front page, telling readers today about the need to defuse 'the spending time bomb for health and retirement programs.' Of course this time bomb is entirely an invention of the Post. ... There is nothing that resembles a time bomb in the case of Social Security ... Medicare is projected to face serious shortfalls, but this is due to the projected explosion of health care costs in the United States. If the United States can repair its health care system, as President Obama has pledged to do, then Medicare costs would also be manageable."

Earlier W. Post interview of Obama indicates he seeks only a minor tweak in Social Security and broader health care reform to reduce cost pressure on Medicare: "'Social Security, we can solve,' [Obama] said, waving his left hand. 'The big problem is Medicare, which is unsustainable. . . . We can't solve Medicare in isolation from the broader problems of the health-care system.'"

Buy American Debate

USA Today editorial board opposes provisions in economic recovery bill to Buy American: "A tit-for-tat round of retaliations in the form of buy-local provisions in stimulus measures could be disastrous for the United States, which sells about $1.7 trillion a year in merchandise and services abroad, about 12% of the economy. Big exporters such as Boeing and Caterpillar could see even more layoffs. A Buy American provision would also drive up costs of the stimulus, or limit what it buys, because in some cases foreign products would be cheaper or better suited to the task."

Sen. Byron Dorgan defends the provision: "Of course, I recognize that there are a variety of products that are not made in this country anymore, and there also might be instances where U.S. products are not sufficient -- either in quantity or quality. So my provision allows for these common-sense exceptions. But it just makes sense that, where possible, we try to stimulate our own economy, rather than the economy of other countries. Some decry the Buy American effort as the start of a trade war. They say it's just disguised protectionism. That is thoughtless nonsense. It's nothing of the sort. It is entirely within international trade rules to require that these kinds of public projects use American-made inputs."

OurFuture.org's David Sirota: "Will Obama Keep His 'Buy America' Promise?"

Shorter Work Week Gains Momentum

Last week, Dean Baker's NY Daily News oped touted the shorter work week as a way to create jobs. Grist's David Roberts then touted the green benefits.

Today, Stateline reports, "Four-day workweek grows on Utahns":

...nearly six months into Utah’s Friday-off experiment, employee satisfaction is shifting in a noticeable way, and the three-day weekend doubles as a recruitment tool, enticing younger residents to work for the state, Hansen said.

A November 2008 survey of state employees found that the four-day workweek was growing more popular with usage. After four months, 70 percent said they preferred the schedule, compared to 56 percent before the change. The report also found that absenteeism and turnover rates went down.

Despite some kinks in the program, Utah saved $203,177 on custodial contracts in 2008.

Another byproduct is a dose of economic stimulus. Much of the $6 million that state employees are expected to save in commuting costs will be spent on goods and services.

White House Praises Unions, Will Unions Unify?

Marc Aminbder posts Biden comments on CNBC about EFCA:

Vice Pres. BIDEN: We're going to try to push for [EFCA] prudently. By that I mean there's only so much on the plate these first couple months. Everyone understands--I think both of us thought 10 months ago that this would be a top-priority item in terms of immediate action. We know there's probably going to be some compromise here. We also know that we have to get more than just Democratic support for this. But we both believe it's very important, making and--taking away the roadblocks that were built up. ... we do think making it--taking away the impediments to organization is in the self-interest of labor, but also I believe in the self-interest of economic growth.

[CNBC's JOHN] HARWOOD: Sounds like that is a 2010 or beyond issue.

Vice Pres. BIDEN: No, no, no, no. This year. This year, we hope. Our expectation is this year, this calendar year, that we will move, and hopefully with some bipartisan support, to dealing with this issue.

HuffPost's Robert Kuttner offers ideas in advance of ECFA "Without Obama's strong personal engagement, EFCA will be anything but a legislative cakewalk. Democrats may have a working majority. But at least five business-oriented Democrats are not considered certain votes for EFCA, and Obama will need to let them know that the White House considers this bill a top priority ... If Obama is serious, he can take a leaf from FDR's book, and use government's extensive contracting power to actively promote unions. Late in the Clinton administration, then Vice President Al Gore led an effort ... to reward federal contractors who took the high road by providing good jobs and not standing in the way of unions."

LA Times' Harold Meyerson frets over friction within UNITE HERE and SEIU: (via Working Life) "At a time when unions are battling for their lives in the fight over the Free Choice Act, two of America's best unions are busy battling themselves."