The Jobs Imperative

By PAUL KRUGMAN Published: November 29, 2009 New York Times

If you’re looking for a job right now, your prospects are terrible. There are six times as many Americans seeking work as there are job openings, and the average duration of unemployment — the time the average job-seeker has spent looking for work — is more than six months, the highest level since the 1930s.

You might think, then, that doing something about the employment situation would be a top policy priority. But now that total financial collapse has been averted, all the urgency seems to have vanished from policy discussion, replaced by a strange passivity. There’s a pervasive sense in Washington that nothing more can or should be done, that we should just wait for the economic recovery to trickle down to workers.

This is wrong and unacceptable.

Yes, the recession is probably over in a technical sense, but that doesn’t mean that full employment is just around the corner. Historically, financial crises have typically been followed not just by severe recessions but by anemic recoveries; it’s usually years before unemployment declines to anything like normal levels. And all indications are that the aftermath of the latest financial crisis is following the usual script. The Federal Reserve, for example, expects unemployment, currently 10.2 percent, to stay above 8 percent — a number that would have been considered disastrous not long ago — until sometime in 2012.

And the damage from sustained high unemployment will last much longer. The long-term unemployed can lose their skills, and even when the economy recovers they tend to have difficulty finding a job, because they’re regarded as poor risks by potential employers. Meanwhile, students who graduate into a poor labor market start their careers at a huge disadvantage — and pay a price in lower earnings for their whole working lives. Failure to act on unemployment isn’t just cruel, it’s short-sighted.

So it’s time for an emergency jobs program.

How is a jobs program different from a second stimulus? It’s a matter of priorities. The 2009 Obama stimulus bill was focused on restoring economic growth. It was, in effect, based on the belief that if you build G.D.P., the jobs will come. That strategy might have worked if the stimulus had been big enough — but it wasn’t. And as a matter of political reality, it’s hard to see how the administration could pass a second stimulus big enough to make up for the original shortfall.

So our best hope now is for a somewhat cheaper program that generates more jobs for the buck. Such a program should shy away from measures, like general tax cuts, that at best lead only indirectly to job creation, with many possible disconnects along the way. Instead, it should consist of measures that more or less directly save or add jobs.

One such measure would be another round of aid to beleaguered state and local governments, which have seen their tax receipts plunge and which, unlike the federal government, can’t borrow to cover a temporary shortfall. More aid would help avoid both a drastic worsening of public services (especially education) and the elimination of hundreds of thousands of jobs.

Meanwhile, the federal government could provide jobs by ... providing jobs. It’s time for at least a small-scale version of the New Deal’s Works Progress Administration, one that would offer relatively low-paying (but much better than nothing) public-service employment. There would be accusations that the government was creating make-work jobs, but the W.P.A. left many solid achievements in its wake. And the key point is that direct public employment can create a lot of jobs at relatively low cost. In a proposal to be released today, the Economic Policy Institute, a progressive think tank, argues that spending $40 billion a year for three years on public-service employment would create a million jobs, which sounds about right.

Finally, we can offer businesses direct incentives for employment. It’s probably too late for a job-conserving program, like the highly successful subsidy Germany offered to employers who maintained their work forces. But employers could be encouraged to add workers as the economy expands. The Economic Policy Institute proposes a tax credit for employers who increase their payrolls, which is certainly worth trying.

All of this would cost money, probably several hundred billion dollars, and raise the budget deficit in the short run. But this has to be weighed against the high cost of inaction in the face of a social and economic emergency.

Later this week, President Obama will hold a “jobs summit.” Most of the people I talk to are cynical about the event, and expect the administration to offer no more than symbolic gestures. But it doesn’t have to be that way. Yes, we can create more jobs — and yes, we should.

Frontline's "The Card Game" on PBS

What your credit card company is doing to you with usurous rates, and likely from your bailout money. Tonight on PBS' Frontline. "The Card Game"

Bankers Vs. The People: Which Side Is The White House On?

By Dan Froomkin, Huffington Post, October 28, 2009

As the battle lines are drawn between the people and the bankers outside the ABA convention in Chicago, the question arises: Which side is the White House on, exactly?

Yes, the Obama administration is pushing to dramatically increase the regulation of consumer and other financial transactions that have run amok, but there is widespread concern from across the political spectrum that the White House is neither going far enough nor fighting hard enough. And time and again -- most notably with the ongoing $700 billion bailout -- Obama administration policies have put the interests of bankers and Wall Street ahead of those of impoverished families, unemployed workers or underwater homeowners.

One reason -- which has never been directly addressed by Obama -- may be that many of his chief financial advisers have pocketed extraordinary amount of money from banks and Wall Street, and presumably intend to do so again. They are part of the banker class, and their loyalties have been bought and paid for.

Back in April, when the White House released financial disclosure forms late one Friday, those few people paying attention learned just how stupendously beholden Obama's top economic adviser, Larry Summers, is to the financial industry that he is ostensibly trying to rein in.

Summers was paid $5.2 million for his part-time work for a massive hedge fund in 2008. He also took in more than $2.7 million in fees for speaking engagements at such places as Citigroup, Lehman Brothers, Merrill Lynch and Goldman Sachs -- including one visit alone that netted him $135,000 from Goldman Sachs.

That's right: $135,000 for one visit on one day. You can't pocket that kind of money and not be, on some level, corrupted.

Similarly, deputy national security adviser for international economic affairs Michael Froman received $7.4 million from Citigroup between January 2008 and January 2009 -- including a year-end bonus of $2.25 million that he received just days before coming to work at the White House for a man who was at that very moment calling just such bonuses "shameful".

And earlier this month, Bloomberg's Robert Schmidt significantly added to our understanding of just how co-opted Obama's financial team is by examining the financial disclosure forms of Treasury Secretary Timothy Geithner's closest aides.

The advisers include Gene Sperling, who last year took in $887,727 from Goldman Sachs and $158,000 for speeches mostly to financial companies, including the firm run by accused Ponzi scheme mastermind R. Allen Stanford.

Story continues below

Another top aide, Lee Sachs, reported more than $3 million in salary and partnership income from Mariner Investment Group, a New York hedge fund.

Sachs, who joined Treasury in January, reported in February that he was still owed a 2008 bonus whose value was "not ascertainable." I wonder how that one turned out.

Also in Geithner's inner circle, according to Schmidt: "counselor Lewis Alexander, the former chief economist at Citigroup; Chief of Staff Mark Patterson, who was a lobbyist at Goldman Sachs, and Matthew Kabaker, a deputy assistant secretary who worked at private equity firm."

Alexander was paid $2.4 million in 2008 and the first few months of 2009 by Citigroup; Kabaker earned $5.8 million working on private equity deals at Blackstone in 2008 and 2009.

Patterson, Geithner's chief of staff, was a registered lobbyist for Goldman Sachs before joining the Obama campaign, and took in what seemed at first glance to be a relatively modest-by-Goldman-standards salary of $637,230 in 2008. But it turns out that was only for three months' work -- he left Goldman in early April.

All this money makes Obama's top financial advisors veritable poster boys for the Wall Street culture that the president in his speeches has publicly decried as a "house of cards" and a "Ponzi scheme" in which "a relatively few do spectacularly well while the middle class loses ground".

I'm not doubting the smarts of Obama's financial team -- but I do feel that the vast majority of people who take the kind of money we're talking about here can't help but be warped by it, and that in choosing to cash in, they essentially disqualified themselves from public service.

Unless they are willing to assertively act in ways that redeem themselves and show that their allegiances have not been purchased, they should step down and make way for people who see the people's side of things a little more clearly.

* * * * * * * * * * * *
A message from Dan about how to find me: I'm not writing every day anymore -- I've now also Washington Bureau Chief for the Huffington Post. But there are lots of ways to keep track of me.

You can find my latest posts on this page, or you can subscribe to this RSS feed. You can also get an e-mail alert as soon as I post by creating a HuffPost Account (or logging in, if you have one already) and becoming one of my "fans". Make sure you also click on "Get Email Alerts from this Reporter" -- so that on this page, the little box next to "Notify me when a blogger I'm a fan of writes a new post" is checked. You can also follow me on Twitter, or Facebook. And I always welcome your emails at

Changing the World

By BOB HERBERT, NY Times, October 27, 2009

One of the most cherished items in my possession is a postcard that was sent from Mississippi to the Upper West Side of Manhattan in June 1964.

“Dear Mom and Dad,” it says, “I have arrived safely in Meridian, Mississippi. This is a wonderful town and the weather is fine. I wish you were here. The people in this city are wonderful and our reception was very good. All my love, Andy.”

That was the last word sent to his family by Andrew Goodman, a 20-year-old college student who was murdered by the Ku Klux Klan, along with fellow civil rights workers Michael Schwerner and James Chaney, on his first full day in Mississippi — June 21, the same date as the postmark on the card. The goal of the three young men had been to help register blacks to vote.

The postcard was given to me by Andrew’s brother, David, who has become a good friend.

Andrew and that postcard came to mind over the weekend as I was thinking about the sense of helplessness so many ordinary Americans have been feeling as the nation is confronted with one enormous, seemingly intractable problem after another. The helplessness is beginning to border on paralysis. The wars in Iraq and Afghanistan, nearly a decade long, are going badly, and there is no endgame in sight.

Monday morning’s coffee was accompanied by stories about suicide bombings in the heart of Baghdad that killed at least 150 people and wounded more than 500 and helicopter crashes in Afghanistan that killed 14 Americans.

Here at home, the terrible toll from the worst economic downturn since the Great Depression continues, with no end to the joblessness in sight and no comprehensible plans for fashioning a healthy economy for the years ahead. The government’s finances resemble a Ponzi scheme. If you want to see the epidemic that is really clobbering American families, look past the H1N1 virus to the home foreclosure crisis.

The Times ran a Page A1 article on Monday that said layoffs, foreclosures and other problems associated with the recession had resulted in big increases in the number of runaway children, many of whom were living in dangerous conditions in the streets.

Americans have tended to watch with a remarkable (I think frightening) degree of passivity as crises of all sorts have gripped the country and sent millions of lives into tailspins. Where people once might have deluged their elected representatives with complaints, joined unions, resisted mass firings, confronted their employers with serious demands, marched for social justice and created brand new civic organizations to fight for the things they believed in, the tendency now is to assume that there is little or nothing ordinary individuals can do about the conditions that plague them.

This is so wrong. It is the kind of thinking that would have stopped the civil rights movement in its tracks, that would have kept women in the kitchen or the steno pool, that would have prevented labor unions from forcing open the doors that led to the creation of a vast middle class.

This passivity and sense of helplessness most likely stems from the refusal of so many Americans over the past few decades to acknowledge any sense of personal responsibility for the policies and choices that have led the country into such a dismal state of affairs, and to turn their backs on any real obligation to help others who were struggling.

Those chickens have come home to roost. Being an American has become a spectator sport. Most Americans watch the news the way you’d watch a ballgame, or a long-running television series, believing that they have no more control over important real-life events than a viewer would have over a coach’s strategy or a script for “Law & Order.”

With that kind of attitude, Andrew Goodman would never have left the comfort of his family home in Manhattan. Rosa Parks would have gotten up and given her seat to a white person, and the Montgomery bus boycott would never have happened. Betty Friedan would never have written “The Feminine Mystique.”

The nation’s political leaders and their corporate puppet masters have fouled this nation up to a fare-thee-well. We will not be pulled from the morass without a big effort from an active citizenry, and that means a citizenry fired with a sense of mission and the belief that their actions, in concert with others, can make a profound difference.

It can start with just a few small steps. Mrs. Parks helped transform a nation by refusing to budge from her seat. Maybe you want to speak up publicly about an important issue, or host a house party, or perhaps arrange a meeting of soon-to-be dismissed employees, or parents at a troubled school.

It’s a risk, sure. But the need is great, and that’s how you change the world.

The Warning: PBS' Frontline

Alan Greenspan who loved Ayn Rand... who said "I'm for complete economic freedom...I am for the complete separation of the state and the economic system."... sooooo.. how did that work for everyone the past 2 years?

http://www.pbs.org/wgbh/pages/frontline/warning/

Alan Greenspan, Lawrence Summers and Robert Rubin

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."

Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.

"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

"It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."

The Banks Are Not Alright

By PAUL KRUGMAN, NY Times, October 19, 2009

It was the best of times, it was the worst of times. O.K., maybe not literally the worst, but definitely bad. And the contrast between the immense good fortune of a few and the continuing suffering of all too many boded ill for the future.

I’m talking, of course, about the state of the banks.

The lucky few garnered most of the headlines, as many reacted with fury to the spectacle of Goldman Sachs making record profits and paying huge bonuses even as the rest of America, the victim of a slump made on Wall Street, continues to bleed jobs.

But it’s not a simple case of flourishing banks versus ailing workers: banks that are actually in the business of lending, as opposed to trading, are still in trouble. Most notably, Citigroup and Bank of America, which silenced talk of nationalization earlier this year by claiming that they had returned to profitability, are now — you guessed it — back to reporting losses.

Ask the people at Goldman, and they’ll tell you that it’s nobody’s business but their own how much they earn. But as one critic recently put it: “There is no financial institution that exists today that is not the direct or indirect beneficiary of trillions of dollars of taxpayer support for the financial system.” Indeed: Goldman has made a lot of money in its trading operations, but it was only able to stay in that game thanks to policies that put vast amounts of public money at risk, from the bailout of A.I.G. to the guarantees extended to many of Goldman’s bonds.

So who was this thundering bank critic? None other than Lawrence Summers, the Obama administration’s chief economist — and one of the architects of the administration’s bank policy, which up until now has been to go easy on financial institutions and hope that they mend themselves.

Why the change in tone? Administration officials are furious at the way the financial industry, just months after receiving a gigantic taxpayer bailout, is lobbying fiercely against serious reform. But you have to wonder what they expected to happen. They followed a softly, softly policy, providing aid with few strings, back when all of Wall Street was on the ropes; this left them with very little leverage over firms like Goldman that are now, once again, making a lot of money.

But there’s an even bigger problem: while the wheeler-dealer side of the financial industry, a k a trading operations, is highly profitable again, the part of banking that really matters — lending, which fuels investment and job creation — is not. Key banks remain financially weak, and their weakness is hurting the economy as a whole.

You may recall that earlier this year there was a big debate about how to get the banks lending again. Some analysts, myself included, argued that at least some major banks needed a large injection of capital from taxpayers, and that the only way to do this was to temporarily nationalize the most troubled banks. The debate faded out, however, after Citigroup and Bank of America, the banking system’s weakest links, announced surprise profits. All was well, we were told, now that the banks were profitable again.

But a funny thing happened on the way back to a sound banking system: last week both Citi and BofA announced losses in the third quarter. What happened?

Part of the answer is that those earlier profits were in part a figment of the accountants’ imaginations. More broadly, however, we’re looking at payback from the real economy. In the first phase of the crisis, Main Street was punished for Wall Street’s misdeeds; now broad economic distress, especially persistent high unemployment, is leading to big losses on mortgage loans and credit cards.

And here’s the thing: The continuing weakness of many banks is helping to perpetuate that economic distress. Banks remain reluctant to lend, and tight credit, especially for small businesses, stands in the way of the strong recovery we need.

So now what? Mr. Summers still insists that the administration did the right thing: more government provision of capital, he says, would not “have been an availing strategy for solving problems.” Whatever. In any case, as a political matter the moment for radical action on banks has clearly passed.

The main thing for the time being is probably to do as much as possible to support job growth. With luck, this will produce a virtuous circle in which an improving economy strengthens the banks, which then become more willing to lend.

Beyond that, we desperately need to pass effective financial reform. For if we don’t, bankers will soon be taking even bigger risks than they did in the run-up to this crisis. After all, the lesson from the last few months has been very clear: When bankers gamble with other people’s money, it’s heads they win, tails the rest of us lose.

Foreclosures Force Ex-Homeowners to Turn to Shelters

By PETER S. GOODMAN, NY Times October 19, 2009

CLEVELAND — The first night after she surrendered her house to foreclosure, Sheri West endured the darkness in her Hyundai sedan. She parked in her old driveway, with her flower-print dresses and hats piled in boxes on the back seat, and three cherished houseplants on the floor. She used her backyard as a restroom.

The second night, she stayed with a friend, and so it continued for more than a year: Ms. West — mother of three grown children, grandmother to six and great-grandmother to one — passed months on the couches of friends and relatives, and in the front seat of her car.

But this fall, she exhausted all options. She had once owned and overseen a group home for homeless people. Now, she succumbed to that status herself, checking in to a shelter.

“No one could have told me that in a million years: I’d wake up in a homeless shelter,” she said. “I had a house for homeless people. Now, I’m homeless.”

Growing numbers of Americans who have lost houses to foreclosure are landing in homeless shelters, according to social service groups and a recent report by a coalition of housing advocates.

Only three years ago, foreclosure was rarely a factor in how people became homeless. But among the homeless people that social service agencies have helped over the last year, an average of 10 percent lost homes to foreclosure, according to “Foreclosure to Homelessness 2009,” a survey produced by the National Coalition for the Homeless and six other advocacy groups.

In the Midwest, foreclosure played a role for 15 percent of newly homeless people, according to the survey, reflecting soaring rates of unemployment — Ohio’s reached 10.8 percent in August — and aggressive lending to people with damaged credit.

At a shelter for women and children run by the West Side Catholic Center in Cleveland, where Ms. West now lives, foreclosure accounted for zero arrivals in 2007, the center’s executive director, Gerald Skoch, said. Last year, two cases emerged. This year, the number has already reached four.

Similar increases have been reported at shelters in California, Michigan and Florida, where a combination of joblessness and the real estate bust have generated unusually severe rates of foreclosure.

Most people who become homeless because of foreclosure had been low-income renters whose landlords stopped making their mortgage payments, leaving them scrambling for new housing with little notice and scant savings, according to the survey and interviews with shelters.

But in recent months, there has been a visible increase in the number of former homeowners showing up in shelters. Like Ms. West, most have landed there after months trying to stave off that fate.

“These families never needed help before,” said Larry Haynes, executive director of Mercy House in Santa Ana, Calif. “They haven’t a clue about where to go, and they have all sorts of humiliation issues. They don’t even know what to say, what to ask for.”

Many start off camping out in cars, particularly in warmer places.

“We’ve seen a rise in people sleeping in their cars,” said Rick Cole, city manager in Ventura, Calif., which recently allowed car-camping in designated areas. “Some are foreclosed former homeowners, and some couldn’t afford their rent. People will give up their house before they give up their car.”

Those with means try to rent homes or apartments, though tainted credit often makes that impossible. Growing numbers are landing in motels that rent by the week, cramming whole families into single rooms and using hot plates as kitchens. But as unemployment expands, many are losing the wherewithal to remain.

Many take refuge with families and friends, occupying extra bedrooms, basements and attics. But such hospitality rarely lasts.

So, as lean times endure and paychecks disappear, homeless shelters are absorbing those who have run out of alternatives.

For Ms. West, whose youthful appearance belies her age, in her mid-50s, the nights spent on couches in other people’s homes were uncomfortably familiar. She grew up an only child in a housing project in Neptune, N.J., where her mother slept in the lone bedroom, and she occupied a pullout sofa in the living room.

“I’ve always had this dream of doing better,” she said. “I always wanted to own my own house.”

She realized that dream shortly after arriving in Cleveland with her husband and two children in the early 1990s. At first, they rented. But one fall afternoon, Ms. West found herself on a block lined with leafy trees in Mount Pleasant, a neighborhood east of the Cuyahoga River that was a magnet for middle-class black families like hers. Red brick homes with wooden porches sat on ample lots. Public schools were a few blocks away.

When she saw an ad in the Sunday paper offering a house on that very block, she bought it for $45,000; for the $9,000 down payment she used the savings her mother had left her when she died. She and her husband assumed the mortgage from the previous owner, with affordable payments of less than $400 a month.

Ms. West then had a job as a maintenance worker at an apartment complex for about $9 an hour. Her husband earned about $10 an hour as a truck driver. As the years passed, they added shrubbery to the front yard and photos of children’s birthday parties to the walls.

“I thought that was going to be my house,” she said.

She tapped her inheritance to buy another house on nearby Union Street, paying $15,000 in cash for a light-blue, vinyl-sided A-frame. She turned the house into a home for five homeless people. She did their laundry, reminded them to take their medications and cooked meals, while collecting payments of up to $750 a person each month from the agencies that placed them.

Over the years, Ms. West and her husband spent more than they earned. They used credit cards to finance restaurant meals. They bought a new S.U.V.

At the group home, Ms. West’s compensation slipped as the state limited benefit payments. Yet every month brought the same thicket of bills — water, electricity, gas, plus food for the people under her charge.

In 2001, Ms. West and her husband took out a $67,000 mortgage on the Union Street house — which had increased considerably in value — to refinance high-interest debts, assuming payments of nearly $700 a month.

Two years later, her husband left her.

“It just took the life out me,” she said. “I was in a very bad state, a very depressed situation. Things just kind of went downhill. I just didn’t care anymore.”

By 2005, she was broke. She sold the brick house to her cousin, disbanded the group home and moved in. She paid what bills she could through temporary jobs as a signature collector for petition drives. But as many months passed without work, the bills piled up past due.

By the next year, terse letters were coming from the mortgage company — notices of delinquency, then threats of foreclosure. Much of the neighborhood was in a similar state. Broken windows sat unrepaired at a two-story apartment block across the street, where tattered curtains flapped in the breeze. The city boarded up abandoned homes to deter vagrants, drug addicts and prostitutes.

Ms. West wrote to her mortgage company, seeking lower payments. But with tainted credit and no full-time job, she was not a candidate for a deal. Fliers beckoned with relief as companies offered to negotiate with her lender for lower payments. But when she called, the companies demanded upfront payments as high as $500.

“I told them, ‘if I had that money, I wouldn’t be going into foreclosure,’ ” she said.

In the spring of 2008, Ms. West accepted an offer from the mortgage company: move out, hand over the keys and collect $2,500. She sold what furniture she could and put the rest on the street — tables, beds, a couch.

Her uncle had said she could stay with him for a while. But when she called him to say she was on the way, he told her that his girlfriend was uncomfortable with the arrangement. Ms. West’s daughter was in a cramped rented house with her boyfriend and her two children. Her son was in a rooming house.

So Ms. West, a stylish woman with a penchant for shiny lipstick and glittering jewelry, wound up camping in her car. She listened to the radio to drown out the voices of prostitutes trawling the street. She meditated. (“Just blank out everything in your mind,” she said. “Just go to a place that’s peaceful, like a beach.”) She prayed.

“It was scary,” she said. “Here I am, alone, and I don’t have nowhere to go.”

The next day, she moved in with a friend, remaining there for about three months. For several more months, she stayed with the cousin who had bought her old brick house and was living there with her husband and seven children. Toys lay scattered across the floor. The walls vibrated with music, television and the sounds of children. She lay awake on the couch, a vagabond in the one place that had once felt so solid.

“I was losing my mind,” she said.

She was grateful to be inside — particularly during the Cleveland winter — yet never comfortable or stable enough to plan beyond the next day.

“You know in the back of your mind that people don’t really want you there,” she said.

Sometimes, she lived out of her car, spending days at the public library, where she washed up in the restroom and used a computer to scan meager job listings.

Finally, a woman she met on the street took her in and helped her formulate a recovery plan. She signed up for food stamps. She enrolled at a community college in a three-month, state-financed training program that would give her a certificate for an entry-level job in biotechnology, putting her in position to earn as much as $16 an hour.

In September, she got a bed at the homeless shelter, reluctantly accepting that she needed her own space to re-establish her life.

“I never wanted to go to the shelter because of the stigma,” she said. “I’m a very independent person. I felt like I got myself into this situation, and I’ve got to get myself out. But I knew I couldn’t just keep going back and forth and staying with these people and not moving forward with my life.”

She sleeps in a twin bed with a flower-print duvet, in a small room painted lavender. Her plants line the windowsill. She keeps to herself, reading motivational books, as she prepares to start classes next month.

She is working again, taking care of senior citizens in their homes part time, and saving money.

By December, she will exhaust the shelter’s 90-day limit, so she is hurrying to line up a house to rent while arranging a subsidy through the West Side Catholic Center.

She is still shaken by the past and anxious about the future, but she is again looking ahead.

“I do want to eventually own a house again,” she said. “That’s the American dream. That’s what everybody wants.”

Guarding the Family Fortune

NY Times Editorial, April 8, 2009

Last week, as the unemployment rate hit a 25-year high and nearly one in 10 Americans was receiving food stamps, 10 Democrats in the Senate joined all 41 Republican senators to cut estate taxes for the wealthiest families. The provision would funnel an additional $91 billion over 10 years to the heirs of megafortunes, money that would otherwise have been paid in federal taxes or donated to charity.

With economic pain and suffering on the rise, how do the senators justify a big tax cut for multimillionaires? By asserting that an estate tax cut is just what struggling Americans need.

Senator Blanche Lincoln, a Democrat of Arkansas, co-sponsored the measure with Senator Jon Kyl, a Republican of Arizona. She said it was critical to creating jobs through small businesses. “With all the money we’ve spent to help the economy, very little of it has filtered down to Main Street and family-owned businesses,” she said.

The implication is that upon the death of an owner, estate taxes typically devastate small businesses and the jobs they provide. That is swill.

Under today’s estate tax, which is retained in both the House version of the budget and in President Obama’s version, 99.8 percent of estates will never owe any estate tax. That’s because the tax applies only to estates that exceed $7 million per couple or $3.5 million for individuals, and a vast majority of American families are not and never will be that wealthy.

Of the tiny number of estates that are taxable, almost none are small businesses. A new analysis by the Tax Policy Center found that under 2009 law, only 100 small businesses and family farms would owe any estate tax in 2011. And almost all such estates are able to pay the tax bill without having to sell business assets, according to a report by the Congressional Budget Office. The Lincoln-Kyl tax cut would raise the estate-tax exemption to $10 million per couple ($5 million for singles) and, in an even bigger giveaway to the superrich, lower the top rate from 45 percent to 35 percent.

That sure would enrich the heirs of America’s biggest fortunes. It would not jump-start job creation on Main Street.

In addition to Ms. Lincoln, other Democratic senators voting for the estate tax cut were Max Baucus and Jon Tester of Montana, Evan Bayh of Indiana, Maria Cantwell and Patty Murray of Washington, Mary Landrieu of Louisiana, Ben Nelson of Nebraska, Bill Nelson of Florida and Mark Pryor of Arkansas.

America the Tarnished

By PAUL KRUGMAN, NY Times, March 30, 2009

Ten years ago the cover of Time magazine featured Robert Rubin, then Treasury secretary, Alan Greenspan, then chairman of the Federal Reserve, and Lawrence Summers, then deputy Treasury secretary. Time dubbed the three “the committee to save the world,” crediting them with leading the global financial system through a crisis that seemed terrifying at the time, although it was a small blip compared with what we’re going through now.

All the men on that cover were Americans, but nobody considered that odd. After all, in 1999 the United States was the unquestioned leader of the global crisis response. That leadership role was only partly based on American wealth; it also, to an important degree, reflected America’s stature as a role model. The United States, everyone thought, was the country that knew how to do finance right.

How times have changed.

Never mind the fact that two members of the committee have since succumbed to the magazine cover curse, the plunge in reputation that so often follows lionization in the media. (Mr. Summers, now the head of the National Economic Council, is still going strong.) Far more important is the extent to which our claims of financial soundness — claims often invoked as we lectured other countries on the need to change their ways — have proved hollow.

Indeed, these days America is looking like the Bernie Madoff of economies: for many years it was held in respect, even awe, but it turns out to have been a fraud all along.

It’s painful now to read a lecture that Mr. Summers gave in early 2000, as the economic crisis of the 1990s was winding down. Discussing the causes of that crisis, Mr. Summers pointed to things that the crisis countries lacked — and that, by implication, the United States had. These things included “well-capitalized and supervised banks” and reliable, transparent corporate accounting. Oh well.

One of the analysts Mr. Summers cited in that lecture, by the way, was the economist Simon Johnson. In an article in the current issue of The Atlantic, Mr. Johnson, who served as the chief economist at the I.M.F. and is now a professor at M.I.T., declares that America’s current difficulties are “shockingly reminiscent” of crises in places like Russia and Argentina — including the key role played by crony capitalists.

In America as in the third world, he writes, “elite business interests — financiers, in the case of the U.S. — played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive.”

It’s no wonder, then, that an article in yesterday’s Times about the response President Obama will receive in Europe was titled “English-Speaking Capitalism on Trial.”

Now, in fairness we have to say that the United States was far from being the only nation in which banks ran wild. Many European leaders are still in denial about the continent’s economic and financial troubles, which arguably run as deep as our own — although their nations’ much stronger social safety nets mean that we’re likely to experience far more human suffering. Still, it’s a fact that the crisis has cost America much of its credibility, and with it much of its ability to lead.

And that’s a very bad thing.

Like many other economists, I’ve been revisiting the Great Depression, looking for lessons that might help us avoid a repeat performance. And one thing that stands out from the history of the early 1930s is the extent to which the world’s response to crisis was crippled by the inability of the world’s major economies to cooperate.

The details of our current crisis are very different, but the need for cooperation is no less. President Obama got it exactly right last week when he declared: “All of us are going to have to take steps in order to lift the economy. We don’t want a situation in which some countries are making extraordinary efforts and other countries aren’t.”

Yet that is exactly the situation we’re in. I don’t believe that even America’s economic efforts are adequate, but they’re far more than most other wealthy countries have been willing to undertake. And by rights this week’s G-20 summit ought to be an occasion for Mr. Obama to chide and chivy European leaders, in particular, into pulling their weight.

But these days foreign leaders are in no mood to be lectured by American officials, even when — as in this case — the Americans are right.

The financial crisis has had many costs. And one of those costs is the damage to America’s reputation, an asset we’ve lost just when we, and the world, need it most.

Courting Disaster in South Carolina

Published: March 29, 2009

Now that Gov. Mark Sanford of South Carolina has polished his credentials with the Republican right by recklessly rejecting $700 million in federal education stimulus money, we keep hoping he will change his mind and put the needs of his recession-ravaged state ahead of his political ambitions.

It will be up to more responsible political leaders to act if Mr. Sanford sticks by his disastrous choice, which would drive an already depressed state economy deeper into a hole and place even more South Carolinians at risk of losing their homes.

In the State Legislature, it was encouraging to see influential Republicans’ distancing themselves from what State Senator Hugh Leatherman, the Finance Committee chairman, rightly describes as an irresponsible policy. In a letter sent to Mr. Sanford last week, Mr. Leatherman pleaded with him to change his mind, writing that rejecting the funds would “create absolute chaos in governmental agencies that perform core missions for the people, and will hurt tens of thousands of South Carolina families at a time when uncertainty and fear over the economy already pervade almost every household.”

The federal stimulus money is meant to shield schools from layoffs and reignite a national reform effort that still has a long way to go in places like South Carolina. Without the federal money, state lawmakers say, tuition at state-supported universities could increase dramatically and thousands of teachers could be laid off.

With South Carolina’s unemployment rate already one of the highest in the nation, state lawmakers seem poised to invoke a provision of the federal stimulus law that allows them to override the governor’s decision. They worry, however, that a legal challenge might tie up the issue in the courts beyond the beginning of the state’s next fiscal year.

It would be best, therefore, for Mr. Sanford to find a face-saving way to reverse himself. If he does not, voters should remember that their governor placed politics ahead of schoolchildren and the schools that are struggling to save them.

The Market Mystique

By PAUL KRUGMAN

On Monday, Lawrence Summers, the head of the National Economic Council, responded to criticisms of the Obama administration’s plan to subsidize private purchases of toxic assets. “I don’t know of any economist,” he declared, “who doesn’t believe that better functioning capital markets in which assets can be traded are a good idea.”

Leave aside for a moment the question of whether a market in which buyers have to be bribed to participate can really be described as “better functioning.” Even so, Mr. Summers needs to get out more. Quite a few economists have reconsidered their favorable opinion of capital markets and asset trading in the light of the current crisis.

But it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic.

The market mystique didn’t always rule financial policy. America emerged from the Great Depression with a tightly regulated banking system, which made finance a staid, even boring business. Banks attracted depositors by providing convenient branch locations and maybe a free toaster or two; they used the money thus attracted to make loans, and that was that.

And the financial system wasn’t just boring. It was also, by today’s standards, small. Even during the “go-go years,” the bull market of the 1960s, finance and insurance together accounted for less than 4 percent of G.D.P. The relative unimportance of finance was reflected in the list of stocks making up the Dow Jones Industrial Average, which until 1982 contained not a single financial company.

It all sounds primitive by today’s standards. Yet that boring, primitive financial system serviced an economy that doubled living standards over the course of a generation.

After 1980, of course, a very different financial system emerged. In the deregulation-minded Reagan era, old-fashioned banking was increasingly replaced by wheeling and dealing on a grand scale. The new system was much bigger than the old regime: On the eve of the current crisis, finance and insurance accounted for 8 percent of G.D.P., more than twice their share in the 1960s. By early last year, the Dow contained five financial companies — giants like A.I.G., Citigroup and Bank of America.

And finance became anything but boring. It attracted many of our sharpest minds and made a select few immensely rich.

Underlying the glamorous new world of finance was the process of securitization. Loans no longer stayed with the lender. Instead, they were sold on to others, who sliced, diced and puréed individual debts to synthesize new assets. Subprime mortgages, credit card debts, car loans — all went into the financial system’s juicer. Out the other end, supposedly, came sweet-tasting AAA investments. And financial wizards were lavishly rewarded for overseeing the process.

But the wizards were frauds, whether they knew it or not, and their magic turned out to be no more than a collection of cheap stage tricks. Above all, the key promise of securitization — that it would make the financial system more robust by spreading risk more widely — turned out to be a lie. Banks used securitization to increase their risk, not reduce it, and in the process they made the economy more, not less, vulnerable to financial disruption.

Sooner or later, things were bound to go wrong, and eventually they did. Bear Stearns failed; Lehman failed; but most of all, securitization failed.

Which brings us back to the Obama administration’s approach to the financial crisis.

Much discussion of the toxic-asset plan has focused on the details and the arithmetic, and rightly so. Beyond that, however, what’s striking is the vision expressed both in the content of the financial plan and in statements by administration officials. In essence, the administration seems to believe that once investors calm down, securitization — and the business of finance — can resume where it left off a year or two ago.

To be fair, officials are calling for more regulation. Indeed, on Thursday Tim Geithner, the Treasury secretary, laid out plans for enhanced regulation that would have been considered radical not long ago.

But the underlying vision remains that of a financial system more or less the same as it was two years ago, albeit somewhat tamed by new rules.

As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.

Feeling Too Down to Rise Up

By SUDHIR VENKATESH

IN Chicago, during the summer of 1992, I watched a rally explode into a riot. Unruly public housing tenants were protesting high prices at local grocery stores. A request to speak with a manager turned into shouts and screams when the proprietor was spotted scurrying out the back door. In minutes, bottles flew overhead, gangs began shooting indiscriminately, people shouted for the heads of the management, and mothers scrambled to shelter infants from flying glass and bullets. In the eyes of the rioters, I could see both anger and euphoria.

These days, we are hearing a lot about “populist rage,” but so far no riots have broken out in front of the Treasury Department or the A.I.G. headquarters. The pundits assure us that Americans are furious, disgusted, mad as hell, but cabinet officials and chief executives haven’t been confronted by throngs of angry citizens. In fact, the only mass disturbance to make news lately was at an “America’s Next Top Model” audition, where three people were arrested on charges of “inciting a riot” — the cause of that uprising, for the record, was not the financial crisis.

The texture of discontent (or lack thereof) can say a lot about a nation, and that Americans today are less likely to rebel may not be an entirely positive sign.

It certainly doesn’t mean we have more love, patience or tolerance for one another. Indeed, it may mean just the opposite, that we tend not to trust one another and that we are more alienated from our neighbors than ever before. The lack of direct action could signal the weakening of a social contract that keeps people meaningfully invested in the fate of our country — which may, in turn, be hindering our ability to resolve this crisis.

Before blogs and radio call-in shows, people joined forces and turned to the streets as their most effective means of expression; a unified, angry crowd was often sufficient to win concessions from employers and governments. And so most rebellions of the 20th century were over bread-and-butter issues like unsafe work conditions, wages and high prices for basic commodities. Even “race riots” were usually motivated by competition between ethnic groups over access to jobs and housing subsidies.

But some outbreaks of lawlessness were also indicators of strong, shared sentiments and were driven by a sense of higher purpose. For example, in 1919 Chicago, black soldiers returned home from World War I to find segregated ghettos, white-dominated unions and racist government practices. Many joined their neighbors who battled white youth and police officers in the streets. They had fought an enemy overseas; now it was their moral duty to fight injustice at home.

Today widespread anger and collective passivity exist side by side. To explain this seeming contradiction, we might look for clues — as so many are doing — in 1930s America. Then, as now, the citizenry reacted angrily to high unemployment, mass layoffs and a crippled banking system.

But it was only several years after the stock market crash that large-scale protests, bread riots and street rebellions began to occur in small towns and big cities. That’s the most pertinent lesson of the Great Depression: people waited, with relative patience, for years for some government response before anyone looted a grocery store or fought off police officers who were evicting families. So it’s possible that if our economic hardships endure, civil unrest could follow.

But if American anger remains corralled on the Internet, into e-mail messages to Congress and in sporadic small-group protests, it is unlikely that the Obama administration will do much to assuage the anger of taxpayers. Administration officials certainly don’t seem concerned that rage will heat up and overflow; after all, anticipating unrest would mean a broad and intensive campaign to shore up housing, food and welfare safety nets. The proposed budget contains a few such line items, but a comprehensive, coordinated program to prevent violence and defuse anger would need sustained commitments from mayors, service providers and civic leaders.

Perhaps the lack of concern is warranted, as several factors make widespread revolt less likely today. Our cities are no longer dense, overcrowded industrial centers where unionized laborers and disgruntled strikers might take a public stand. Concentrated inner-city poverty has declined, too, so don’t expect 1960s-style ghetto unrest.

Our urban centers are instead corporate hubs and the victims of this recession include hundreds of thousands of white-collar workers. For obvious reasons, these folks tend not to have the particular sense of grievance — that a select few are receiving preferential treatment, that they’re on the losing end of a rigged game — that usually sets off a conflagration.

And in today’s cities, even when we share intimate spaces, we tend to be quite distant from one another. Mass disturbances are not highly orchestrated ballets. They require spontaneous interaction, a call and response among unidentified cries of rage, the possibility for a unified mass to form from a gathering of loosely connected individuals.

But these days, technology separates us and makes more of our communication indirect, impersonal and emotionally flat. With headsets on and our hands busily texting, we are less aware of one another’s behavior in public space. Count the number of people with cellphones and personal entertainment devices when you walk down a street. Self-involved bloggers, readers of niche news, all of us listening to our personal playlists: we narrowly miss each other. Effective rebellions require that we sing in unison.

We may also have anger fatigue. Each day brings more layoffs and more news of taxpayer-financed corporate office renovations. Add to this the Iraq war, which is six years old this month, and a national debt that will likely rise by trillions. Such reports provoke fury but after some time, even the righteously indignant can tire and accept the outrageous as status quo.

Ultimately, however, what could keep the lid on unrest is the very issue that has pushed us toward the cliff: our high levels of personal and household debt. The average American owes about $9,000 on credit cards alone. Indebtedness redirects an individual’s energies inward: failing to pay the mortgage and college tuition can bring up feelings of anxiety, shame and a sense of personal failure.

It’s easy to feel that one isn’t working hard enough, that one should try harder to save money or take on additional work. To rebel publicly, even to engage politically, would mean exposing your own inadequacies, so most people just hunker down and keep plugging away at those monthly payments.

As our shame grows, we shutter ourselves inside. Afraid of acknowledging our anger and unable to join those similarly suffering, we grow distant. Worse, we judge quickly and harshly the actions of others; we devolve into snark, which will never lead to meaningful change.

To restore our social bonds, each one of us must overcome our isolating feelings of embarrassment and humiliation and understand that this is a shared plight. We’ll also have to accept that anger, real anger, has a role to play in producing collective catharsis and fostering healing.

Fury, after all, can manifest itself in more productive ways than urban rioting or cable-TV ranting. Fury can inspire real protest, nonviolent civil disobedience, even good old-fashioned, town-hall meetings. That’s how we’ll recover our public life and perhaps help one another through this crisis — storming angrily into the streets and then, once we’re out there, actually talking to one another.

Sudhir Venkatesh, a professor of sociology at Columbia, is the author of “Gang Leader for a Day: A Rogue Sociologist Takes to the Streets.”

Financial Policy Despair

By PAUL KRUGMAN

Over the weekend The Times and other newspapers reported leaked details about the Obama administration’s bank rescue plan, which is to be officially released this week. If the reports are correct, Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle Bush administration policy — specifically, the “cash for trash” plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson.

This is more than disappointing. In fact, it fills me with a sense of despair.

After all, we’ve just been through the firestorm over the A.I.G. bonuses, during which administration officials claimed that they knew nothing, couldn’t do anything, and anyway it was someone else’s fault. Meanwhile, the administration has failed to quell the public’s doubts about what banks are doing with taxpayer money.

And now Mr. Obama has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing.

It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street. And by the time Mr. Obama realizes that he needs to change course, his political capital may be gone.

Let’s talk for a moment about the economics of the situation.

Right now, our economy is being dragged down by our dysfunctional financial system, which has been crippled by huge losses on mortgage-backed securities and other assets.

As economic historians can tell you, this is an old story, not that different from dozens of similar crises over the centuries. And there’s a time-honored procedure for dealing with the aftermath of widespread financial failure. It goes like this: the government secures confidence in the system by guaranteeing many (though not necessarily all) bank debts. At the same time, it takes temporary control of truly insolvent banks, in order to clean up their books.

That’s what Sweden did in the early 1990s. It’s also what we ourselves did after the savings and loan debacle of the Reagan years. And there’s no reason we can’t do the same thing now.

But the Obama administration, like the Bush administration, apparently wants an easier way out. The common element to the Paulson and Geithner plans is the insistence that the bad assets on banks’ books are really worth much, much more than anyone is currently willing to pay for them. In fact, their true value is so high that if they were properly priced, banks wouldn’t be in trouble.

And so the plan is to use taxpayer funds to drive the prices of bad assets up to “fair” levels. Mr. Paulson proposed having the government buy the assets directly. Mr. Geithner instead proposes a complicated scheme in which the government lends money to private investors, who then use the money to buy the stuff. The idea, says Mr. Obama’s top economic adviser, is to use “the expertise of the market” to set the value of toxic assets.

But the Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. So this isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.

The likely cost to taxpayers aside, there’s something strange going on here. By my count, this is the third time Obama administration officials have floated a scheme that is essentially a rehash of the Paulson plan, each time adding a new set of bells and whistles and claiming that they’re doing something completely different. This is starting to look obsessive.

But the real problem with this plan is that it won’t work. Yes, troubled assets may be somewhat undervalued. But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus — for that is what the Geithner plan amounts to — will change that fact.

You might say, why not try the plan and see what happens? One answer is that time is wasting: every month that we fail to come to grips with the economic crisis another 600,000 jobs are lost.

Even more important, however, is the way Mr. Obama is squandering his credibility. If this plan fails — as it almost surely will — it’s unlikely that he’ll be able to persuade Congress to come up with more funds to do what he should have done in the first place.

All is not lost: the public wants Mr. Obama to succeed, which means that he can still rescue his bank rescue plan. But time is running out.

Carcieri Plans to Cut Taxes: Uses Obama's Stimulus Bill to Bridge Shortfall

I read in the Newport Daily News and Providence Journal that Governor Carcieri, who criticized Obama's stimulus bill, intends to use the "Bush policy" of cutting all taxes to corporations, the wealthy, while facing an $866 million deficit.

Carcieri's plan is to follow Bush's "trickle down" policy, which seems to have gotten us into the trouble we're in with the entire country. Caricieri would

• Cut the corporate tax rate to drop, from 9 percent to 7.5 percent, increasingly each year, until it is eliminated completely


• The top personal tax rate will drop by nearly 1/2 from 9.9 percent to 5.5 percent.


• Reduce the inheritance tax by Increasing the amount to be deducted from inheritances to $1 million before facing a tax

How will Carcieri make up the shortfall with an already $866 million deficit and nearly no taxes available in the future? Initially he will:

• Cut $55 million in funding to cities and towns


• Refuse to repay money to the rainy day fund


• Tap , temporarily, to replace (for 2 years) $31 million to cities and towns, from the Obama stimulus fund, that Carcieri criticized heavily (But this will still leave a funding deficit to cities and towns of $24 million per year, and it will only last 2 years, causing further problems, stated below)

This will cause cities and towns to lose money for their operating expenses and for schools. Carcieri belives his "black box" ideology will magically create jobs.

Even so, the cities and towns, without funding, would almost have to increase taxes, institute a city income tax, or increase already high property taxes significantly. They could not do any of these things, but there would be no money then for police, refuse pickup, fire departments, and other city services, as well as no money for schools. All of these would, of course deteriorate quickly.

City services and school quality would decline OR real estate taxes would increase dramatically. Even IF corporations settled here.. and at 0 percent, I am sure they would... it is unlikely anyone could afford to LIVE here. Living over the border in Connecticut or Massachusetts would be desireable at that point, while working on any "black box" jobs created for corporate tax havens.

So perhaps our tiny state of Rhode Island COULD be the Republican "stimulus package" (read no, stimulus - eliminate taxes to coroporations and the wealthy, cut off funding to cities and towns and social services, and "hope for the best").

With no funding to cities and towns, as stated, and no funds to the state, I simply wonder how the state would decrease their already $866 million deficit. Creating jobs in the state with the 2nd highest unemployment rate in the country is desireable, but if everyone has to move to Massachusetts for city services, schools that are funded and any quality of life needs that any human being would want, what is Rhode Island?

It will be a haven for Corporations, the wealthy, and those who have made deals with them, and it will not house anyone under a $300,000 income, or more.

Carcieri's hypocrisy in using the Obama funds he criticized to make his plan "look presentable" for 2 years until it is too late, is quite sad.

Now.. expand this to the U.S. Where will everyone with under $300,000 salaries live? Mexico?

I look forward to the "Republican black box plan" taking effect in such a small state as ours. If it succeeds, certainly, the Republicans can "show everyone the way". But if it fails... while we here in Rhode Island will suffer (or become Massachusetts residents)...the country will have had its second test of the "Bush economic doctrine". The past 8 years were the first test. But if it takes us to remind you all of why we're in this trouble, it's the least we can do.

But if we DO suffer in order to test it once more for the rest of you... will you please use your stimulus package to help out a neighbor?

Miracles Take Time

By BOB HERBERT

Barack Obama has only been president for six weeks, but there is a surprising amount of ire, anger, even outrage that he hasn’t yet solved the problems of the U.S. economy, that he hasn’t saved us from the increasingly tragic devastation wrought by the clownish ideas of right-wing conservatives and the many long years of radical Republican misrule.

This intense, impatient, often self-righteous, frequently wrongheaded and at times willfully destructive criticism has come in waves, and not just from the right. Mr. Obama is as legitimate a target for criticism as any president. But there is a weird hysterical quality to some of the recent attacks that suggests an underlying fear or barely suppressed rage. It’s a quality that seems not just unhelpful but unhealthy.

Mr. Obama is being hammered — depending on the point of view of the critics — for the continuing collapse of the stock market, for not moving fast enough to revive the suicidal financial industry, for trying to stem the flood tide of home foreclosures, for trying to bring health insurance coverage to some of the millions of Americans who don’t have any, for running up huge budget deficits as he tries to fend off the worst economic emergency since World War II and for not taking time out from all of the above to deal with — get this — earmarks.

Earmarks.

More than 4.4 million jobs have been lost since this monster recession officially got under way in December 2007, and we’ve got people wigging out over earmarks. Folks, get a grip. Some earmarks are good, some are not, but collectively they account for a tiny, tiny portion of the national budget — less than 1 percent.

Freaking out over earmarks is like watching a neighborhood that is being consumed by flames and complaining that there is crabgrass on some of the lawns.

In the midst of the craziness, conservatives are busy trying to blame this epic economic catastrophe — a conflagration of their own making — on the new president. Forget Ronald Reagan and George Herbert Walker Bush and George Herbert Hoover Bush and the Heritage Foundation and the Club for Growth and Phil Gramm and Newt Gingrich and all the rest. The right-wingers would have you believe this is Obama’s downturn.

The bear market would no doubt have magically turned around by now, and those failing geniuses at the helm of our flat-lined megacorporations would no doubt be busy manufacturing new profits and putting people back to work — if only Mr. Obama had solved the banking crisis, had lowered taxes on the rich, had refused to consider running up those giant deficits (a difficult thing to do at the same time that you are saving banks and lowering taxes), and had abandoned any inclination that he might have had to reform health care and make it a little easier for ordinary American kids to get a better education.

As the columnist Charles Krauthammer was kind enough to inform us: “The markets’ recent precipitous decline is a reaction not just to the absence of any plausible bank rescue plan, but also to the suspicion that Obama sees the continuing financial crisis as usefully creating the psychological conditions — the sense of crisis bordering on fear-itself panic — for enacting his ‘big-bang’ agenda to federalize and/or socialize health care, education and energy, the commanding heights of post-industrial society.”

That’s a more genteel version of the sentiment expressed a couple of weeks ago by the perpetually hysterical Alan Keyes, a Republican who was beaten by Mr. Obama in the Illinois Senate race in 2004. “Obama is a radical communist,” said Mr. Keyes, “and I think it is becoming clear. That is what I told people in Illinois, and now everybody realizes it’s true.”

I don’t know whether President Obama’s ultimate rescue plan for the financial industry will work. He is a thoughtful man running a thoughtful administration and the plan, a staggeringly complex and difficult work in progress, hasn’t been revealed yet.

What I know is that the renegade clowns who ruined this economy, the Republican right in alliance with big business and a fair number of feckless Democrats — all working in opposition to the interests of working families — have no credible basis for waging war against serious efforts to get us out of their mess.

Maybe the markets are down because demand has dried up, because many of the nation’s biggest firms have imploded and because Americans are losing their jobs and their homes by the millions. Maybe a dose of reality is in order, as opposed to the childish desire for yet another stock market bubble.

Maybe the nuns in grammar school were right when they counseled that patience is a virtue. The man has been president for six weeks.

Climate of Change

By PAUL KRUGMAN , NY Times, Op Ed, Feb. 27, 2009

Elections have consequences. President Obama’s new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.

The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration’s refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.

For this budget allocates $634 billion over the next decade for health reform. That’s not enough to pay for universal coverage, but it’s an impressive start. And Mr. Obama plans to pay for health reform, not just with higher taxes on the affluent, but by putting a halt to the creeping privatization of Medicare, eliminating overpayments to insurance companies.

On another front, it’s also heartening to see that the budget projects $645 billion in revenues from the sale of emission allowances. After years of denial and delay by its predecessor, the Obama administration is signaling that it’s ready to take on climate change.

And these new priorities are laid out in a document whose clarity and plausibility seem almost incredible to those of us who grew accustomed to reading Bush-era budgets, which insulted our intelligence on every page. This is budgeting we can believe in.

Many will ask whether Mr. Obama can actually pull off the deficit reduction he promises. Can he actually reduce the red ink from $1.75 trillion this year to less than a third as much in 2013? Yes, he can.

Right now the deficit is huge thanks to temporary factors (at least we hope they’re temporary): a severe economic slump is depressing revenues and large sums have to be allocated both to fiscal stimulus and to financial rescues.

But if and when the crisis passes, the budget picture should improve dramatically. Bear in mind that from 2005 to 2007, that is, in the three years before the crisis, the federal deficit averaged only $243 billion a year. Now, during those years, revenues were inflated, to some degree, by the housing bubble. But it’s also true that we were spending more than $100 billion a year in Iraq.

So if Mr. Obama gets us out of Iraq (without bogging us down in an equally expensive Afghan quagmire) and manages to engineer a solid economic recovery — two big ifs, to be sure — getting the deficit down to around $500 billion by 2013 shouldn’t be at all difficult.

But won’t the deficit be swollen by interest on the debt run-up over the next few years? Not as much as you might think. Interest rates on long-term government debt are less than 4 percent, so even a trillion dollars of additional debt adds less than $40 billion a year to future deficits. And those interest costs are fully reflected in the budget documents.

So we have good priorities and plausible projections. What’s not to like about this budget? Basically, the long run outlook remains worrying.

According to the Obama administration’s budget projections, the ratio of federal debt to G.D.P., a widely used measure of the government’s financial position, will soar over the next few years, then more or less stabilize. But this stability will be achieved at a debt-to-G.D.P. ratio of around 60 percent. That wouldn’t be an extremely high debt level by international standards, but it would be the deepest in debt America has been since the years immediately following World War II. And it would leave us with considerably reduced room for maneuver if another crisis comes along.

Furthermore, the Obama budget only tells us about the next 10 years. That’s an improvement on Bush-era budgets, which looked only 5 years ahead. But America’s really big fiscal problems lurk over that budget horizon: sooner or later we’re going to have to come to grips with the forces driving up long-run spending — above all, the ever-rising cost of health care.

And even if fundamental health care reform brings costs under control, I at least find it hard to see how the federal government can meet its long-term obligations without some tax increases on the middle class. Whatever politicians may say now, there’s probably a value-added tax in our future.

But I don’t blame Mr. Obama for leaving some big questions unanswered in this budget. There’s only so much long-run thinking the political system can handle in the midst of a severe crisis; he has probably taken on all he can, for now. And this budget looks very, very good.

I Ponied Up for Sheryl Crow?

By MAUREEN DOWD, NY Times

LOS ANGELES

Talk about being teed off.

The economy is croaking and bankers are still partying at a golf tournament here on our dime.

It’s a good argument for nationalization, or better yet, internationalization. Outsource the jobs of these perfidious, oblivious bank executives to Bangalore; Bollywood bashes have to cost less than Hollywood ones.

The entertainment Web site TMZ broke the story Tuesday that Northern Trust of Chicago, which got $1.5 billion in bailout money and then laid off 450 workers, flew hundreds of clients and employees to Los Angeles last week and treated them to four days of posh hotel rooms, salmon and filet mignon dinners, music concerts, a PGA golf tournament at the Riviera Country Club with Mercedes shuttle rides and Tiffany swag bags.

“A rep from the PGA told us Northern Trust wrote one big, fat check in order to sponsor the event,” TMZ reported.

Northern No Trust had a lavish dinner at the Ritz Carlton on Wednesday with a concert by Chicago (at a $100,000 fee); rented a private hangar at the Santa Monica Airport on Thursday for another big dinner with a gig by Earth, Wind & Fire, and closed down the House of Blues on Sunset Strip on Saturday (at a cost of $50,000) for a dinner and serenade by Sheryl Crow.

In the ignoble tradition of rockers who sing for huge sums to sketchy people when we’re not looking, Crow — in her stint as a federal employee — warbled these lyrics to the oblivious revelers:

“Slow down, you’re gonna crash,
Baby, you’re a-screaming it’s a blast, blast, blast
Look out babe, you’ve got your blinders on ...
But there’s a new cat in town
He’s got high payin’ friends
Thinks he’s gonna change history.”

Northern Untrustworthy even offered junketeers the chance to attend a seminar on the credit crunch where they could no doubt learn that the U.S. government is just the latest way to finance your deals and keep your office swathed in $87,000 area rugs.

In what is now an established idiotic ritual of rationalization, the bank put out a letter noting that it “did not seek the government’s investment” even though it took it, and that it had raised $3 million for the Los Angeles Junior Chamber of Commerce Charity Foundation and other nonprofits. They riposted that they have a contract to do it every year for five years; but this isn’t every year.

The bank cloaks itself in a philanthropic glow while wasting our money, acting like the American Cancer Society when in fact it’s a cancer on American society.

It asserted that it earned an operating net income of $641 million last year and acted as though it did Americans a favor by taking federal cash.

I would ask Northern No Trust: If you’re totally solvent, why are you taking my tax dollars? If you’re not totally solvent, why are you giving my tax dollars to Sheryl Crow?

Coming in a moment when skeptical and angry Americans watched A.I.G., Citigroup, General Motors and Chrysler — firms that had already been given a federal steroid injection — get back in line for more billions, the golf scandal was just one more sign that the bailed-out rich are different from you and me: their appetites are unquenchable and their culture is uneducable.

President Obama served them notice on Tuesday night in his Congressional address, saying: “This time, C.E.O.’s won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over.”

But will they notice?

John “Antique Commode” Thain had to be ordered by a judge to tell Andrew Cuomo’s investigators which Merrill Lynch employees got those $3.6 billion in bonuses that Thain illicitly shoved through as his firm was failing and being taken over by Bank of America with the help of a $45 billion bailout. Kenneth Lewis, the Bank of America C.E.O., made the absurd assertion to Congress that his bank had “no authority” to stop the bonuses, even though he knew about them beforehand.

“They find out they’re $7 billion off on the estimate of losses for the fourth quarter and they never think maybe we should go back and adjust these bonuses?” Cuomo told me, as Thain was finally responding to investigators on Tuesday at the New York attorney general’s office. “He refused to answer questions on the basis that ‘the Bank of America didn’t want me to.’ You can take the Fifth Amendment or you can answer questions. But there’s no Bank of America privilege. The Bank of America doesn’t substitute for the Constitution. And who’s the Bank of America, by the way?”

He gets incensed about how ingrained, indoctrinated and insensitive the ex-masters of the universe are. “They think of themselves as kings and queens,” he said. And they’re not ready to abdicate.

What Part of ‘Stimulus’ Don’t They Get?

Imagine yourself jobless and struggling to feed your family while the governor of your state threatens to reject tens of millions of dollars in federal aid earmarked for the unemployed. That is precisely what is happening in poverty-ridden states like Louisiana and Mississippi where Republican governors are threatening to turn away federal aid rather than expand access to unemployment insurance programs in ways that many other states did a long time ago.

What makes these bad decisions worse is that they are little more than political posturing by rising Republican stars, like Gov. Bobby Jindal of Louisiana and Gov. Mark Sanford of South Carolina. This behavior reinforces the disturbing conclusion that the Republican Party seems more interested in ideological warfare than in working on policies that get the country back on track.

Fortunately, as President Obama prepares for his first address to Congress on Tuesday evening, voters of both parties have noticed. About three-quarters of those polled in a recent New York Times/CBS News survey — including more than 60 percent of Republicans — said Mr. Obama has been trying to work with Republicans. And 63 percent said Republicans in Congress opposed the stimulus package primarily for political reasons, not because they thought it would be bad for the economy. It should be sobering news for Republicans that about 8 in 10 said the party should be working in a bipartisan way.

The Republican Party’s attacks on the unemployment insurance portion of the stimulus package are a perfect example. States that accept the stimulus money aimed at the unemployed are required to abide by new federal rules that extend unemployment protections to low-income workers and others who were often shorted or shut out of compensation. This law did not just materialize out of nowhere. It codified positive changes that have already taken place in at least half the states.

To qualify for the first one-third of federal aid, the states need to fix arcane eligibility requirements that exclude far too many low-income workers. To qualify for the rest of the aid, states have to choose from a menu of options that include extending benefits to part-time workers or those who leave their jobs for urgent family reasons, like domestic violence or gravely ill children.

Data from the National Employment Law Project, a nonprofit group, show that 19 states qualify for some of the federal financing and that a dozen others would become eligible by making one or two policy changes. Unemployed workers are worst off in the Deep South, where relatively few people are eligible to receive payments. Louisiana, Mississippi and Texas stand out.

The governors are blowing smoke when they suggest that the federal unemployment aid would lead directly to new state taxes. No one knows what the economic climate will be when the federal aid has been used up several years from now. But by dumping billions of dollars into shrinking state unemployment funds, which puts money into the hands of people who spend it immediately on food and shelter, the stimulus could help the states through the recession and into a time when unemployment trust funds can be replenished. In other words, the stimulus could make a tax increase less likely.

But even if new taxes are required at some point, the new federal standards would protect more unemployed workers than ever before and bring states like Louisiana, Mississippi and Texas into the 21st century.

Governors like Mr. Jindal should be worrying about how to end this recession while helping constituents feed and house their families — not about finding ways to revive tired election-year arguments about big spending versus small government.