Plebian Acts

The Incomparable One, Bob Somerby, seems to be channeling my writings about the cultural Stevensonians all this week. He talks about the cultural blindness in The Fruits of Our Blinkered Elites:

“That a New Elite has emerged over the past 30 years is not really controversial,” Charles Murray wrote in Sunday’s Washington Post. “That its members differ from former elites is not controversial.” Murray went on to explain what this means; according to Murray, this “New Elite” differs from earlier elites in that its members earn their status through high performance in universities and then in graduate schools.

After that, they inter-marry—and breed. The process starts again.

The Undeserving

The LA Times has a business columnist, David Lazarus, who isn't much of a writer and he's far too committed to conventional economic wisdom for his own good, but in today's Sunday Times he hit one out of the park:

Why were Wall Street workers not asked for concessions?

Say what you will about the role of the [UAW] in exacerbating Detroit's financial troubles, one thing stands out: Blue-collar workers are taking it in the shorts as part of their employers' efforts to secure some bailout bucks from Uncle Sam.

I don't recall white-collar workers on Wall Street stepping up with similar concessions in return for their companies' receiving billions of dollars in taxpayer cash. ...

That said, a bailout's a bailout, at least as far as taxpayers are concerned. So why are we holding blue-collar workers to a different standard than their white-collar kin?

Put another way, how many people can even list the terms of the recently announced multibillion-dollar bailout for financial colossus Citigroup Inc. and what the company agreed to do in return for our generosity? ...

The UAW, long criticized (unfairly, I believe) for being too powerful and too greedy, has done the stand-up thing in offering concessions to protect jobs at a perilous time for the auto industry.

White-collar workers on Wall Street, many of whom pull down hundreds of thousands of dollars a year in salary and bonuses, have shown no such spine or self-sacrifice as their employers pass the hat among taxpayers.

[Economist Robert] Reich is right: A bailout should require concessions from all stakeholders, not just the top brass and certainly not just the public.

By that standard, the auto industry has earned its piece of the pie, while Wall Street firms, silver spoons in hand, are enjoying their dessert on the house.

The poll that accompanies the article is over 77% in agreement that blue collar workers are being treated differently and unfairly compared to white collar workers. It's just an online poll so should be taken with a grain of salt, but it probably does register some fairly common popular sentiments that are not often represented in the media.

The people being forced to offer concessions here for a manufacturing base bailout are not members of Whole Foods Nation, the people who comprise the symbolic analyst elite that is having its collective butt covered by the economic Hanky Panky (thus far).

From my perspective, this is another sign of the fault line in the Democratic Party and is indicative of where and how the power elite is going to spend their political capital.

Anglachel

Hillary on New Stimulus Boost

Hillary has sent a letter to Bush, Harry Reid, Robert Byrd and Daniel Inouye pushing them to act now and start new stimulus spending for Main Street and not sit on their butts for almost three months until the Golden Calf is installed at the White House for us all to worship. She prioritizes New York's stimulus needs, as is to be expected, but the letter is more general. She does her usual job of combining hard facts, common sense and political zingers for an enlightening read. A few highlights:

We are in a recession which demands decisive action. I believe that in order to stimulate this economy, we need to get people working, earning, and building – not just spending. We have borrowed hundreds of billions that have gone to banks and financial institutions and borrowed tens of billions more to energize the economy, yet the economic downturn has continued and the financial turmoil has worsened. What is clear is that any action we take – especially as we borrow more money to do so – must pay off in the near and long term. That is what America does best: we can address this crisis while preparing for our future.

However, we do have immediate needs that cannot wait between now and when the next Congress and the next President takes office. And although your Administration has voiced skepticism about the need for a stimulus bill, I believe that the current conditions call for a coordinated response now.

Good little zing about the Wall Street give away, though she's not too sharp as New York is a financial capital, and a delicious slap to Bush with"not just spending" as a solution to sustantail financial problems. zHer next paragraph, though clearly taking Bush to task, strikes me as aimed more at the current Senate leadership than at the lame duck in the White House. No, you can't just sit on your hands until after the Inauguration. You need to set expectations now and get the ball rolling.

Hillary then goes on and identifies specific programs - Unemployment Insurance, SNAP, Medicaid - that will immediately help her constituents who are facing jobs losses. She goes into some detail about Medicaid:

In the midst of one of the greatest fiscal crises to hit our states, an increase in the Medicaid FMAP rate would help prevent further and deeper cuts to health care and other essential services like education, child care and public safety. Rising demand for health insurance coverage through Medicaid due to increasing job loss is straining state budgets, and the federal government should act to help ease this growing burden on our states.

This is something that the Spousal Unit is very keen on, the Feds supplying the money for social service programs to ensure that the states to not rob Peter to pay Paul, or steal the kids' lunches to pay for their vaccinations. One of the biggest dangers of a protracted economic downturn is that states cut services to the weakest and must vulnerable parts of the population. A city park may endure a lawn brown from lack of water, but a child will not survive a winter with no food and no heat. Her mention of this is also an implicit criticism of the decision to deny her a formal leadership role in the crafting of health care policy and initiatives.

She goes on to discuss infrastructure investment, noting that this long term improvement "serves the dual purpose of modernizing our country’s deteriorating roads, bridges, and transit systems while stimulating the economy," and thus provides tangible benefit to the public, unlike throwing money at Wall Street, especially when the funds are disbursed without provisions for accountability. Hillary returns to a topic she has discussed for months, the mortgage crisis, and warns that there is more bad news waiting for us, but that we have the power to proactively address the problem:

The next wave of foreclosures looms, and we should address it immediately. It is critical that we modify unworkable mortgages into clear and stable terms if we are to prevent the bottom of the housing market from falling even further. I have proposed HOME, the Home Owners Mortgage Enterprise, based on the successful program enacted during the New Deal which not only saved one million homes but also turned a profit for the Treasury. We should continue focusing on initiatives large and bold enough to meet the scale of the challenges presented by the faltering housing market.

As I've said before, home prices have to come down in alignment with wages, so I disagree with Hillary about the bottom of the housing market falling even further. That must happen. I think she knows it (mostly because she's waaaay smarter than me) which is why she so consistently pushes the HOME program, which would purchase mortgages at cut rates from the toxic pool, rework them when possible by reducing principal and adjusting rates, and end up providing a controlled devaluation of the house market.

This stands in juxtaposition to the announcement just today from Fannie Mae and Freddy Mac (h/t, Calculated Risk, FHFA Modification Program Details), where they do not wish to reduce outstanding principal in order to make a loan be affordable (no more than 38% of gross income). The press release is contradictory in that the first answer in the Q&A section states "It may include a change to the product (an ARM to a fixed rate mortgage), interest rate, amortization term and maturity date, and/or unpaid principal balance," which would seem to indicate that reducing principal is an option, but the answer to the question about benchmark ratios does not include changes to an unpaid principal balance among its options, "Once the affordable payment is determined, there are several steps the servicer can take to create that payment – extending the term, reducing the interest rate, and forbearing interest." The key here is that a HOLC/HOME style program can easily perform this action because of taking the mortgage back from investors (who eat the loss, which is the downside of risk) and issuing a sustainable rather than a profitable loan.

In the midst of the general celebration and self-congratulation over the elections, Hillary reminds the power brokers and the pundits that ordinary people are hurting and delays are unacceptable. My own Congress Critters are heading in the right direction, but have said nothing since before the election on these matters. Sen. Feinstein did find time to issue a press release on the theme for the Inauguration, bless her heart.

Hillary's overall message is Think Big, which is just what the good professors Krugman, Roubini and Galbraith all advocate when addressing the financial meltdown, and to do it now.

There's some change I can believe in.

Anglachel

PS - I found that I kept writing "reduced principle" instead of "reduced principal" when discussing the GRE press release. I am fully confident that the Bush Treasury can reduce their principles without limit.

You First

This is the second part of my take on the "call to service" hooey being served up the Obama-Biden transition site. The problem is defined this way:

The Problem
Americans Not Asked to Serve After 9/11: President Bush squandered an opportunity to mobilize the American people following 9/11 when he asked Americans only to go shopping.

Insufficient Federal Support for Service: While more than 500,000 people have served in AmeriCorps, the program turns away tens of thousands of applicants a year because of limited funding.

Need for More R&D in Nonprofit Sector: Research and development in the nonprofit sector is limited and there is a disconnect between charitable foundations that can fund innovation and the organizations on the ground that can test new concepts and bring them to scale.

I'm honestly not sure why the third item is on this list. Nonprofit =/= volunteer. Nonprofit organizations can be serious money makers. I work for one myself and, trust me, I am no volunteer. I am paid an industry competitive salary and have a benefits package better than most. All of the excess income brought in by my organization is ploughed right back into the community. I am 100% behind beefing up nonprofits to do things like research, especially if the fruits of the research can then be provided to the public without having to make a profit from it. However, what I know from working with nonprofits is how they can be used to unfairly enrich some top executives and not actually provide much benefit. In any event, this doesn't belong on the Service page.

The middle item, expanding the funding for AmeriCorps, is a valid goal, though there is also a need to create a new CCC, paying people to perform needed work rather than asking for them to both volunteer and support themselves. We need fiscal stimulus at the individual level through creation of jobs that will keep local economies moving but which can be allowed to vanish or be converted to a more permanent position once the economy picks up.

One of the reasons why volunteerism is promoted by conservatives is because it prevents the establishment of government agencies and employment positions that people will get to like, especially if they involve job security and are open to social outsiders. The goods and resources provided by a volunteer group are not things the recipient has a right to - it's charity, not benefits, and can be offered with many strings attached or withdrawn abruptly and with no recourse. It makes the recipients into beggars, at base, dependent on the generosity and attention span of their socio-economic betters. This is why volunteerism is something that must enhance, not replace, state supported social services.

The first statement, however, is what leads off the plea for service, figured as some kind of sacrifice due for our supposed failure to serve after 9/11. Bush did not ask us, so we didn't bother is the message, so now the Good Fathers (not the Prodigal Son) will take us to task and have us make amends for our neglect of the Beloved Community.

To which I say, you first, Bub.

Pray tell, what sacrifice is due from the people of this country? What great bounty has the average American reaped under Bush?

It is not Madge the manicurist and Serena the student who owe America a sacrifice. Joe the janitor and Carlos the car mechanic have been working their asses off the last 8 years trying to make ends meet, or haven't you noticed? Antoine the hair stylist has struggled to keep his salon open and his staff employed, while Chris the window repair gal has been sub-contracting a bunch of her jobs to friends who are down on their luck, not keeping a dime for herself. Unemployment is on the rise and estimates of how high it will be are approaching double digits. The percentage increases the further down the ladder you go and we aren't even touching on underemployment.

Why should the blue and pink collar workers, the students and new graduates, the low-level denizens of cubicle cities sacrifice their second job or time with their children or just the opportunity to take a day off for the sake of restoring an economy and society laid waste by the money men and corporate cronies, by the worst president ever and his criminal administration, by a rapacious and ruthless political oligarchy still more interested in defending the golden parachutes of Goldman Sachs than the stagnant wages of Rosie the Riveter?

I think those who got to party are the ones who should pay the bill. It is the people at the very top of the socio-economic food and political chain who are due for some sacrifice. Like 50%, 60%, 70% marginal tax rates. Like lower profits for shareholders. Like seeing some jail time for war crimes.

I think the people who benefitted from the international and domestic misery inflicted by Bush & Co need to lead by example and endure some sacrifices. How about they have to put in a few hundred hours of community service? How about having the senior executives of AIG go to the public schools in New York and do some painting and window washing for a few months? How about we send Bush's failed agency heads into the Lower 9th Ward to fix things, mow lawns and run errands for the residents in atonement for having allowed so many to die? That's assuming the residents would allow that pack of thieves and thugs into their neighborhood, of course. Don't want to give up your free time? OK, fine, then you can pay through the nose for each hour you want exempted. From your own pocket. And no tax breaks on it or charging it off to the company.

Ordinary Americans will volunteer their time in their communities as they always have, tutoring kids at school, organizing local amateur sports, improving neighborhoods, caring for the elderly, donating a few extra dollars to a worthy cause. They owe the nation nothing. Before we start guilt tripping the people who are going to be hard pressed to make ends meet in the next few years to relinquish yet more of their lives, it is time that the people who created the mess feel a good measure of the pain they are causing for the rest.

You go first. We insist.

Anglachel

Hillary on the Unemployment Numbers

Statement of Senator Hillary Rodham Clinton on October Jobs Report

(My emphasis)

Under the Bush Administration, the American economy has lost jobs for 10 straight months. Today's report contains the worst unemployment rate in 14 years with our economy now having lost more than 1.2 million jobs in this last year alone. The Bush Administration has the worst job creation record of any administration since the Great Depression.

Businesses large and small are struggling to secure financing to survive. Families cannot find affordable mortgages and consumer loans. The housing crisis has wiped out hundreds of billions of dollars in home equity and grows deeper every day. This final chapter of the Bush Administration's ill-conceived economic policies cannot end soon enough.

We are in a recession and we must act decisively and wisely to change course, hasten a recovery, and reform the broken economic policies that will be the sad and disastrous legacy of the Bush Administration. Under a Democratic Congress and Administration, we will have the ability to do precisely that. In the coming weeks, as we consider a stimulus package, I believe we should pursue several goals that will help restore stability to our markets and financial system.

One, we must prevent another wave of looming foreclosures that will drive down home values and the broader financial markets. Twenty percent of Americans now hold mortgages that exceed the value of their homes. We must prevent as many unnecessary foreclosures as possible by rewriting mortgages for families committed to making monthly payments and acting responsibly. I have proposed, and will introduce, the Home Owners' Mortgage Enterprise, or HOME Act, to buy and rewrite mortgages at risk of failure. This is based on the successful Home Owner's Loan Corporation created during the Great Depression by President Roosevelt, which not only saved more than one million homes but also turned a profit while staving off foreclosures and preventing wider home values from falling further. We also should consider jump starting the housing market with a temporary tax credit to address record levels of low demand.

Two, a stimulus package should help displaced workers and struggling middle class and hardworking families. Extending unemployment insurance benefits for the hundreds of thousands of workers who will soon exhaust their benefits is necessary to ease the burden on those families who continue to seek work. Aid for struggling families facing higher home heating bills this winter must also be an urgent priority.

Three, we should also help our distressed states and cities. Our states, many of which face record budget shortfalls, need fiscal aid in order to fill their budget holes without having to sacrifice their critical health, social, and public safety services.

And four, we should consider steps to create jobs in the near term by targeting a stimulus that will not only boost the economy now but pay dividends in the future. For example, providing resources for states to begin construction on "fast-tracked" infrastructure projects will help create hundreds of thousands of new jobs while fixing our crumbling roads and deteriorating bridges, creating room for the economy to grow.

The challenges we face are daunting, and today's jobs report clearly shows that the road to recovery will be difficult. But it is imperative that we take these urgent steps that will kick start our economy and hasten our recovery.

All good, solid Democratic efforts. My biggest point of disagreement with Hillary is that house prices need to drop further because they have been grossly over priced in the bubble areas. Thus, we need to let prices drift down further until they are in line with household incomes and sensible borrowing.

I love her line: "We are in a recession and we must act decisively and wisely to change course, hasten a recovery, and reform the broken economic policies that will be the sad and disastrous legacy of the Bush Administration." More of this, please. More nicely, sweetly partisan knife twisting to ensure that Bush is never spoken of without BartCop's tag line - Worst President Ever.

On a practical note, and (giving credit where credit is due) something I have heard The Precious say he wants done, is to extend unemployment insurance benefits. OK, Congress Critters, do it. Do something that is chump change compared to the Hanky Panky but will immediately and materially improve ordinary lives starting now.

The push for infrastructure projects is also good because those are highly localized operations that will benefit working class families directly. It's a threefer - stimulate local economies, target the segment of the workforce that is being devastated by the loss of manufacturing and construction, and create infrastructure that is an investment for long-term growth through better roads, ports, bridges, power and water systems, and so forth.

See? Being a good liberal means doing what is right at every scale and takes a lot less effort than plotting how to screw people while enriching your cronies back home.

Anglachel

Unemployment Increases

Interrupting the election euphoria is the economic news. The NYT has a series of graphs that show information about unemployment since 1990: The Labor Picture in October. The graphs will open in a new window.

Of particular interest to me are the graphs on the unemployment rate, job losses in sectors (note how the professional services sector is being affected), part-time employees looking for full time jobs (under-employment), and decreases in weekly wages.

In the accompanying article, Jobless Rate at 14-Year High After Big October Losses, there is more information about how the losses have occurred (my emphasis):

Above all, the latest monthly snapshot of the job market reinforced how the economy remains gripped by a potent combination of troubles — plunging housing prices, tight credit and shrinking paychecks — with all three operating at once in a downward spiral.

Companies have been hiring tepidly and laying off workers throughout the year as business has slowed, while cutting working hours for those on the payroll. Millions of Americans accustomed to borrowing against homes to finance spending have lost that artery of cash as home prices have fallen.

Wages have effectively shrunk for most workers, as rising costs for food and fuel have more than absorbed meager increases in pay. That has further crimped American proclivities to spend.

In October, weekly wages for rank-and-file workers — those not in supervisory or managerial positions — grew just 2.9 percent from October 2007, well below the rate of inflation.

The health care industry and public schools were the only sectors of the economy that showed more than notional growth last month. Otherwise, the losses were deep and broad. The troubles in the auto industry led to thousands of layoffs at car dealerships and factories that produce car parts. Tens of thousands of workers at manufacturers and construction companies lost their jobs.

Janitors, administrative workers and temporary employees were hit hard, with 57,000 jobs lost in October. Even general merchandise stores, which have seen an increase in business because of lower prices and more budget-minded consumers, laid off 18,000 workers last month.

The 284,000 jobs lost in September was the biggest monthly toll since November 2001, in the aftermath of the terrorist attacks in New York and Washington.

The economy never really recovered from the 2001 drop. Employment was heavily driven by the real estate bubble, especially here in California. Construction was home construction, retail was very much invovled with home furnishings and home improvements, consumption was financed by home equity cash-outs, and so forth.

The housing bubble has disguised the long-term effect of falling real wages with the home ATM making up for the shortfall in paychecks. While the main focus on the bubble has been on exotic mortgages, less sustained attention has been given to refinancing. A significant number of these transactions will be recourse loans, debts that cannot be discharged with a foreclosure but which will stay with the debtor, dragging down both personal and more widespread economic recovery.

Whatever real value stored up in housing has been exhausted and then some. It's not enough to put people back to work if those jobs are non-union, part-time, and low wage. A reduction in consumption and a lower rate of growth are not inherently bad things if overall economic security is improved. Can we all stand to drive older vehicles, have fewer things, and live in smaller digs? Probably, but austerity for the working class and poor will not solve the structural problems of chronic underemployment and incremental impoverishment that are creeping their way up the socio-economic food chain.

The Wall Street bailout is not even a start at addressing the structural problems afflicting the real economy.

Anglachel