The Edmund L. Andrews Archives
Politics is a tough business, so I don't want to sound like a crybaby about the Republican strategy of blocking every possible Democratic bill in Congress. But the GOP hypocrisy toward small business is so transparent that I can't resist writing about this again.
Both parties talk about small business as if it were mom and apple pie. President Obama actually used the apple-pie cliche at a small-business event last month. But Obama is pushing a bill that might actually help small businesses, which have laid off a disproportionately large share of workers during this recession and are bouncing back much more slowly than big companies. Senate Republicans, meanwhile, have been blocking the bill for a month now.
Have we gotten to the point where the Federal Reserve ought to start targeting a higher rate of inflation?
As someone who came of age during the Great Inflation of the 1970s and was looking for my first job just as Paul Volcker was trying to exorcise the demons, I never thought I’d ever say anything like that.
For politicians, being "for'' is like being for mom and apple pie. That's why President Obama invited two restaurant owners named Pancake and Wheat to the White House in June to promote a bill to increase small-business lending, and why he recently visited with local business owners at the Tastee Shop Shop in Edison, N.J.
So it was probably inevitable that small busines would end up at the center of the war over extending the Bush tax cuts for the top 2 percent of households with incomes above $250,000. Republicans claim this would be a disaster for small business owners, because "50 percent'' of small business income would be "captured" by the higher tax rates. Democrats say that's baloney, because only 3 percent of small business owners make enough money to be in the top bracket.
The deficit battles in Congress are reaching a level of absurdity that makes your head spin. Every day brings new confirmation that the economic recovery is sputtering. GDP growth plunged in the 2nd quarter; consumer spending is anemic; the housing market has slumped; private-sector job growth has been well below 100,000 per month since May. Meanwhile, state and local governments are poised to cut another 300,000 jobs over the next year to deal with their acute budget shortfalls -- that's on top of about 200,000 jobs they have cut already.
There's been an enormous amount of media commentary in recent days on President Obama's slipping popularity and what he woulda coulda shoulda done differently. One day after Obama scored his latest big accomplishment -- passage of the huge financial reform bill-- the NYT puzzles over why Obama's star is falling and says he hasn't been able to "change the partisan tone in the capital." In Politico, editors John Harris and Jim Vandehei say Obama "has shown himself to be a Big Government liberal,'' which is "killing him with independent-minded voters."
I'm skeptical about journalistic second-guessing about political tactics and messaging. When unemployment remains stuck above 9 percent, with a huge share of those people jobless more than six months, nobody is going to be popular.
That said, two new pieces today -- one in Salon and one in the Fiscal Times -- offer specific examples of tone-deafness at the White House.
The Wall Street Journal sank to a new low in political hackery today with a front page story entitled "Financial Overhaul Hits Farmers."
The story purports to document how the sweeping financial reform bill, which Senate Democrats hope to finally pass this week despite relentless opposition from Wall Street, is already disrupting heartland farmers in Nebraska who use derivatives to hedge against crop prices. According to another headline, the bill is casting a "long shadow over the Plains."
But the doesn't come within a country mile of delivering the goods. The story offers not one example of anybody who has been "hit'' by the new legislation. It glosses over basic information about the bill that contradicts the thesis. It includes "worries" that have nothing to do with farmers, like those of a pay-day lender who frets about consumer regulations. (He probably should be worried; payday lenders charge rates that routinely top 100 percent. But that's far afield from farmers.)
Naturally, I am deeply disappointed that President Obama did not choose our own Stan Collender as the next White House budget director. If you read the Wall Street Journal or the Hill, you might have noticed Stan's name pop up as a person under consideration. Sure, he might have been a dark horse -- a very dark horse. But he spent years on the House and Senate budget committees, wrote a book on the budget process and has been better than relentless at ripping through the nonsense used to justify endless tax cuts and soaring deficits.
Besides, he's my friend and colleague. Loyalty counts.
Politicians love to invoke "the American people'' to justify their votes, but a new poll out today by Pew Research and National Journal provides further evidence that The People aren't likely to provide meaningful guidance on tough fiscal issues.
As I noted in the Fiscal Times, the poll suggests that Americans strongly favor "none of the above'' when it comes to dealing with the acute fiscal crises that most states are now battling. An overwhelming majority doesn't want Washington to ride to the states' rescue -- good news for Senate Republicans, led by Mitch McConnell, who blocked a watered-down Democratic bill last week that would have provided states with extra money for Medicaid and a few other things. But lopsided majorities also opposed all of the other main options for balancing state budgets as well.
It took until 5:08 AM this morning, but House and Senate conferees reached final agreement on the Dodd-Frank bill to reform financial regulation.
Despite countless compromises, the final bill will be a big improvement over what we have now if, as seems certain, it wins final passage in the House and Senate.
it's impossible to dissect all the last-minute deals right now in the big fights. But my quick take is that the reformers held up amazingly well in the face of massive lobbying from banks, non-banks, Wall Street, hedge funds and the rest of the financial services industry.
We’re in the final stretch of the House-Senate conference on financial regulation, still waiting to assess the final compromises on the big ticket issues of reining in derivatives and proprietary trading by banks.
But while we wait, we already know that the House capitulated to automobile dealers.
House Dems got the conference to agree on excluding car dealers from regulation by the new Consumer Financial Products Bureau.
Do we care? Only if you think that subprime mortgages had catastrophic consequences for civilization as we knew it.
Car loans are the second biggest financial obligation for most families, and the single biggest for most people who don’t have a mortgage. Eighty percent of car loans are originated by dealers, and subprime lending is a lucrative part of that market.
My colleague at The Fiscal Times, John M. Berry, has just published a must-read piece about the amazingly wrong things that Alan Simpson, co-chair of President Obama’s deficit commission, said last week in a video interview about Social Security.
Brad Delong says I still have a bad habit from my years at the New York Times -- “balance,’’ or striving for a fictional objectivity by giving equal weight to two opposing viewpoints. Delong is steamed about my post yesterday, which criticized dueling op-ed pieces by both Alan Greenspan and Paul Krugman on how to deal with soaring deficits. He can’t understand why I criticize Krugman for being too glib about deficits, when I seem to agree with him about
Paul Krugman and Alan Greenspan came out with dueling op-eds Friday about budget deficits gone wild. Krugman: we're slitting our wrists by trying to slash our deficits now. Greenspan: cut spending now, right now, and don't worry your pretty little head about a double-dip recession.
Neither was convincing, and there's a reason: the fiscal debate has become so polarized that combatants on both sides are glossing over what they don't know. I would argue that we ought to be doing the opposite: the unknowables right now are huge, and we ought to talk about them. Put another way: we need insurance. Against our next mistake.
Here's Greenspan:
(T)he fears of budget contraction inducing a renewed decline of economic activity are misplaced. The current spending momentum is so pressing that it is highly unlikely that any politically feasible fiscal constraint will unleash new deflationary forces.
Since my last post, venting over those who blame the financial crisis on the government policies to help low-income people, Raghuram Rajan has fired back at Paul Krugman over how much blame should go to Fannie Mae and Freddie Mac.
Since I mentioned Krugman's criticism of Raghu, I want to clarify a couple of points. For starters, I think Krugman was over-the-top toward him. Rajan is most definitely not a member of the right-wing fantasy history campaign. He may be at the University of Chicago, but he is not an ideologue and he is an outstanding scholar.
Of all the canards that have been offered about the financial crisis, few are more repellant than the claim that the “real cause’’ of the mortgage meltdown was blacks and Hispanics.
Oh, excuse me -- did I just accuse someone of racism? Sorry. Proponents of the above actually blame the crisis on “government policy’’ to boost home-ownership among low-income families, who just happened to be disproportionately non-white and immigrant. Specifically, the Community Reinvestment Act “forced’’ banks to make bad loans to irresponsible borrowers, while Fannie Mae and Freddie Mac provided the financial torque by purchasing billions worth of subprime paper.
Oh my God. I never thought i would ever say this, but Warren Buffett has turned into an evasive, disingenuous, bumbling buffoon. I've just finished watching the beloved Oracle of Omaha being grilled by the Financial Crisis Inquiry Commission about the catastrophic role of credit rating agencies, and it's pitiful to watch him plead ignorance on the most elemental questions about what Moody's and Standard & Poors did wrong or how they should be changed.
This is the same Warren Buffett who has been all but canonized as a saint for his adherence to long-term value investing, his folksy candor, his opposition to Wall Street gimmickry and not the least for his memorable description of financial derivatives as "weapons of mass financial destruction."
Where have you gone, Joe DiMaggio?
To the bank, apparently. Buffett's Berkshire Hathaway owns a hefty chunk of Moody's Investor Service -- somewhere around 13 percent -- and he only appeared today after being subpoened by the commission.
Floyd Norris, the New York Times' pithy and wise observer of financial follies, reveals on his blog today that he's going through a nasty fight against cancer. The good news is that his chances of a recovery are good. The bad news is that he has to go through hell first:
I know that it is not news that radiation treatment can be miserable. I did not do all the homework I could have done, so perhaps I should have been better prepared.
But the pain involved is more than I have ever experienced. It is virtually impossible for me to eat. I am losing weight at an impressive rate, to the dismay of the radiation doctor. I have little energy, which is probably both because of the radiation directly and because of the lack of nutrition.
Not surprisingly, Floyd isn't wallowing in his misery. He says he still counts himself incredibly lucky, and he's drawn inspiration from the people he's already met during treatment.
That didn't take long. As I predicted, Simon Johnson's first word out on the Senate financial overhaul is to accuse the Dems of selling out because they dropped plans for a vote on the Merkley-Levin amendment to ban banks from proprietary trading. Paul Krugman is skeptical,saying that the resttraints on the shadow-banking system are more important than the lack of action against too-big-to-fail banks.
I applaud Simon for his tireless efforts, and I agree on the prop-trading ban -- aka the Volcker Rule, which Obama belatedly but publicly endorsed with former Fed chairman Paul Volcker at his side. But if your only take on the 1500-page bill is that one issue, you're losing perspective.
A few hours ago, the Senate did something truly amazing: it clobbered Wall Street and the banking industry, defying armies of overpaid lobbyists and passing genuine reforms for our run-amok financial system. Voting 59 to 39, the Senate passed Senator Chris Dodd's sprawling bill to clamp down on the Wall Street excesses that nearly destroyed capitalism.
Here is my initial quick take in the Fiscal Times. But let me amplify a bit here. For all its compromises and omissions and special exceptions, this is a strong bill that will make life a lot less free-wheeling and lucrative for the big banks and, with a little perserverence, a lot safer for consumers and the economy as a whole. This is a victory for the good guys.
