This is not a revelation, because I wrote about it in great detail before the 2010 midterms, sounding warnings for months and months that Pres. Obama buying into the Right’s economic argument would end in big trouble for us all.
The connection between the foreclosure crisis and rampant unemployment is well known by economists and the administration. Diving home values and heavy debt burdens force cutbacks in both consumer spending and tax revenue for local governments. These reduced spending levels and lower government revenues force layoffs in both the public and private sector. And those layoffs, in turn, spur more foreclosures. A July 2010 report from the International Monetary Fund suggested that foreclosure problems added 1.25 points to the unemployment rate — or more than 10 percent. On Thursday, President Barack Obama warned House Democrats in a private meeting that the housing situation could drag down the entire economy. His stated concern about foreclosures, however, doesn’t match up with the administration’s public response. – Huffington Post
Unsurprisingly, it was foretold by Paul Krugman as well:
Maybe the most notable contrast between Mr. McCain and Mrs. Clinton involves the problem of restructuring mortgages. Mr. McCain called for voluntary action on the part of lenders – that is, he proposed doing nothing. Mrs. Clinton wants a modern version of the Home Owners’ Loan Corporation, the New Deal institution that acquired the mortgages of people whose homes were worth less than their debts, then reduced payments to a level the homeowners could afford.
… I was pleased that Mr. Obama came out strongly for broader financial regulation, which might help avert future crises. But his proposals for aid to the victims of the current crisis, though significant, are less sweeping than Mrs. Clinton’s: (Mr. Obama) wants to nudge private lenders into restructuring mortgages rather than having the government simply step in and get the job done.
Mr. Obama also continues to make permanent tax cuts – middle-class tax cuts, to be sure – a centerpiece of his economic plan. It’s not clear how he would pay both for these tax cuts and for initiatives like health care reform, so his tax-cut promises raise questions about how determined he really is to pursue a strongly progressive agenda.
Barack Obama never pretended to have a progressive agenda, but what is clear is that his rightward leanings are mimicking the trouble we’d have if a Republican president was in the White House.
He didn’t even offer a fight on taxes before the 2010 midterms, which was followed by capitulating and compromising on Bush tax cuts. Now he’s offered a grand gesture to House Democrats saying he won’t extend them again, but it comes way too late.
Democrats have every right to be furious at Pres. Obama’s economic message and policies.
Rep. Dennis Cardoza (D-Calif.) said Obama’s approach to the foreclosure crisis has been “an absolute failure” and predicted it will continue to drag down the economy unless he changes tack.
“For the life of me, I can’t figure out why a community organizer who says he cares about families, who says he cares about communities, has just turned his back on one of the biggest problems in America,” said Cardoza, who co-chairs the Democratic Caucus Housing Stabilization Task Force. “The way they get defensive when you point out it’s been a failure just underscores to me they don’t have a clue about what to do.”
Cardoza’s central California district has been hit hard by foreclosures. The three cities he represents — Modesto, Stockton and Merced — all rank in the top 10 cities with the highest foreclosure rates in the country. Three out of five homeowners in his district are “underwater,” owing more on their home loans than their houses are worth.
“I don’t blame [the administration] for causing the housing crisis,” Cardoza said. “But at two-and-a-half years in office, if they can’t figure out something to do soon that turns us around, I guarantee you they will pay for this at the ballot box.”
Pres. Obama’s formulating his deficit commission was the nail in the economic argument, because it solidified the Right’s talking points that the deficit is all important in a recession when spending is required. It opened the door for Paul Ryan’s Medicare scheme that gave the Dems a boost with NY-26, but put entitlements on the table in the first place.
No one is more responsible for the conversation about deficit reduction over revenue, while ignoring the foreclosure catastrophe, and giving Republicans the floor on austerity, than Pres. Obama. If he doesn’t figure out how to turn it around he deserves to lose his job.
On the foreign policy front, if Pres. Obama doesn’t come up with real reductions in troops in Afghanistan, a policy that is breaking us, rumored to be anywhere from a paltry 5,000 to as high as 15,000 (the minimum that should be considered), his leadership is unworthy of the challenges we face. (But let’s not kid ourselves that Mitt Romney or Tim Pawlenty are up to the job either.) Leon Panetta at the Pentagon is a hopeful sign, as he’s an OMB guy and a deficit hawk, which in the SecDef position could be important, but the election can only foreshadow what might come in a second term. Getting out of Iraq is another point of contention, but instead we get Sec. Clinton opening up the Iraq cookie jar to U.S. businesses, though considering all preemption cost this country getting something back isn’t the worst of Obama’s plans.
Of course, you can’t talk economy without mentioning health care fee-for-service costs that remain a huge drag; so Obama got the kudos without the results needed, leaving us all with a hangover and a lot more that needs to be done, with no will to tackle it.
The economic news today brings with it the reality of what could have been done earlier, starting with corporations who aren’t paying their fair share of taxes, but also includes targeting mill-billionaires to create a higher tax bracket for the super wealthy. It’s attacking the problem through revenue that is broadly accepted by the American people as being fair. Channeling Bill Clinton’s tax policy when everyone knew the “recovery” would be fragile certainly made a hell of a lot more sense than sucking up to the Republican economic model, which is what Barack Obama did instead.
Now Obama’s only option is trying to change the narrative, because he can’t change the reality that may not have started on his watch, but which he’s managed as a Republican, with the results similarly catastrophic.
As Jared Bernstein has said, who last month joined Center on Budget Policy and Priorities (after serving in the White House), the “cut spending craze” has got to stop, as it “threatens to make an already tough situation worse.”
Wasted wisdom, because Pres. Obama’s not listening.
Screen capture from Huffington Post.