Robert Kuttner

Outsiders as Insiders

Flickr/Office of Governor Patrick
Flickr/Office of Governor Patrick M assachusetts could be the harbinger of a hopeful national trend in Democratic Party politics – the reformer as regular. For 16 years, this bluest of blue states oddly kept electing Republican governors. Between 1990 when Gov. Michael Dukakis stepped down and 2006 when Deval Patrick took the governorship back, no fewer than four Republicans sat in the governor’s chair. And then Democrats blew the special election for Ted Kennedy’s seat in January 2010, when Scott Brown upset Attorney General Martha Coakley. This occurred in a state that reliably votes Democratic for president, and hasn’t sent a Republican to the U.S. House since 1994. Despite the Democratic sentiments of Massachusetts voters, the institutional party has often seemed dysfunctional, decrepit, and not welcoming of new blood. In this odd history, however, one fact screams out. The two big statewide winners of recent decades were complete outsiders—Deval Patrick and Elizabeth Warren...

Deficits: The End of an Obsession

AP Photo/Alan Diaz
The consensus around debt reduction is beginning to crumble. Some straws in the wind are more careful attention to the actual numbers, as well as public conversions by such key players as Larry Summers and Peter Orszag, two former top aides to President Obama, who only yesterday were key members of the deflate-your-way-to-recovery club. Summers wrote a piece in Wednesday’s Financial Times titled “End the Damaging Obsession with the Budget Deficit,” pointing out that the more serious deficits were in jobs, wages, and infrastructure. His former colleague Orszag wrote a piece pointing out that the rest of the budget is in decent shape—the huge outlier is federal health care costs, projected to rise from 5.5 percent of GDP now to 12 percent by 2050. President Obama, in his second inaugural address, had little to say about deficit-reduction as some kind of panacea and more about broadly-shared recovery. In the era of the Bowles Simpson Commission, the Peterson Foundation’s regular...

The President's Running Room—and Ours

AP Photo/Susan Walsh
AP Photo/Susan Walsh P resident Barack Obama won a tactical victory on New Year’s weekend by forcing Republicans to raise taxes on the top 1 percent, but he has far bigger challenges to address—and so do progressives. The economy is still at risk of several more years of hidden depression, with a high level of unemployment and no wage growth. The initial budget deal, thanks to Obama’s post-election toughness on tax increases on the rich and pressure by unions and progressive organizations not to cut Social Security and Medicare, was better than it might have been. But still to come are debates over budget cuts, with Republicans having the leverage of an automatic $120 billion “sequester” for this fiscal year now postponed to early March, if Congress fails to legislate its own additional deficit reduction. In principle, Obama has committed to $4 trillion in budget cuts over a decade, a sum that would be a huge drag on the recovery, leaving too little for the public investment necessary...

How’s That Medicine Taste, Germany?

Oliver Lang/dapd
Germany, the powerhouse of Europe, experienced negative growth in the last three months of 2012, down from a positive growth rate of 3 percent in 2011. Chancellor Angela Merkel, who more than any other leader inflicted austerity on the rest of Europe, is finding that what goes around, comes around. All of the small nations that have bowed to Germany’s austerity demands—Greece, Ireland, Spain, Portugal—are stuck in an even deeper downward spiral. They cut spending, but their deficits increased. Why? Because the hit to employment, consumption, and then to government revenues leaves their economies in deeper distress. This is a path to permanent depression. It is economic madness, a fact recognized by no less than the chief economist of the International Monetary Fund (IMF), the organization that has been Germany’s partner in enforcing austerity. The IMF’s Olivier Blanchard, in a paper released January 1, warned that the negative effects of austerity far outweighed the positive ones. It...

Hagel Faces Down the Neo-Cons

Rex Features via AP Images
It’s terrific news that the neo-conservatives like Bill Kristol and Elliott Abrams, who have been peddling the slander that Chuck Hagel is an anti-Semite, got no traction with leading pro-Israel senators. The announcement by New York senator Chuck Schumer and California senator Barbara Boxer that they will support Hagel signals that the mainstream Jewish community wasn’t buying it, and even that the Israel lobby is split. Well placed sources tell me that the full-page ad in yesterday’s New York Times created by Kristol and company, under the name “The Emergency Committee for Israel” actually backfired. In the ad, Alan Dershowitz is quoted as saying that Hagel speaks the language of “the bigots of Tehran.” The ad evidently failed to sway leading legislators. The Committee’s entire board is Kristol, Gary Bauer (a prominent rightwing Christian supporter of Israel) and Rachel Abrams, a neo-con married to Elliott Abrams. Schumer’s support now makes it safe for other Democrats and moderate...

All the President's Resolve

AP Photo/Carolyn Kaster
AP Photo/Carolyn Kaster President Barack Obama listens to reporters' questions in the East Room of the White House. Three very good signs in the past few days suggest that President Obama has been reading Robert Caro’s latest volume on Lyndon Johnson. The president is handling the debt-ceiling fight very shrewdly, and making the Republicans look both reckless and childish for playing cute with the risk of another financial meltdown. Some of us have been waiting four years for Obama to sound like this: Republicans in Congress have two choices here: They can act responsibly, and pay America’s bills; or they can act irresponsibly, and put America through another economic crisis. But they will not collect a ransom in exchange for not crashing the American economy. The financial well-being of the American people is not leverage to be used. The full faith and credit of the United States of America is not a bargaining chip. Wow! Drew Westen didn’t say that, President Obama did. He’s also...

The Mortgage Mess and Jack Lew

Rex Features via AP Images
The more information we learn about the mortgage settlement that was announced Monday—official documents are yet to be made public—the more of a smarmy backroom deal it turns out to be. The deal lets ten major banks and other “loan servicers” off the hook for a corrupted and illegal process of millions of foreclosures, with a paltry one-time settlement of $8.5 billion. The economic damage inflicted on homeowners, and by extension on the economy, was many times that. The deal was hatched by the weakest of the federal bank regulatory agencies, the Comptroller of the Currency, and signed off on by the Federal Reserve. There was no consultation with the more consumer-oriented agencies, such as the FDIC or the Consumer Finance Protection Bureau. The Comptroller just went and did it. Nor was the Justice Department consulted, even though the deal, nominally a civil settlement, will make criminal prosecutions more difficult now that a major regulator has signed off on an bargain to close the...

Is Jack Lew the Best We Can Do?

AP Photo/Charles Dharapak
AP Photo/Charles Dharapak White House Chief of Staff Jack Lew in the East Room of the White House in Washington T o no one’s great surprise, President Obama has appointed his chief of staff, Jack Lew, to succeed Tim Geithner as Treasury Secretary. Mainly, the choice signals that there will be no change either in the Obama-Geithner approach to reforming Wall Street (not very much), or on fiscal politics, where deficit reduction is a paramount goal despite a faltering recovery. The positives of Lew are these. He’s not a hard-core deficit hawk like Erskine Bowles (low bar). He’s not a bully like Larry Summers or Rahm Emanuel (even lower bar.) He’s a highly competent, detail-oriented numbers guy, and a skilled negotiator. That combination seems to drive some Republicans nuts, because in the infighting over the budget deal of 2011, Lew’s knowledge of the details enabled him to win some tactical victories in what was otherwise a rout for the administration (this was the deal that created...

The Banks Win Again

AP Photo/Mike Groll, File
Last February, the big banks agreed to a major “settlement” to protect themselves from litigation by state attorneys general stemming from fraudulent documentation of mortgages. Though some, such as New York’s crusading attorney general Eric Schneiderman, believed that the government had leverage to get a lot more, the settlement required the banks to pony up some $25 billion to settle outstanding charges. The banks, without admitting wrongdoing, agreed to reform fraudulent practices, such as “robo-signing” and proceeding with foreclosures on one track while supposedly helping borrowers to adjust terms on another. The settlement reserved the government’s right to continue criminal prosecutions. But there was a lot of double counting of funds already committed, and at the end of the day the banks parted with only a few billion dollars in new money, precious little of which went to relief of damaged mortgage holders. Only about $2.5 billion has found its way to actual principal...

Calling McConnell’s Bluff

Flickr/Gage Skidmore
The budget deal that just averted the supposed fiscal cliff was only a warm up. The next fiscal cliff is the $110 billion in automatic budget cuts (sequesters) that last week’s budget deal deferred only until March. But, as long as we are using topographic metaphors, this is less a cliff than a bluff. On the Sunday talk shows, Republican leaders were full of bravado and swagger. Representative Matt Salmon of Arizona, on CBS “Face the Nation” said it was about time “for another government shutdown.” Senate Minority Leader Mitch McConnell, speaking with ABC’s George Stephanopoulos, ruled out any further tax increases, declaring that “the tax issue is finished, over, completed.” He insisted, “Now it’s time to pivot and turn to the real issue, which is our spending addiction.” But is spending really the problem? For most the postwar era, federal tax revenues hovered around 19 percent of GDP, and spending a bit more than that. But for the four years since the financial collapse, federal...

The Austerity Lobby Loses One

Flickr/Michael Pollack
Flickr/Michael Pollack A conference sponsored by Fix the Debt in Washington, D.C. takes place in January 2012. T he fiscal deal that raised taxes on the top one percent was a victory only for what it did not do. It did not cut Social Security, Medicare, Medicaid, or other public spending. Unfortunately, it merely put off the next round of jousting over fiscal issues to a time when Republicans will have more leverage. In what we might call Cliff One (tax increases for the rich), the status quo played to President Obama’s advantage. If Congress failed to act, taxes would go up on everyone. So the Republicans caved. But in the coming battles over Cliff Two (the debt ceiling) and Cliff Three (the $120 billion in automatic cuts known as the Sequester) the status quo favors the Republicans. If Congress fails to act affirmatively, the United States defaults on its debt, and highly deflationary spending cuts kick in automatically. President Obama might dispatch Cliff Two by invoking the...

The Endless Cliff

Flickr/Talk Radio News Service
Flickr/Talk Radio News Service B eyond yesterday’s narrow escape from the dreaded fiscal cliff are … more cliffs. President Obama and Congress averted one fiscal calamity of tax-hikes-for-all only to face even steeper cliffs—the sequester, the debt ceiling, the Social Security shortfall, ad infinitum . It is a fiscal Wizard of Oz, an extended odyssey with perils on every side. The question progressives are asking themselves this morning is whether President Obama settled for too little in the fiscal mini-deal, having traded away his best single piece of leverage—the automatic tax increase on all Americans scheduled to hit today unless Congress acted. Some, like our colleague Robert Reich, have argued that it would have been better to “go over the cliff”—let tax hikes briefly take effect on everyone, thus increasing pressure on Republicans—rather than to make this agreement. Mercifully, Obama backed off any “grand bargain.” The deal was a defeat not only for the Republicans but for the...

Retrench Warfare

AP Photo/Alex Brandon
AP Photo/Alex Brandon Senator Mike Johanns, a Republican from Nebraska, left, walks with Senate Minority Leader Mitch McConnell from Kentucky to the Senate floor for a vote on the fiscal cliff early this morning. The Senate vote just before dawn in favor of a permanent tax hike on the top one percent defers virtually all of the other budget battles. Assuming the House follows suit today, it is up to President Obama and the Democrats to radically change the conversation. In the deal that the Senate agreed to, with only eight senators voting against, the Democrats won big in two respects. They forced the Republicans to raise taxes on the rich, and they took all spending cuts including in Social Security off the table—for now. If Tea Party Republicans vote against the deal and it passes the House with the voters of nearly all Democrats and a few dozen renegade Republicans, it could cost John Boehner his Speakership. But automatic cuts of $120 billion this year and $1.2 trillion over a...

The Problem's Guns—Not the Mentally Ill

Flickr/Robert Huffstutter
In the aftermath of the massacre of first-graders at Sandy Hook elementary school, right-wing defenders of unregulated guns have gravitated to a common alibi: The problem isn’t guns; it’s mental illness. If only society kept better track of crazy people and kept weapons out of their hands, we could prevent more episodes of armed mayhem. Senator elect Marco Rubio has spoken of the need to “keep guns out of the hands of the mentally ill” and dozens of Tea Party Republicans have echoed the same talking point. The always predictable Charles Krauthammer wrote: “While law deters the rational, it has far less effect on the psychotic. The best we can do is to try to detain them, disarm them…. there's no free lunch. Increasing public safety almost always means restricting liberties.” And the NRA's Wayne LaPierre, in additional to calling for an armed guard in every school, urged an "active national database of the mentally ill." Oh my, where to begin? Mental illness is just now starting to...

Debating the Chained CPI

Flickr/The Survivor Woman/401(K)
Yesterday, I posted a piece that questioned the political and policy wisdom of President Obama’s latest offer for a budget deal. My qualms were vindicated when Speaker Boehner, rather than taking the widely leaked “progress” as a new common ground, went back to his starting point and offered his own “Plan B”. This left President Obama in just the position that he vowed that he’d be in again—“negotiating against himself.” In the piece, I also criticized the role of my friend Bob Greenstein in lending credence to backdoor cuts in Social Security. Bob is the much revered and tireless advocate for the poor who is the longtime president of the Center on Budget and Policy Priorities. My piece questioned both his political logic in assuming that Social Security cuts have any place in this budget deal and his assumption that including them will somehow protect programs for the poor. My piece mistakenly described the annual cut as 3 percent rather than 0.3 percent, but it accurately pointed...

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