Robert Kuttner

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...

Chairman Summers? Let’s Hope Not

AP Photo/Shizuo Kambayashi
AP Photo/Shizuo Kambayashi Former U.S. Treasury Secretary Lawrence Summers addresses a press conference after attending the Group of Seven finance ministers in Fukuoka, Japan in July 2000. He’s back. Larry Summers is running hard to succeed Ben Bernanke as chairman of the Federal Reserve when Bernanke’s term expires in early 2014. This is not a great idea, for three main reasons. The first is Summers’ famous temperament. The problem is not just that he’s less than sensitive to women. It’s that he’s a bully in general, cocksure of himself, using others as foils and prevailing by controlling the agenda. Through several turns in a career marked by falling upwards, Summers’ chief patron and sponsor, Robert Rubin, keeps assuring people that “Larry has changed.” And Larry keeps not changing. It was the bullying more than the disrespect towards women that finally got him fired as president of Harvard. Justice Oliver Wendell Holmes, Jr. famously said of Franklin Roosevelt, “a second-rate...

Social Security: Will Obama Cave?

AP Photo/Charles Dharapak
AP Photo/Charles Dharapak President Barack Obama looks toward reporters shouting questions at him regarding the fiscal cliff as he walks to the White House after attending a holiday party for the National Security Council. O nce again, President Obama seems to be on the verge of folding a winning hand. Widely leaked reports indicate that the president and House Speaker John Boehner are making a fiscal deal that includes hiking tax rates back to the pre-Bush levels with a threshold of $400,000 rather than the original $250,000, and cutting present Social Security benefits. Obama, the reports say, will now settle for as little as $1.2 trillion in tax increases on the rich rather than the $1.6 trillion that he had originally sought. The difference, in effect, will come out of the pockets of workers, retirees, the young, and the poor. Especially foolish is the cut in Social Security benefits, disguised as a change in the cost-of-living adjustment formula. Before getting to the arcane...

Rice Takes Herself Out

(AP Photo/Bebeto Matthews)
Here is the lead of The New York Times' two-column front-page story today: Washington—President Obama knew before he picked up the phone on Thursday afternoon what Susan E. Rice, his ambassador to the United Nations, was calling about: she wanted to take herself out of the running for secretary of state and spare him a fight. Really ? Are you kidding? I have no inside sources, but this just not how things work. Does Times reporter Landler truly think that President Obama left this decision to Rice? More likely, the president and his political strategists and vote counters have been agonizing for weeks about whether a good dogfight with Republicans over Rice’s confirmation would be a net plus or a net minus. Ultimately, they decided it was better to get someone else. If Obama really did leave this to Rice herself, he is even more of a wuss than his worst detractors contend. Landler continues in the second paragraph: By acceding to Ms Rice’s request, which she had conveyed to White...

The Courts: How Obama Dropped the Ball

AP Photo/Carolyn Kaster
(AP Photo/J. David Ake) I n his novel King of the Jews , Leslie Epstein sets his story in the wartime ghetto of Lodz, Poland, where the Gestapo ruled through an appointed council of Jewish elders. Epstein, researching the book, tracked down the gallows humor of the time. In one such joke, told by a character in the novel, two Jews are facing a firing squad. The commandant asks if they would like blindfolds. One of the condemned whispers to the other, “Don’t make trouble.” “Don’t make trouble” could have been the credo of the first year of the Obama Administration. The White House calculated that if the president just extended the hand of conciliation to the Republicans, the opposition would reciprocate and together they would change the tone in Washington. This was the policy on everything from the stimulus to health reform to judicial nominations. It didn’t work out so well. Now, spurred by the tailwind of a re-election victory and the realization that public opinion is on his side,...

Magnificent Trespasser

Albert Hirschman, an economist who became one of the greatest of the 20 th century’s moral philosophers, died Tuesday at age 97. Hirschman’s intellectual odyssey took him from the study of eastern European economies under Hitler to work as a development economist for the Federal Reserve Board, then in Latin America in the 1950s and 1960s, as an adviser to the Colombian Planning Ministry, and then to engagement with the enduring questions of economy and society from the 1970s until illness suspended his active life. Along the way he taught at Yale, Columbia, Harvard, and the Institute for Advanced Study. To the extent that Hirschman is widely known today, it is mainly though a small book with a puzzling title, Exit, Voice, and Loyalty , written in 1970. The book has a huge following among social scientists, mainly outside of Hirschman’s own profession of economics. His basic insight is elegant, simple, and original. Citizens and consumers have two basic ways of responding when they...

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