Redistricting Reform Is In Peril...Again

Source: NY Uprising

Drawing districts in New York State is a dizzying political game, with accusations of political partisanship and gerrymandering thrown back and forth for years. The ball is now firmly in Governor Cuomo’s court, much to his chagrin. Today brought the Governor's most public attempt to swat the issue out of his office and back at the NYS legislature.

Today, Governor Cuomo switched his stance on the absurdly gerrymandered districts in the state. The popular Governor has replaced his oath to veto political lines with a punt back to the legislature, or as Captial reporter Josh Benson put it, “a hedgey intention to 'wait and see'…and an uncharacteristic complaint that he lacks the political wherewithal to compel the legislature to do the right thing.”

Gov. Cuomo’s new reluctance to veto a plan flies in the face of recommendations from voting rights organizations and the New York Times editorial board, which wrote,

If these politically skewed districts are approved by the Legislature as expected, Gov.Andrew Cuomo should veto them. That would give a court-appointed special master a better chance to create independent maps that might actually allow for competition in political races.

This new disheartening announcement from New York’s executive is a step backwards in what progressive optimists hoped might be a string of victories in the name of democracy. It was not long ago that Demos, the Prison Policy Initiative and other voting rights groups celebrated the LATFOR prison-based gerrymandering victory that protected the rights prisoners to be counted in their home communities, not in the districts they are held in.

Call me naïve, but just yesterday it felt like New York might be stepping in a more democratic direction with that win. Now the state is as off-track as ever, with a reopened possibility that we’ll maintain the status quo and see squid-shaped and politically-motivated districts for the foreseeable future. 

Goldman Sachs Buys TransUnion. What’s In It For You?

One of the major companies responsible for the nation’s credit meltdown will now control your personal credit history. Goldman Sachs Capital Partners, the private equity wing of the financial firm, has partnered with another private equity company to buy the credit reporting firm TransUnion. Collecting and reselling personal information about your borrowing and bill-paying behavior is apparently worth more than $3 billion.

For those at the top, it’s a sweet deal: one former TransUnion owner will see a 50 percent increase in return on its investment in the company after owning it for less than two years. Private equity funds selling to other private equity funds is a lucrative business.

But for consumers, the deal promises few benefits. Consider the problem of credit reporting errors:  private equity companies buy firms for their potential to generate profit, and credit reporting companies like TransUnion earn the lion’s share of their profits from creditors rather than consumers— thus they have little financial incentive to conduct meaningful investigations when consumers find an error in their credit report. Instead, they rely on cheap automated dispute-resolution processes to resolve them. Nothing changes there, unless private equity pressures to keep costs down squeeze the dispute resolution process at TransUnion still more.

And the sale makes TransUnion no more likely to respond to a petition urging it to cease selling credit reports to employers on the grounds that they are unreliable and discriminatory in an employment context. Since when has Goldman Sachs listened to the Lawyers' Committee for Civil Rights or the National Council of La Raza?

This is a great time to have the Consumer Financial Protection Bureau on the job. In August, Demos submitted comments urging the CFPB to supervise the nation’s powerful credit reporting agencies,  including TransUnion, Equifax, Experian and smaller entities that gather personal credit information about consumers and profit by selling it to lenders, insurance companies, and employers. This month the CFPB responded to the concerns raised by Demos and others, recognizing that “the consumer reporting market plays a critical role in the consumer financial services marketplace and in consumers’ financial lives” and issuing a proposed rule saying that the largest credit reporting agencies would fall under its highest level of scrutiny. That’s a power that even Goldman Sachs may have to listen to.

The Centrist Delusion

Tom Friedman of the New York Times is at it again, claiming that what America needs to fix our economic and political mess is a radically centrist third party. Radical in this case means conservative when it comes to belt-tightening. Friedman in Sunday's Times urges a third party "to fill the space between the conservative Santorum (or even Mitt Romney) and the left-of-center Barack Obama."

Friedman has written this column before.

This time, he has a coyly undeclared candidate, David Walker, formerly president of the austerity-mongering Peter G. Peterson Foundation. Walker, who served in a previous life as head of the Government Accountability Office, has been barnstorming around the country, denying that he is running for anything, blaming America's woes on Social Security, Medicare, and Federal deficits.

Walker even campaigned hard for votes in Politico's third party preference poll last October, contending that his personal campaign was only to drum up support for the idea of budgetary prudence, and coming in second. But it sure looks to me like the fellow is running for something. And nice to have Friedman as a cheerleader.

Normally, a single-issue crusader like Walker would not get to first base. But this time, a dubious group of Wall Street multi-millionaires has created a vehicle for the likes of Walker called Americans Elect, to reserve a third party spot on the ballot, with the candidate to be selected later. They claim that the goal is to enhance democracy and break partisan deadlock. They also count Friedman as a big booster.

Americans Elect has already raised $22 million, and has qualified its yet-to-be named candidate for the ballot in 14 states including California. With some 6,000 paid and volunteer canvassers, they hope to gain a ballot slot in every state. Later this spring, its 350,000 members will vote via the Internet for their choice of nominee.

However, if the self-appointed steering committee of hedge fund private equity magnates doesn't like the public's choice (Bernie Sanders? Ron Paul?), they get to override it. As Ronald Reagan once memorably said, I paid for this microphone. The brand name is Americans Elect, but it might as well be Money Talks.

If anything, Americans Elect and David Walker epitomize all that's wrong with American democracy. Americans Elect is the creature of multi-millionaires and billionaires, who now have the ability to spend infinite money putting their thumbs on the scales of American democracy thanks to the Supreme Court's Citizens United decision. Walker himself enjoys his enlarged megaphone thanks to the billion dollars that retired private equity mogul Pete Peterson put into the austerity crusade.

The deadlock preventing solutions to America's real problems is not the result of a symmetrical partisan stand-off. Republicans are surely farther to the right than any mainstream party in American history, but today's Democrats are hardly left-wing. The policy stalemate is simply the consequence of Republicans blocking everything Obama proposes.

We already have a centrist party. It's called the Democrats. Obama's Democrats are to the right of Richard Nixon on most domestic economic issues. If Democrats had not joined Republicans in financial deregulation, we never would have had the economic collapse of 2008.

Contrary to the claims of Friedman, Peterson, and Walker, what ails America is not the long term budget projections of Social Security or even Medicare, but the continuing knock-on effects of the financial collapse of 2007-2008. The weakness of the housing sector, combined with lagging wages and persistently high unemployment, is leading to a prolonged period of deflation. More fiscal austerity would only make things worse.

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Rethinking Growth and Sustainable Development

Ahead of the 20^th UN Conference on Sustainable Development in June, Oxfam has released a discussion paper that presents a model that could help eradicate poverty while at the same time is environmentally sustainable. The paper addresses the very real tension between needing economic growth to bring development to impoverished areas and lift people out of poverty, and needing to decrease resource consumption as we are rapidly reaching our boundaries.

The paper argues that there is a space in which social justice concerns and economic development can co-exist in a manner that brings people out of poverty in an environmentally sustainable way. The visual representation is below.

Figure 1. A safe and just space for humanity to thrive in: a first illustration

Source: Oxfam. The 11 dimensions of the social foundation are illustrative and are based on governments’ priorities for Rio+20. The nine dimensions of the environmental ceiling are based on the planetary boundaries set out by Rockström et al (2009b)

Moving into this sustainable space takes fewer resources than you may think. We’ve highlighted how there are, in fact, enough resources but because consumption levels are so high and resources are distributed so inequitably, we end up with shortages. Oxfam breaks it down further and the results are stark:

• Just 1 percent of the current global food supply would provide the needed calories for the 13 percent of the population facing hunger
• Bringing electricity to those that currently lack it could be achieved with less than a 1 per cent increase in global CO2 emissions
• Ending income poverty for the 21 per cent of the global population who live on less than $1.25 a day would require just 0.2 per cent of global income.

And, most of the resources are consumed by the richest populations:

• Roughly half of all global carbon emissions are generated by just 11 percent of people
• 57 per cent of global income is in the hands of just 10 per cent of people
• A third of the world’s sustainable nitrogen budget is used to produce meat for people in the EU, even though they make up just seven per cent of the world’s population.

Exacerbating these trends is the heavy reliance on GDP and how it assesses growth, and in turn progress, through monetary terms alone. As we’ve pointed out, GDP does not take environmental degradation, income inequality, or a number of other issues that keep people in poverty into account. Yet, it is the dominent measure of growth and progress, even though it is poorly suited to accurately reflect the issues facing economies today. Indeed, GDP is unable to reflect the importance of sustainable development because it focuses solely on growth and development, regardless of whether it is sustainable or not.

The idea of infinite growth at whatever cost is quickly becoming obsolete due to both planetary constraints and the lack of progress for many people, indicating that growth does not equal progress. New metrics are needed to provide a more complete picture of economic and social progress. The Oxfam visualization is a strong start and hopefully indicative of what's to come.

Obama's Corporate Tax Reform: Not Progressive Until It's Revenue Positive

We'll be getting more details about the White House's plan for corporate tax reform early this afternoon, but for now I'm still hung up on the basic premise behind their proposals: that America's global competitiveness is somehow damaged by excessively high business tax rates.

Let's just start with the facts -- as we've written before, America's most profitable businesses simply do not pay extraordinarily high rates. According to a much-cited report last fall from the Citizens for Tax Justice, fully 78 of the 280 most profitable U.S. corporations had at least one year between 2008 and 2010 where they paid absolutely nothing in incomes taxes at all. And the average rate paid by these 280 businesses put together comes out to 18.5 percent -- still significantly lower than even the new 28 percent rate proposed by the White House.

If the U.S. is really concerned about global competitiveness, we should think about how our tax revenues from corporations actually compare to other nations. In the chart below, you'll see that corporate taxes make up only 7.1 percent of all taxation in the U.S., significantly below the UK's 10 percent and the OECD average of 10.1 percent. It's hard for me to imagine globally-competive levels of infrastructure or R&D investment in the U.S. as long as we have sub-average taxation on corporate incomes.

What's more, the White House is actually committed to making corporate tax reform "revenue neutral," and this is seen as a bold progressive stance given the preference for revenue-negative tax reform from many on the right. If we know that many of the richest corporations in the U.S. pay next-to-nothing in income taxes, why wouldn't we insist on revenue positive reform? Can't corporations afford the hike?

Yes, they can -- and it's actually the federal government that can't afford reform that is revenue neutral. In 1955, the federal government raised over 27 percent of its revenue from corporate taxes; today, today it's below 9 percent. In 1955, corporate tax revenues amounted for 4.3 percent of GDP; today, they account for only 1.3 percent.

Now, it's true that today's record-low revenues from corporate taxes are due in large part to the growth of deductions and exemptions, which Obama plans to limit as part of his reform. But I'm not optimistic: while roll backs on some deductions, like accelerated depreciation, do make it into the proposal, the White House is actually calling for an expansion of other deductions to support certain industries like manufacturing. 

The details of corporate tax reform are going to be devilish, and I imagine that's where most of the debate will center -- but before we get there, shoudn't we stop and figure out what we want more generally from this kind of reform? If it's improved global competitiveness or greater fiscal security, then it seems like we're already headed down the wrong path.

Forgetting History -- and Keynes -- in Greece

Greece has been the most pillaged country in Europe this Depression, among other reasons, because no one in any leadership position seems to have learned lessons from the 1930s. Plus, banks have more power now than they did then to call the shots.

Despite no signs of the first bailout working – certainly not in growing the Greek economy or helping its population - but not even in being sufficient to cover speculative losses, Euro elites finalized another 130 billion Euro, ($170 billion) bailout today. This is ostensibly to avoid banks’ and credit default swap players’ wrath over the possibility of Greece defaulting on 14.5 billion Euros in bonds.

Bailout promoters seem to believe (or pretend) that: bank bailout debt + more bank bailout debt + selling national assets at discount prices + oppressive unemployment = economic health. They fail to grasp that severe austerity hasn’t, and won’t, turn Greece (or any country) around. Banks, of course, just  want to protect their bets and not wait around for Greece to really stabilize for repayment.

Prior to the Great Depression, the Greek economy experienced years of growth, a healthy commercial activity spree, and like today, a stark increase in (less-leveraged) bank loans to finance it. When the Depression struck, banks and local businesses faced unpayable loans and declining asset values.  (Stop me when this sounds familiar).

Credit constricted immediately, choking internal economic activity.  In 1928, the Greek Drachma was tied to the gold standard, but pegged to the British pound. When Britain devalued its pound in 1931, the Greek government responded by raising public investments and pegging the Drachma to the US dollar.

But by early 1932, central bank reserves had fallen so much that they only backed 40% of Greek bonds. Even without the slow drip of rating agency downgrades to highlight this leveraged debt situation (which is nothing compared to say, today’s US reserves vs. debt leverage), the lack of reserves caused foreign speculators to fleece the Drachma/dollar exchange rate. Bond yields blew out. Borrowing costs shot up.  

So in March 1932, the League of Nation’s (the precursor bank bailout entity to the ECB/IMF) agreed to provide a loan to service Greece’s debt in return for – wait for it - austerity measures. Unlike today, the government said ‘hell no.’ Instead, in April, 1932, it floated the Drachma - which devalued quickly. It also declared a public debt moratorium, and increased infrastructure spending to strengthen its economy. It negotiated repayment terms with creditors for overdue interest.  By 1934, agriculture and industrial production rose, the currency was more stable, employment increased, and the budget balanced.

The situation is different now. Though national Greek banks registered relatively few domestic loan losses in 2009 ( a fact unrecognized by the bailout supporters), they did begin taking losses in their trading books due to various international bets. Their borrowing and margin costs rose sharply and quickly with each rating downgrade which increased their trade losses, and kept them from extending or renegotiating loans locally, which caused more economic pain for the population.

Greece would have been better off, had it not suffered a rapid series of downgrades and been pulverized by subsequent hot-money flight and pressure. Despite a clear warning from the Central Bank of Greece in late 2009 (when Greece was critical, but breathing) that it could sustain its costs if they didn’t rise egregiously, Moody’s (and later others) cut Greece’s sovereign debt rating from A1 to A2 in December, 2009.  From that point on, the international banking community went into ravage mode, fast.

Moody's cut Greece’s debt again, to A3 in April, 2010, to Ba1 (junk) in June, 2010, and to B1 in March, 2011. Three months later, Greece’s rating was cut to Caa1. By September, 2011 the six biggest Greek banks were downgraded to Caa2, a smidge above default levels, crushing national credit flow to the population.

When any country is downgraded from single A to junk within 18 months, it has to issue more expensive debt to stay even, which by definition, makes the credit-worthiness of its bonds decline.  As in any country, Greece's banks are big buyers of its government bonds. They also use those bonds as collateral for other borrowing  and trades - with each other – and with  international banks.

As Greek banks weakened and borrowing costs soared, their ability to buy Greek bonds from their own government diminished, which weakened the value of government debt. Circularly, Greek banks took further hits for holding the devalued Greek bonds and thus become weaker - further reducing their ability to sustain local needs.

That is why the Greek government wants to bolster its now junk-rated banks (in addition to the money that banks are getting directly from bailout-for-austerity loans) and foreign ones, at the cost of hurting the population.  But since the economy (even at its healthiest level ever) can’t sustain its bailout borrowing costs (as opposed to its operating costs which would have been payable without the increased rates and bailout principle mixed in), this is an unstoppable downward spiral.

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Blown Opportunity: Michael Grabell Revisits The Stimulus

In Stoppard's Rosencrantz & Guildenstern Are Dead, Guildenstern, just before his execution, says to his doomed friend: "There must have been a moment at the beginning, where we could have said no. Somehow we missed it. Well, we’ll know better next time."

Michael Grabell's Money Well Spent? is the story of legislators given the briefest of opportunities to resuscitate a broken country and "somehow missed it," again and again. The achievement of Grabell's book is to draw a line from the bungling of lawmakers at the highest levels all the way down to the struggling workers at the bottom. Readers who have been living with unacceptably high unemployment rates for so long are liable to wonder what might have been every few pages of this terrific book.

It's irrelevant that much of the story of the American Recovery and Reinvestment Act, particularly the sections on the Congressional machinations, has already been told. The book is effective because it reopens old wounds. We are reminded of the aggravating lawmakers who were neither dogmatically against the stimulus nor inclined to pass a strong bill -- and yet, because Republican support was nearly nonexistent, were the linchpin of the effort.

Senators Arlen Specter, Susan Collins, Olympia Snowe and Ben Nelson were famously able to water the stimulus down, to chip away at the price tag by citing their personal bugaboos, greatly diminishing its potential efficacy and job-creating capabilities. Collins, for example, forced the removal of a provision "designed to encourage federal workers to point out cases where taxpayer money is subject to waste, fraud, or abuse."

As Paul Krugman wrote, 10 days before the bill was signed:

Now the centrists have shaved off $86 billion in spending — much of it among the most effective and most needed parts of the plan. In particular, aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high. But in the name of mighty centrism, $40 billion of that aid has been cut out.

The stimulus was not considered adequate then and it isn't now. Granted: there would be "between 2.2 million and 4.2 million fewer Americans employed if the bill had never passed," but this isn't good enough. As Grabell succinctly put it in a recent interview:

The stimulus did a lot of good but ultimately failed to bring about the strong recovery the public expected. The money was spread so far and wide that in a lot of different programs it was absorbed into existing budgets. The tax cuts weren’t strong enough and public enough to overcome these prevailing fears of losing a job, a home, or years of retirement savings.

For this reason, there may be no more nauseating moment in Money Well Spent? as when Nelson tells the Senate, "We trimmed the fat, fried the bacon, and milked the sacred cows." It is Grabell's achievement to make the reader appreciate how this triumphialism -- along with the outdated government funding formulas that determined the distribution of dollars -- led to the devastation Nelson seems so gleeful to have wrought.

To take one example: Grabell reports that the stimulus funds oftentimes did not get proportionally allocated to states that needed them most. South Dakota, for instance, had minimal unemployment yet received $1,952 per person, while Florida -- with more than double the percentage of unemployed -- received less. Why? Because there was "no relationship" between where projects were funded and the levels of unemployment and poverty. That meant that a place that was really hurting, such as LaGrange County, only got $213, while Thomas Country (population: 538) was awarded $7 million for a viaduct.

Grabell digs even deeper, putting a face on the Americans who were ostensible targets of the stimulus. His portraits are disparate: among them, Ed Neufeldt, who worked for a shuttered RV factory in Indiana and "briefly became the face of the economic downturn"; Derrick McRae, a carpenter from Paterson who tells Grabell, "right now I'd probably be homeless" were it not for the stimulus; and Malcolm MacIver, a neurobiology and engineering professor who received "a $1.25 million grant to use electric fish from the Amazon to study how animals take in sensory information to move quickly in any direction."

Ultimately, Grabell calls the American Recovery and Reinvestment Act "an extraordinary and flawed endeavor." It wasn't an abject failure, but it certainly wasn't the second coming of the New Deal -- which is what the country required -- but a defanged imitation.

Well, we’ll know better next time.

Celebrate President's Day By Not Going Shopping

Here we go again. Another holiday, another sale-explosion/shopping extravaganza. Can we stop and ask ourselves: Is buying more stuff, which we probably do not need and may very well not use, the best way to honor our Presidents?

We talked a bit about this at Christmas time and how deeply consumption is imbedded in our culture. As we pointed out then, we don’t have the resources to continue our current consumption patterns and high levels of consumption don’t necessarily translate into economic gains domestically. But, the pull of consumption is so strong and the lure of over the top sales run at holiday times exacerbates that pull.

Take, for example, the sales-extravaganza at Macys.com, which offers up to 75 percent off regular prices during President’s day. Looking at jeans, a staple of almost every wardrobe, sales piled upon sales means that you can buy a pair of jeans for less than $22. Yet, is the advertised cost the true cost of making those jeans, or is it more than $22? And, if so, who is paying for the difference in cost?

Let’s start with the cotton used to make the jeans. Cotton is highly susceptible to disease so many farmers use large volumes of fertilizers and pesticides. Cotton farming is also extremely water intensive. It takes up to 650 gallons of water to grow the cotton used for one shirt. Beyond the water requirements just to grow cotton, the high levels of fertilizer and pesticide used can result in tainted water supplies. Recent soil samples in cotton growing areas of West Africa showed 77 percent of all the land had high levels of toxic chemicals, which eventually leached into the drinking supply. Not to mention that more resources will be needed going forward as climate change will decrease cotton yields so more crops will need to be planted to make up for the decline.

Then there is the manufacturing and dying process to turn the cotton into jeans. The dying process has turned local drinking sources in Mexico toxic and blue. Jeans that are made to look “distressed” have a higher toll on the environment because the process uses extremely toxic chemicals, including potassium permanganate, which was once used to induce abortion, and hydrocyanic acid, a relative of cyanide. Manufacturing and dying jeans has turned an area of Mexico that used to grown genetically pure maize into an area that is now sterile and non-productive.

Finally, there’s the issue of wages and exploiting labor in developing countries.  A recent documentary called China Blue took an in-depth look at the conditions at a blue jeans factory in southern China. Not surprisingly, the conditions are appalling. Workers make less than $1 a day, from which rent and meals are deducted. Like other industries, the push for more volume at lower costs comes at the price of worker’s rights and wages. You may pay $50 for a pair of jeans, but the 20-25 workers that were involved in making those jeans will share compensation that is often less than $1. Workers in factories that produce jeans for Wal-Mart earn less than 40 cents per day. Children in Honduras work for 25 cents per hour to sew jeans that Wal-Mart then sells for $20.

There are changes being made in the industry and things like organic cotton growing help minimize the environmental damage. But, for something that most people have multiple pairs of, do you really need to buy that extra pair of jeans today? It may be cheap for you, but there is no doubt that someone is paying the true cost.

Celebrating Presidents' Day with the Great Progressives-In-Chief

Demos

In the interest of having some Presidents' Day fun, consider the following question: If progressives were given the chance to re-sculpt Mount Rushmore in their image and likeness, which presidents would most deserve recognition?

I've given you my personal favorites below -- on the whole, it's a fairly predictable line-up, but as you'll see, some of the more predictable choices have earned their progressive plaudits for accomplishments that tend to get glossed over by the history books.

Theodore Roosevelt

First thing's first: TDR would get to stay. To understand why, see his 1910 "New Nationalism" address in Osawatomie, Kansas, which President Obama explicitly channeled in a recent populist call to arms in the same town -- both speeches called for a return to shared prosperity, a strong middle class, and freedom from abuse by powerful corporate entites that corrupt the political system to serve their interests. 

TDR also understood how the values of economic fairness and democratic inclusion were logically connected to environmental sustainability -- his Square Deal agenda placed ecological preservation front and center with consumer protection and trust busting, highlighting how corporate exploitation of our natual resources remains closely related to the exploitation of wage workers and the electoral system. This is a policy lens that we at Demos take very seriously and have worked to extend to the problems of the 21st century.

Franklin Roosevelt

Our readers will see FDR as maybe the most obvious choice, but no list would be complete without him -- the legislative accomplishments of his first 100 days are an unmatched contribution to the establishment of a mixed economy promoting fairness and shared prosperity. 

But FDR gets less recognition for another proposal near the end of his presidency -- the "Economic Bill of Rights" -- which, according to legal scholar Cass Sunstein, was sincerely intended to be incorporated into the Constitution to supplement the "political" rights already enumerated in the Bill of Rights. Here's how FDR put it in his 1944 State of the Union:

As our nation has grown in size and stature...political rights proved inadequate to assure us equality in the pursuit of happiness. We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. Necessitous men are not free men.

The guarantees provided by this Economic Bill of Rights would include "the right to a useful and remunerative job," "the right of every family to a decent home," and "the right to adequate protection from the economic fears of old age, sickness, accident, and unemployment."

These are powerful ideas, and they sit at the intersection of what Demos was founded to promote -- the mutually-reinforcing condition of a fair economy and inclusive democracy. For all that FDR achieved, the failure of these rights to become explicit guarantees for all Americans means that his greatest ambitions remain open for today's generation of progressives to fulfill.

Harry Truman

Although Truman is appreciated far less than FDR as a progressive leader, his economic agenda was distinctive in that it aimed to combat inequality in a time of budding economic recovery -- does that, by any chance, sound familiar? Truman's "Fair Deal" agenda called for major reforms in housing, labor, social welfare programs, and public institutions, all of which were concerned with preventing excessive accumulation of wealth at the top in the postwar economic rebound.

The Fair Deal generally gets less credit as a progressive agenda because, for the most part, it failed to get passed into law -- the Republican Congress of the time worked aggressively to block much of Truman's legislative agenda in order to hold his presidency at a stand-still. That should also sound familiar.

Lyndon Johnson

Much like Franklin Roosevelt, LBJ is perhaps an obvious choice: the Great Society initiatives -- ranging from the Civil Rights Act and the Voting Rights Act to Medicare, Medicaid, the National Endowment for the Arts and NPR -- remain some of the most popular and enduring contributions that progressives have made to American society.

Consequently, LBJ tends to get more credit for his legislative accomplishments than he does for his contributions to progressive thought -- but, as Ira Katznelson of Columbia University highlights in a recent book, Johnson was a passionate advocate for an amazingly activist philosophy of social justice: one that insists on making "equality" among Americans not just a formal promise but rather an actual fact of life. Here's a brief exerpt from a commencement speech at Howard University outlining this idea:

...[F]reedom is not enough. You do not wipe away the scars of centuries by saying: Now you are free to go where you want, and do as you desire, and choose the leaders you please. [...] This is the next and the more profound stage of the battle for civil rights. We seek not just freedom but opportunity. We seek not just legal equity but human ability, not just equality as a right and a theory but equality as a fact and equality as a result.

Barack Obama

As long as we're rotating the line-up on Mount Rushmore, we would go ahead and add a fifth slot to honor President Obama for extending the legacy of progressive activism into the 21st century -- for overseeing an economic stimulus of unprecedented scale, for passing financial reform and establishing the Consumer Financial Protection Bureau, and for extending health coverage to 30 million more Americans.

Of course, my hope is that his greatest progressive accomplishments are yet to come, particularly because the American middle class remains as strapped today as ever. But if this list does nothing else, I'd say it gives us reason to be optimistic.

Supreme Court to Review Citizens United?

Yesterday evening brought a fascinating new development on the noteworthy case in which the Montana Supreme Court, in December, upheld a Montana law barring corporate expenditures in Montana elections, despite the U.S. Supreme Court’s Citizens United decision which struck down a federal ban on such expenditures.  The big news, however, is not that the U.S. Supreme Court granted a stay of the Montana Supreme Court’s decision, pending fuller consideration by the Court (that was virtually a foregone conclusion). Two developments are more significant. 

First, the Supreme Court declined to follow the plaintiffs’ suggestion (in papers filed by long-time CFR opponent James Bopp) that the Court should simply summarily reverse the Montana Supreme Court’s decision without even the filing of a cert. petition in the normal course -- by simply treating the stay application as a cert petition. 

Second, but more significant, is a concurring statement by Justice Ginsburg, joined by Justice Breyer, putting on the table what has become abundantly clear since Citizens United: unlimited independent expenditures on behalf of candidates do, indeed, have the potential to corrupt our political process, and the Montana case presents the opportunity for the Court to review its CU decision in light of the experience of the last two years:

Montana’s experience, and experience elsewhere since this Court’s decision in Citizens United v. Federal Election Comm'n make it exceedingly difficult to maintain that independent expenditures by corporations “do not give rise to corruption or the appearance of corruption.” Id., at ___ (slip op., at 42). A petition for certiorari will give the Court an opportunity to consider whether, in light of the huge sums currently deployed to buy candidates’ allegiance, Citizens United should continue to hold sway.

This concurring statement is the starting bell, and the fact that plaintiffs now must file a separate petition for certiorari means there will be an opportunity for the Court to consider, on fuller briefing, what the experience of the last two years -- as well as the unique factual record in the Montana case -- may bring to bear on the debate over whether unlimited independent expenditures are a threat to democracy.  The Battle of the Supremes has just gotten much more interesting.

Who is Representing the Uninsured in the Contraception Debate?

Yesterday’s House oversight committee hearing on contraception was far from productive. This is hardly unexpected; the committee is comprised mostly of men making decisions on women’s health, and the witnesses called were more of the same. To add insult to injury, Chairman Darrell Issa refused to allow law student Sandra Fluke to testify, citing her youth and inexperience. Fluke’s testimony was largely based on the personal contraceptive experiences of a friend. Issa’s refusal of the testimony sent a dual message: young women are not welcome, nor are their personal stories – a pretty strange message to send in a hearing purporting to be about contraception.

This disconnect between the committee’s demographics and the objective of the hearing became so great that Delegate Eleanor Holmes Norton walked out in protest of the dearth of women. Norton is right to be outraged; the homogeneity of gender representation at the hearing spoke far louder than any discussion held. Yet Norton has another reason to protest this hearing, for the disconnect in representation is not just gender-based. The committee and witnesses were not only a group of men, but they were also overwhelmingly white and middle-aged or older –- precisely the population least likely to have worries about either contraception or insurance coverage, as the charts below show.

This homogeneity in race and age adds another layer to the contraception debate -- the need for all Americans to have health insurance and have access to contraception through that insurance. Today, nearly half of all pregnancies every year are underintended -- over three million pregnancies a year. About forty percent of these abortions end in abortion. Moreover, according to the Guttmacher Institute: "Unintended pregnancy rates are substantially higher among poor and low-income women, minority women, women aged 18–24, cohabiting women and women with exactly one child than among other groups."

Unintended pregnancies leading to births or abortions can not only be profoundly difficult and disruptive for women, but cost all of us money. A study last year by the Brookings Institution found:

We find that taxpayers spend about $12 billion annually on publicly financed medical care for women who experience unintended pregnancies and on infants who were conceived unintentionally. After accounting for the fact that some of these pregnancies are merely mistimed while others are altogether unwanted, we also estimate that taxpayers would save about half of this amount if all unintended pregnancies could be prevented.

Yes, employers should provide free contraception coverage to all their employees, but what about those who don't have insurance at all, particularly the young and the poor who can least afford to a misstep in life? This is an issue that urgently needs to be discussed -- but the make-up of yesterday's hearing ensured that such a discussion would never occur.

Small Businesses Aren't Concerned About Regulations, So Why is Washington?

The headline for next week's edition of The Economist is "Over-regulated America," with the subtitle "The home of laissez faire is being suffocated by excessive and badly written legislation."

Sounds dramatic, but in reality the only things getting "suffocated" here are the facts about regulations. To be fair, this article does recognize (as few tend to do) that both parties in the U.S. are responsible for the growth of regulations -- this is important to remember, but this falls short of achieving genuine balance given how consistently this piece goes on to misrepresent the relative weight of costs versus benefits of public oversight.

Take this passage, for example:

"A study for the Small Business Administration, a government body, found that regulations in general add $10,585 in costs per employee. It’s a wonder the jobless rate isn’t even higher than it is."

Well, The Economist is right about one thing: it is a wonder that the jobless rate isn't higher today -- but that has a lot more to due with the fact that Congress seems physically incapable of passing the fiscal stimulus measures that we know are needed to make a real dent in the unemployment rate, and less to due with regulatory over-reaching.

And don't take my word for it -- as a Gallup poll of small business owners revealed earlier this week, the number 1, number 2, and number 3 most common reasons why small businesses are not hiring all have to do with insufficient consumer demand (which, as readers of this blog certainly know, the public sector is totally equipped to boost through investment and direct spending). Worries about "government regulation," meanwhile, ranked in at number 6.

But this is not my favorite poll for showing the relative insignificance of regulations to job growth. That would be the poll conducted by the Chamber of Commerce itself just last summer: 

When asked to prioritize factors discouraging more hiring, "too much regulation" registered as the highest priority for a grand total of 8 percent of small business, and only the second highest priority for another 15 percent. I suppose we could have a legitimate debate about the meaning of "economic uncertainty," which came in at number 1, but it seems clear to me that uncertainty about consumer demand is most likely the key factor here (and for what it's worth, one of the most comprehensive analyses of this topic, conducted by EPI's Larry Mishel, confirms that suppressed consumer demand is the main macroeconomic factor holding back job creation).

Yes, there are costs associated with public regulations (just as there are many benefits), and we should have a sober conversation about how they affect the balance sheets of certain businesses. But it's absurd to obsess over the non-crisis of regulatory over-reach when there's a very real crisis of unemployment still at hand.

Students In New York, Prepare To Be Bored

School in New York is probably going to get a little more dull. Yesterday the United Federation of Teachers and Governor Cuomo struck a compromise on the issue of teacher evaluations that will probably mean less focus on creative assignments and more on standardized testing.

In a joint press conference, the UFT and Gov. Cuomo announced a system today in which “60 percent of a teacher's evaluation will be based on subjective classroom observations by the principal or other school officials, and up to 40 percent will be based on student scores on statewide standardized tests.”

This proposal comes from a good place, it's just is a bad policy for teachers in the end. This compromise is part of Gov. Cuomo’s fight to win New York $700 million in education money in the overly simplistic federal Race to the Top program, but misses the mark for reforming education in New York.

In this compromise too much of a teacher's evaluation based on test scores, warns Diane Ravitch, former assistant secretary of education George H.W. Bush administration and appointee to the National Assessment Governing Board. She was quoted saying that the compromise means fewer "field trips, projects, music, whatever is not tested.”

Consider those teachers taking up the noble profession in an “underperforming” district. With 40% of the evaluation coming from their students’ performance, we’re making working in poorer school systems (especially those with students struggling with English) less appealing than ever.

Districts’ only alternative option to this requirement is to “base 20 percent of the score on state test results and the other 20 percent on exams developed by the districts or by a third party, provided that the exams are approved by the state.” This is a costly process for a school system at a time when districts face serious funding cuts and lower tax revenues. It remains to be seen whether achool administrators have the resources to create their own exams.

And those districts that want to refuse the requirements outright? Well, to be sure districts implement evaluations by January of 2013, Gov. Cuomo has warned that non-compliant schools risk not getting their share of an $805-million increase in school aid.

Effective evaluations would require the kind of money and manpower Americans can't or aren't willing to invest in education, at least during the Great Recession. Tested, nuanced evaluations like Small Group Instructional Diagnosis (SGID), require an objective evaluator and designated time for student group discussions about the teacher's impact on their understanding and enjoyment of the class. In an ideal world where we place real priority on education and don't just apply band-aids to the broken system, SGID and other options would be plausible.

Until that day comes, I have to agree with Ravitch's cynicism about the situation. As she put it, yesterday was “a dark day for education in New York," the consequences of which students and teachers may be feeling for a long time. 

The Prince With The Common Touch

"We've displayed to this world leader our work ethic, No. 1, and our value for friendship; that's No. 2," Mayor DeWayne M. Hopkins said in an interview at City Hall. "If that message can be disseminated into the rest of the United States in encouragement for people to be interested in Muscatine and perhaps relocate here - and I mean people all the way from households up to retail and manufacturing - then that's a plus."

The above quote refers to the visit to Iowa by Xi Jinping where the Chinese president in waiting once spent time as a young man.  His visit underscores the desire for the Chinese to maintain strong relations with the U.S., but his choice of cities also underscores his sympathies for the common man. 

Though he is labeled a "princeling" because of his ties to China's revolutionary hero, he worked in the fields in China and identified with the working class as evidenced by Ms. Dvorchak's recall of his humble demeanor when he stayed as a guest in her home.  Americans should be thrilled that Xi Jinping chose to identify with America's heartland rather than the elite 1%.

By bringing media attention to Muscatine, Americans are reminded of the Midwestern work-ethic. In many ways, they have much in common with the rural population in China. Such rare visits may provide the opportunity to establish sister city relationships with cities in China and other countries that can pave the way for more future economic and political cooperation and understanding.

More importantly, Xi's visit demonstrates the importance of hosting overseas visitors and sending young people abroad as a way to build stronger diplomacy.  No one would have guessed that Xi could be the next leader to run the second largest economy in the world when he first came to the States. The fact that his American hosts left a fond memory for him will no doubt help shape his attitude and foreign policy towards the United States which will benefit both nations.  Such citizen diplomacy could arguably have a greater positive impact than all the millions we spend each year in the State department and the trillions we spend in the military.

We should welcome Xi Jinping with warmth and respect as he continues his goodwill tour in the U.S.  No doubt that there are many issues to work out between our two nations.  But friends can always agree to disagree and find ways to reach a compromise.  Rather than treat China and other nations as enemies, we would have a greater chance of achieving our goals of peace and economic prosperity by reciprocating some of our goodwill too.

Ann Lee is a Demos Fellow and author of "What The U.S. Can Learn From China: An Open-Minded Guide To Treating Our Greatest Competitor As Our Greatest Teacher" 

Fed Rethinks Stimulus At Exactly the Wrong Time

What is it about a budding economic recovery that seems to drive U.S. policymaking off the rails? We started out this week with a debate about President Obama's budget proposal that looked right past its job-creating potential to instead focus on how much spending it does or does not cut. As I wrote earlier, this is exactly not the question you ask in order to keep an economic rebound moving.

Now we hear that the Fed is joining this party of confused policymaking by considering a more contractionary monetary policy, motivated by a fear that maintaining today's low interests rates will unleash inflation. But just as this is not the time to be worried about deficits, this is also not the time to be worried about inflation: both fiscal and monetary policy in the U.S. needs to be turned on full-blast stimulus right now to solve the short-term unemployment crisis, and we can take care of the deficits/inflation risks later.

What's particularly surprising about the Fed's shift in focus toward fighting inflation is that the central bank has been, by far, one of the most responsible policymaking arms of the federal government in the wake of the recession. The low interest rates and quantitative easing policies that Bernanke has pursued have been exactly what was needed to make a dent in the unemployment rate. The reason these policies haven't been more effective is because austerity hawks in Congress crippled our fiscal policy.

But do the monetary policy hawks have a reason to fear rising inflation resulting from consistently low interest rates? If history is any guide, then absolutly not: in fact, the last time the Fed genuinely commited itself to low interest rates and an expansionary monetary policy, we saw amazing gains in employment without any significant hike in inflation.

The period I'm referring to is the late 1990s, when Alan Greenspan decided to keep interest rates low and was willing to hold off and see what happened with inflation. Jared Bernstein and Dean Baker's analysis of this period reveals that not only did unemployment drop significantly, but those on the bottom end of the labor pool actually benefited most of all:

The real hourly earnings of low-wage male workers, after falling at an annual rate of 1% from 1973 to 1995…grew 1.5% per year from 1995 to 2000.

The real wages of high school dropouts grew 1% per year after 1995, after falling at about that rate from 1973 to 1995.

This rise in income for the poorest families led to dramatic declines in poverty rates, especially for African American families, whose poverty rates fell 5.7 percentage points from 1995 to 1999 while the overall rate fell by 2 points.

Of course, we are recovering from a much deeper economic downturn today than we were in the late 1990s, but the benefits of expansionary monetary policy are clear -- these gains at the turn of the last century eroded steadily after the Fed shifted course and tightened monetary policy in response to the 2001 recession.

We shouldn't make the same mistake twice. The Fed should continue the expansionary monetary policy that it has wisely pursued thus far -- and our fiscal policymakers need to have their backs.