This item by TDS Co-Editor William Galston is cross-posted from The New Republic.
Today, more the two years after the official start of the recovery, we find ourselves mired in slow growth and high unemployment. The majority of Americans cannot distinguish between this recovery and stagnation, if not continued recession. One question is why the economy is performing so much worse than in the previous post-recessionary periods since World War Two. And once we think we have an answer to that question, we have another: What is to be done?
Economics is the obvious place to turn for answers. But, despite the impressive gains in the field over the past century, economic policymaking (like the rest of public policy) remains more art than science. We try to find the best way forward without being certain that our efforts will produce the hoped-for outcome. Even if the weight of evidence, argument, and common sense leans strongly in one direction, skeptics who look for countervailing considerations can almost always find them. So let me begin an argument that will lead to specific policy recommendations by stating as clearly as I can what is most probably true about the circumstances in which we find ourselves.
First, it is likely that Carmen and Vincent Reinhart are right: We are now enduring the aftermath of a financial crisis, which differs qualitatively from cyclical downturns and typically requires much more time to recover. In a recent paper, “After the Fall,” the Reinharts look at 15 post-WWII single-nation financial crises and three global contractions–the Great Depression of 1929, the post-1973 oil shock, and the 2007 U.S. subprime collapse. Their survey includes five advanced economy crises: Spain (1977), Norway (1987), Finland (1991), Sweden (1991), and Japan (1992). Here are their principal findings:

Real growth rates decline by about 1 percent in the decade following financial crisis.
Unemployment rises on average by about 5 percent points and remains high for many years. In fully a third of the cases the Reinharts analyze, the rate never falls to pre-crisis levels.
In the decade prior to a financial crisis, the debt-to-GDP ratio rises by an average of 38 percent. After the crisis, it falls by the same amount, but it takes close to a decade to subside to previous levels. While the debt is being worked down, credit is restricted, slowing growth in output and employment.
Median housing prices fall on average by 15 to 20 percent (and in some cases by as much as 55 percent) and remain at depressed levels for the entire post-crisis decade.

When we place U.S. economic trends since 2006 into this historical context, the current downturn looks about average for financial slumps–less severe in some respects, more so in others. Though alarming, the sharp decrease of 55 percent in stock market indices that bottomed out early in 2009 was par for the course, as is the steep rise in the public debt-to-GDP ratio. And, if history is any guide, we may be only halfway through the period of debt reduction and slow growth.
Second, compared to other financial crises, distorted household balance sheets are more central. Household debt surged from 65 percent of disposable income in 1980 to 133 percent in 2007. At the core of that surge was the enormous escalation in mortgage indebtedness. When combined with a bubble in housing prices, withdrawal of equity from homes enabled a level of consumer spending that could not be sustained and that left household balance sheets in tatters when home prices receded. This effect has been huge: The most recent Case-Shiller index revealed that housing has already fallen as much from its peak as it did during the Great Depression. And there’s no guarantee that we’ve hit bottom yet. Prices could decline another 5 percent to 10 percent, millions of homes remain at risk of foreclosure, and millions of others are in earlier stages of delinquency that could lead down the same path.
Third, the pace and extent of this jarring decline in the housing sector is affected by public policy. A recent paper by Atif Mian, Amir Sufi, and Francesco Trebbi showed that, in states with foreclosure laws that favor creditors, foreclosures occur more frequently and rapidly, more homes are thrown on the market, housing prices decline more, and the pace of new home construction is much slower. In the aggregate, these effects are highly significant: The authors estimate that foreclosures have been responsible for 20 percent to 30 percent of the decline in housing prices, 15 percent to 25 percent of the decline in residential investment, and 20 percent to 35 percent of the decline in auto sales.
Assuming the validity of these three premises, one would have expected the incoming Obama administration to have given the housing sector a high priority and to have offered dramatic proposals for stabilizing it, all the more so because candidate Obama showed an acute awareness of this issue. On September 16, 2008, as the financial crisis intensified, Obama vowed to “change our bankruptcy laws to make it easier for families to stay in their homes.” But, as investigations by ProPublica have shown, both the Obama campaign and his administration missed (critics would say rebuffed) numerous opportunities–including the TARP legislation and the stimulus package–to do what Obama promised. Instead the end, we ended up with all-but-toothless voluntary programs that predictably have fallen far short of their goals for mortgage modifications.

Read more…

This item is cross-posted from The New Republic.
House Republicans voted on Tuesday to pass a legislative version of “Cut, Cap, and Balance,” one of the newest and most disturbing of the many conservative oaths currently being sworn by large swaths of the GOP. Of course, the bill is not going to be enacted, and for some congressional Republicans, it will just serve as cover for some ultimate debt limit vote that will anger the conservative base. But the “Cut, Cap and Balance” measure explains a lot about the actual priorities of conservatives at a time when they are supposedly fixated on eliminating deficits and debts. Instead of reflecting a concern about balancing the budget, the measure prioritizes a radically limited government agenda at all costs. Its current popular ascendance in Congress will only intensify the already-enormous pressure on Republicans to just say no to any conceivable debt limit increase.
In its original form, as developed by the conservative ideological commissars of the House Republican Study Committee, CCB was a “framework” for budget negotiations, drafted as a list of demands:

103 House Republicans sent a letter to House Republican leadership calling for a solution that could resolve the current debt limit impasse and prevent the bigger, Greece-like debt crisis just over the horizon: Cut, Cap, and Balance.
1. Cut – We must make discretionary and mandatory spending reductions that would cut the deficit in half next year.
2. Cap – We need statutory, enforceable caps to align federal spending with average revenues at 18% of Gross Domestic Product (GDP), with automatic spending reductions if the caps are breached.
3. Balance – We must send to the states a Balanced Budget Amendment (BBA) with strong protections against federal tax increases and a Spending Limitation Amendment (SLA) that aligns spending with average revenues as described above.

CCB aroused high hosannas from conservative opinion-leaders, and was heavily promoted by the RSC’s senatorial counterpart, Jim DeMint. It was soon converted into a “pledge” that omitted some of the original proposal’s specifics (i.e., the GDP “triggers”), but added the inflammatory promise to oppose any other approach, including any debt limit increase at all, until such time as Congress had acted favorably on CCB. The pledge was endorsed by a vast array of conservative advocacy groups, and was pushed especially hard on GOP presidential candidates, who were loath to offend DeMint in advance of next year’s potentially crucial South Carolina primary. By the time Michele Bachmann signed it on Monday (she initially refused on grounds of her own categorical opposition to any debt limit increase), every 2012 wannabee other than Jon Huntsman had signaled their commitment to the cause.
Meanwhile, of course, Republicans in Congress devised a legislative version of CCB, which passed the House last night by a vote of 234 to 190. It’s arguably a bit milder than the original proposal, as it exempts Social Security and Medicare from immediate cuts and phases in the GDP triggers on spending. But despite all the talk of the House vote (and a prospective, if doomed, vote in the Senate) being a meaningless Kabuki exercise that just wastes time before a “real deal” is negotiated between congressional leaders and the White House, it’s worth remembering that 38 House members and 12 Senators (plus those nine presidential candidates and virtually every conservative group you’ve ever heard of) not only endorsed the CCB legislation, but signed the pledge, which effectively makes them unavailable in any deal-making exercise. In other words, even if GOP leaders in Congress pull their forelocks in obeisance to the commands of Wall Street and endorse a debt limit deal, the lines to their office doors of Members seeking a sanctioned “free vote” against it will be very long, and many will cast a nihilistic vote for default no matter what.

Read more…

Attention Democratic campaign workers: Keith Pickering has a don’t-miss post up at Daily Kos “WOW! Simple wording change dramatically increases voter turnout.” It’s all about how pre-election surveys can make a significant difference in GOTV. Pickering quotes from a PHYSorg.com article by Bob Yirka about a new study conducted by Stanford University social psychologist Christopher Bryan and his colleagues, Gregory M. Walton, Todd Rogers, and Carol S. Dweck:

Bryan and his team first sent out surveys to just 38 people prior to the 2008 presidential election. Half the group got a survey asking if it was important to vote, the other half got surveys asking if it was important to be a voter. 87.5 [percent] responded yes to the second question while only 55.6 [percent] did so with the first.
Feeling he was on to something, Bryan then set his sights higher, for his next experiment, he and his team sent surveys to 133 registered voters in California one day before the 2008 election. Afterwards, using voting records, he was able to ascertain that 82% of those who got the “vote” question actually voted, while 96% of the “voter” group did [actually vote].

Bryan and his colleagues noted very similar results in a New Jersey test, which found a 90 percent turnout for the ‘voter’ group vs. 79 percent for the ‘vote’ group, “the largest ever measured effect on voter turnout.”
The authors attribute the increased turnout to leveraging the power of ‘personal identity’ as a motivating force vs. asking about behavior in the abstract — an “are you a good citizen?” subtext.
Pickering provides a handy never-say-this/always-say-this-instead chart for pre-election GOTV surveys, which campaign workers should study (e.g.: Say “Are you going to be a voter on Tuesday?” instead of “Are you going to vote on Tuesday?”)
It could make a difference in close elections. As Pickering concludes, “A 10% to 15% increase in turnout for a tiny word change? Miracles don’t come any cheaper. ”

Alright, Dems, don’t get too excited or overconfident. But state Sen. Dave Hansen’s victory in Wisconsin yesterday is a very good sign. Not only did Hansen get 66 percent of the vote to thwart a GOP-led effort to recall him in retaliation for Hansen’s fleeing the state to try and prevent Governor Walker’s union-bashing. But he did it in a fairly conservative district the GOP considered a prime target, and despite a healthy Republican turnout. A couple of graphs from Steve Contorno’s report in the Appleton Post-Crescent:

Hansen’s victory over a controversial candidate wasn’t a shocker. VanderLeest’s legal and financial troubles became the focus of his campaign, dragging down his bid even after he vowed not to discuss them anymore.
But the margin of victory and the turnout by voters were a first-round demonstration of the Democratic Party’s ground game going into August, when six Republicans and two more Democrats face recall elections with control of state government hanging in the balance….If Democrats can net three seats, they will win back the Senate and provide a check to Republican Gov. Scott Walker’s virtually unchallenged agenda….

Contorno cautions, however,

Hansen’s victory may not be indicative of the rest of Wisconsin, where the eight remaining recall races are the first opportunity for voters to take decisive action for or against the direction Walker and Republicans have taken the state since January. That test will come Aug. 9 when six GOP senators face Democratic challengers followed by the Aug. 16 recall elections of Sens. Jim Holperin, D-Conover, and Robert Wirch, D-Pleasant Prairie.

The outcome of these recall elections could have a significant impact on the future of both the labor movement and the Democratic Party. Those who want to help are directed to ActBlue’s web pages for the Wisconsin recall.

It’s been a rocky personal week for presidential candidate Michele Bachmann. First she’s had to endure steadily growing mockery from TV personalities aimed at her husband’s alleged effeminacy and/or ambivalent sexuality. Now the Daily Caller has published a piece based on unnamed former staffers’ accounts suggesting she has “debilitating” bouts of migraine headaches triggered by stress or adversity and consumes a heavy diet of pills to deal with this or related conditions.
I’m demonstrably not a fan of the wacky Minnesotan, whose views offend me on religious as well as moral and political grounds. But I’m sympathetic to her on these specific “issues.” I used to half-jokingly say we needed a constitutional amendment to ban public references to the families of politicians, by the politicians or by anyone else. So who cares what somebody’s “gaydar” says about Marcus Bachmann, and who cares whether his reportedly atavistic views on gay sexuality reflect hypocrisy, repressed desires, or just good old-fashioned ignorance and bigotry? Aren’t Michele Bachmann’s own views on these subjects sufficient to establish that anyone opposing discrimination based on sexual orientation should probably look elsewhere for a presidential candidate? Leave her husband alone.
As for the “revelation” of Bachmann’s alleged “disability” and treatment for it, it’s worth noting at this point that the author of this story, Jonathan Strong, and his publisher, Tucker Carlson, have a bit of a history of making distorted mountains out of molehills. I can barely read their stuff without being deafened by the sound of axes being ground and website hits being cynically generated. More importantly, Strong’s account is much heavier on innuendo than facts. It’s a bit hard to credit the idea that Bachmann has been disappearing regularly for extended periods of time. She is, after all, rather conspicuous. And the supposed concerns of her staffers (or the writer egging them on) about Bachmann’s pill use may simply reflect the ignorance of the young about how many medications it takes to treat migraines, or for that matter, many other non-debilitating ailments common among people Bachmann’s age (I know whereof I speak, having just bought one of those big plastic pill organizers myself).
In any event, her response stoutly denied the claims she is disabled by migraines or gobbling handfulls of pills, and shrewdly identifies her with “the 30 million other Americans [who] experience migraines that are easily controlled with medication.” That’s a whole lot more people than the readership of the Daily Caller.
UPDATE: Now a story has broken that Bachmann’s staff allegedly roughed up ABC reporter Brian Ross when he pursued the candidate towards her car after an event with follow-up questions (which she ignored) on the migraine allegations.
It will be interesting to see how Team Bachmann handles this potentially bad story. Bachmann has often been unfairly conflated with Sarah Palin. I’ve argued that one difference between the two social conservative Tea Party women is that Bachmann is far less prone than Palin to rely on victimization narratives to rally her supporters. If this latest contretemps had involved Palin, there is zero doubt her supporters would instantly turn it into yet another tale of St. Joan of the Tundra being persecuted by the lamestream media. Bachmann could do the same thing–or she could just apologize, repeat her response to the underlying allegations, and move on.

I don’t mean to dwell to an unnecessary extent this week on the presidential campaign of Herman Cain, but he does seem determined to make news in a way that illustrates how not to run for president. The second quarter financial numbers from Team Cain do not paint a very reassuring picture, as noted by The Iowa Republican‘s Craig Robinson:

Cain’s campaign was able to maintain some cash on hand because of a loan of $500,000 from the candidate. However, a close inspection of Cain’s expenditures shows he is not very fiscally conservative with donors’ money. He raised $2,053,000 and spent $2,096,000. Only Mitt Romney and Tim Pawlenty spent more cash this cycle than Herman Cain did.
The difference is, Romney and Pawlenty raised far more than they spent. Cain is running on a “Common Sense Solutions” platform and claims that his business experience gives him an edge over the rest of the field. If Cain’s campaign was being run like a business, it might be on the verge of bankruptcy.

Comparisons of Cain to other free-spending candidates also indicate the former Pizza King has less to show for his expenses in the way of campaign infrastructure. Pawlenty, for example, has what is universally considered the most formidable field operation in Iowa. Cain’s lost key staffers in both Iowa and New Hampshire on grounds that he’s not spending enough time in either state to make a viable run.
That makes it even odder that Cain’s campaign is spending so much on travel: in the second quarter alone, $336,000 for air travel ($245,000 of that on private jets), and another $65,000 on hotel rooms. They’ve also shelled out, in one quarter, $10,000 for the critical services of Joe the Plumber.
At some point, donors will begin to wonder whether Herman Cain is going somewhere, or just nowhere fast.

A couple of paragraphs from former Secretary of Labor Robert Reich’s blog jump out to underscore a huge gap in public awareness that must be addressed:

A recent paper by Cornell political scientist Suzanne Mettler surveyed how many recipients of government benefits don’t really believe they have received any benefits. She found that over 44 percent of Social Security recipients say they “have not used a government social program.” More than half of families receiving government-backed student loans said the same thing, as did 60 percent of those who get the home mortgage interest deduction, 43 percent of unemployment insurance beneficiaries, and almost 30 percent of recipients of Social Security Disability.
…One would have thought the last few years of mine disasters, exploding oil rigs, nuclear meltdowns, malfeasance on Wall Street, wildly-escalating costs of health insurance, rip-roaring CEO pay, and mass layoffs would have offered a singular opportunity to explain why the nation’s collective well-being requires a strong and effective government representing the interests of average people.

Andrew Levison and others have advocated government reform and getting people more involved in decision-making to challenge the GOP’s “government is the problem” meme. No doubt this is correct. But I think the federal government has an additional problem — lousy public relations. It’s as if even Democratic administrations have been hustled to believe that promoting the effectiveness of government programs is somehow an unacceptably partisan activity.
The selection above from Reich’s blog indicates that it’s not safe to assume that citizens have an adequate awareness of what government does for them. Citizens do need to be expressly reminded from time to time about what they get for their taxes. It’s not a panacea for government-bashing. Government certainly needs reforms to improve public attitudes toward it. But not educating the public about what government does for them makes the Republicans’ anti-government propaganda a lot easier.
I think there should be a permanent public education campaign, using every facet of the mass media to remind people of the important things that government does for them. It should be creative, use humorous skits — whatever it takes to get the public’s attention.
When corporate America wants to sell a product, they promote the hell out of it. Government should do the same, if it wants people to know that they are getting value for their money.
Government funding of such a campaign could certainly be justified. In fact not doing it is more of an indefensible failure, something that is understandable only when it happens during Republican administrations. Progressive groups should also participate in a major public education campaign. Doing no p.r. is a gift to the Republicans.
The website, governmentisgood.com, one of the best internet-based antidotes to government-bashing, has an interesting post “Publicizing What Government Does for Us,” which argues,

We also need to become more aware of what government is doing for us. Many of us rarely think about what we get for our tax dollars – the kinds of services that our local, state and federal governments are providing for us every day. Remarkably, when asked if government has had a positive effect on their lives, 45% of Americans insisted that it has not. But it is revealing that when these same people were asked about specific government programs, a majority said that they had benefited from programs on food and drug safety, consumer protection, workplace regulations, public universities, public schools, roads and highways, parks and recreation, environmental laws, medical research, police and the courts, and social security. So when people stop thinking about government in the abstract, and are made to think of particular government programs, they are more apt to recognize their beneficial effects on their own lives.
Pollsters have found that if they first remind people of the various government programs and services provided for them, and then ask them to rate government, the results improve. “After people consider different government activities and programs, they are more likely to report that government has a positive effect on their lives.” Hardly surprising.
…Governments could also learn from non-profit organizations and charities, which send out annual letters to their donors explaining all the good works that have come from their donations. Our state and local governments should be sending out “annual reports” that inform citizens of all the good their tax dollars are doing. For example, our local government should tell us how many criminals it has arrested, how many supermarket scanners and gas pumps it has checked, how many fires it has put out, how many parks it has been maintaining, how many construction sites it has inspected, how many miles of roads it has cleaned and plowed, how many gallons of clean water it has provided, how many drunk drivers it has gotten off the roads, how many restaurants it has inspected, how many people have used the public libraries, how many children it has educated, and so on. As the old saying goes, “It ain’t bragging if you can do it” – and government is “doing it” for citizens every day.

Nothing is going to stop the Republicans from wholesale government-bashing. But a strong, well-crafted response from Democrats and progressives can help limit their effectiveness.

When marginal candidates make it momentarily big, and then start slipping towards their natural level of support, they generally have two choices: riding it all out with dignity and building up capital for future campaigns, or getting down and dirty with hard-core supporters and trying to bubble back up on a wave of notoriety.
2012 presidential candidate Herman Cain seems to be taking the latter path. For a brief moment this spring, he was the “It” candidate, beloved of the Tea Party folk and lighting up audiences in the early Caucus and primary states. Then his stock speech got a little old; he didn’t do well in the first big candidate debate; he didn’t raise much money; and his Iowa and New Hampshire staff started abandoning him, muttering that he wasn’t running a serious campaign.
So Cain has now apparently made his choice and headed for the fringes, making himself notorious as the candidate who, well, doesn’t like Muslims or maybe even Mormons.
Right when most of us had charitably forgotten the 2010 campaign cycle’s plague of Republican attacks on mosque construction and the phantom threat of Shariah Law, Cain has brought it all back up. He showed up at an anti-mosque rally in Murfreesboro, Tennessee–not an early primary venue–to fan the flames of bigotry in that community, and get some national attention.
And now he’s drifting across another civic line and gratuitously suggesting that Mitt Romney can’t win in the South because of his religion.
It’s not clear at this point if Cain thinks this sort of pandering to the worst instincts of GOP primary voters will revive his campaign, or he’s just building a future audience for radio shows and books. But in any event, the former pizza king is giving us all some heartburn we don’t need.

As many of you no doubt know, this is going to be a grim week in politics, with Washington’s attention riveted on a completely bogus congressional debate over a “cut, cap, balance” proposal to roll back government to the 1950s and then write that into the U.S. Constitution, against the background of actual negotations (and saber-rattling) between the two parties and all sorts of ominous signs of economic disaster.
While it’s obvious the “C-C-B” debate is designed to provide Tea Party conservatives and the GOP presidential field with opportunities to strut their stuff before the real deal goes down, there is a significant risk the posturing will overwhelm the deal-making. There’s no way to know how many congressional Republicans actually think a debt default would be no big deal, just as we can’t know how many of them think an extended depression would be good for the country by crushing the aspirations of all those shiftless freeloaders who don’t simply bend the knee to “job creators” and shuffle along in the great cattle drive of life. It is obvious that if congressional Republican leaders (at the behest of their Wall Street overseers) ever crack the whip for a deal, the line of Members of Congress begging for a “free vote” to denounce the whole thing as a godless betrayal of America on behalf of Big Labor and ACORN will be very long.
Ezra Klein’s analysis of the ultimate deal that is under development is nice and succinct:

It begins with the McConnell plan, in which the debt ceiling is raised three times between now and November, and each time, Republicans are able to offer a resolution of disapproval. Then it adds in $1.5 trillion in spending cuts harvested from the Biden talks. Then it create a committee of 12 lawmakers charged with sending a deficit-reduction plan to Congress by the end of the year. Whatever they decide on would be protected from the filibuster and immune to amendments.

If this is indeed the deal, it will be immediately denounced by most conservative and many progressive activists as a total cave-in, in part because of baleful assessments of “paths not taken” and fearful expectations of what the proposed “super-committee” might actually do. Between all that noise and the shrieking over “cut, cap and balance,” it will be very difficult to figure out what’s actually going to happen as we inch towards default.
Not a bad week to go on vacation, if you are lucky enough to afford it and aren’t on the permanent vacation of unemployment.

If you had the feeling that there is way too much congressional energy and media coverage being lavished on the debt ceiling negotiations, you are not alone. As TDS Co-Editor Ruy Teixeira reports in today’s edition of his ‘Public Opinion Snapshot,’

For most Americans the most important issues are still the economy and jobs. In a late June CBS/New York Times poll, 53 percent said the economy/jobs was the most important problem facing the country today, compared to just 7 percent who said the deficit/debt was most important.
What’s more, 62 percent thought reducing unemployment was more important than reducing the deficit in a just-released Quinnipiac University poll, compared to just 32 percent who thought reducing the deficit was more important.

As Teixeira concludes, “Wake up, policymakers! We’ve got 9.2 percent unemployment, and the public isn’t interested in endless disputes about how much and how fast to cut the deficit. They’re interested in jobs.”