It’s beginning to look like GOP House Majority Leader Eric Cantor may be the congressional Democrats’ secret weapon in the battle for public support in the debt ceiling talks. In a CBS News Poll conducted July 15-17, 71 percent of respondents said they disapproved of the handling of the debt ceiling negotiations by Republicans in congress, with only 21 percent saying they approved of the Republicans role. Slightly more than half of Republicans, 51 percent, said they disapproved of how members of their party in congress are negotiating.
Not that the figures favoring Democratic members of congress were all that great, with 58 percent expressing their disapproval of Democrats in the debt ceiling negotiations, and 31 percent approving. But most Dems are no doubt OK with a 13 point edge over the GOP House members in the disapproval figures.
President Obama did significantly better in the poll, with 43 percent approving of his leadership in the debt ceiling negotiations, and 48 percent disapproving. It can be argued that there are no big winners here. But it’s clear enough which party is the biggest loser.
Month: July 2011
Political correspondent Bill Boyarsky makes a good point in his Truthdig post “Entitlement Is a Republican Word.”
At his news conference this week, President Barack Obama seized on a misleading Washington word–“entitlements”–to describe the badly needed aid programs that are likely to be cut because of his compromises with the Republicans.
“Entitlement” is a misleading word because it masks the ugly reality of reducing medical aid for the poor, the disabled and anyone over 65 as well as cutting Social Security. Calling such programs entitlements is much more comfortable than describing them as what they are–Medicare, Social Security and money for good schools, unemployment insurance, medical research and public works construction that would put many thousands to work.
It’s also a Republican word. It implies that those receiving government aid have a sense of entitlement, that they’re getting something for nothing. And now it’s an Obama word as he moves toward the center and away from the progressives who powered his 2008 campaign for the Democratic presidential nomination over centrist Hillary Clinton.
“There is, frankly, resistance on my side to do anything on entitlements,” he said before heading into another negotiating session over raising the debt limit and cutting the budget. “There is strong resistance on the Republican side to do anything on revenues. But if each side takes a maximalist position, if each side wants 100 percent of what its ideological predispositions are, then we can’t get anything done.”
Having been guilty of using ‘entitlements’ on many occasions, I now realize Boyarsky is right. It is a convenient catch-all term, but it is freighted with negative overtones and plays right into the Republican scam of making programs working people have paid for sound a little like privileges provided to slackers.
Boyarksky goes on to fault the President for caving on social program cuts and adds “To stop them, Obama has to be honest, forthright and progressive–and stop using “entitlements” to refer to worthwhile government programs. He’s a writer. He must know what negative nuances the word carries.”
I’m not so sure as Boyarksy that President Obama used the term with full awareness of its more nuanced implications. The term has creeped into mainstream reportage and common parlance, even among liberals. But Boyarksy is dead right that the President and all progressives need to stop using it, because every time we use it, we reinforce the GOP meme that needed — and hard-earned — social programs are extravagant give-aways.
This item by J.P. Green was originally published on July 8, 2011.
Nate Silver’s well-reasoned analysis, “Why the Republicans Resist Compromise” at his Five Thirty Eight blog at The New York Times affirms the meme that the GOP is pretty much ensnared by its more conservative faction. While this conclusion is no big shocker to most political observers, Silver’s data-driven analysis, as presented in his chart “Ideological Distribution of People Voting Republican for U.S. House,” is impressive and instructive:
The Republican Party is dependent, to an extent unprecedented in recent political history, on a single ideological group. That group, of course, is conservatives. It isn’t a bad thing to be in favor with conservatives: by some definitions they make up about 40 percent of voters. But the terms ‘Republican’ and ‘conservative’ are growing closer and closer to being synonyms; fewer and fewer nonconservatives vote Republican, and fewer and fewer Republican voters are not conservative.
The chart, culled from exit poll data, shows the ideological disposition of those people who voted Republican for the House of Representatives in the elections of 1984 through 2010. Until fairly recently, about half of the people who voted Republican for Congress (not all of whom are registered Republicans) identified themselves as conservative, and the other half as moderate or, less commonly, liberal. But lately the ratio has been skewing: in last year’s elections, 67 percent of those who voted Republican said they were conservative, up from 58 percent two years earlier and 48 percent ten years ago.
Silver notes the pivotal role of disproportionate conservative turnout in last year’s midterms, and the unfortunate consequences for Dems:
This was fortunate for Republicans, because they lost moderate voters to Democrats by 13 percentage points (and liberals by 82 percentage points). Had the ideological composition of the electorate been the same in 2010 as in 2008 or 2006, the Republicans and Democrats would have split the popular vote for the House about evenly — but as it was, Republicans won the popular vote for the House by about 7 percentage points and gained 63 seats.
Many of the G.O.P. victories last year were extremely close. I calculate that, had the national popular vote been divided evenly, Democrats would have lost just 27 seats instead of 63. Put differently, the majority of Republican gains last year were probably due to changes in relative turnout rather than people changing their minds about which party’s approach they preferred.
Addressing “the enthusiasm gap within the Republican party,” Silver cites a Pew Research poll conducted a few days before the election which indicated that,
Among conservatives who are either registered as Republicans or who lean toward the Republican party, about 3 out of 4 were likely to have voted in 2010, the Pew data indicated. The fraction of likely voters was even higher among those who called themselves “very conservative:” 79 percent.
By contrast, only about half of moderate or liberal Republicans were likely voters, according to Pew’s model. That is about the same as the figure for Democrats generally: — about half of them were likely voters, with little difference among conservative, moderate and liberal Democrats.
So the enthusiasm gap did not so much divide Republicans from Democrats; rather, it divided conservative Republicans from everyone else. According to the Pew data, while 64 percent of all Republicans and Republican-leaning independents identify as conservative, the figure rises to 73 percent for those who actually voted in 2010.
Silver cites data indicating that “Republicans are still fairly unpopular,” but adds,
…As long as conservative Republicans are much more likely to vote than anyone else, the party can fare well despite that unpopularity, as it obviously did in 2010. But it means that Republican members of Congress have a mandate to remain steadfast to the conservatives who are responsible for electing them.
Presidential elections are different: they tend to have a more equivocal turnout. The G.O.P. can turn out its base but it has not converted many other voters to its cause, and President Obama’s approval ratings remain passable although not good. The Republicans will need all their voters to turn out — including their moderates — to be an even-money bet to defeat him.
Silver believes that, if Romney is nominated, he would have a clear shot at turning out the GOP moderates, while Bachmann could alienate enough of them to give Obama victory.
At his TPM Editors blog, Josh Marshall applauds Silver’s analysis of conservative domination of the GOP, but adds that it shouldn’t let Democrats off the hook for their failure to take advantage of it:
When I castigate the Democrats for not having a clear message or President Obama for not having an “outside game” in the debt fight, readers will often write in to say that I’m ignoring the fact that the modern GOP is a coherent and highly ideological party while the Democrats simply are not. So Republicans are inherently more able to function as a unified force with a unified message than the Dems. In fact, these folks will argue, it’s not even right to talk about “the Dems” because that buys into the illusion that they’re a party like the GOP as opposed to a coalition of constituencies.
For my money, I don’t find this a sufficient explanation. I do think the Dems are consistently guilty of what amounts to a political failure — the failure to devise and push a consistent message and play on the weaknesses of their foes. I’ve made these points so often that there’s no need (and probably appetite) for me to restate them here. However, it is important to note these structural realities that create a genuine tilt in the playing field of our politics, one that makes it easier for 35% to 40% of the electorate to dominate the country by having virtually total control over one of the two parties.
“Still,” Marshall concludes, “…Politics matters. And on that count the Dems continue to be captive and captured by a weakness it is in their collective power — and for a president to a great degree individual power — to change.”
This item by Ed Kilgore was originally published on July 6, 2011.
At TNR today, Jonathan Chait asks an important and very basic question: in doing things like supporting radical cuts in federal transportation spending, are Republicans actually expressing their vision of what the federal government should or shouldn’t do?
Do they think we’re overinvested in infrastructure? That if we reduce government involvement, the private sector will step in? Or that the economic benefits of maintaining our physical infrastructure — or, more realistically, falling behind at a slower pace — are simply smaller than the economic benefits of keeping taxes low?
There is, I suspect, no one answer. Some conservatives have very radical ideas about legitimate areas of, or levels for, federal involvement in this or domestic function. Others don’t. But particularly when the president is a Democrat, and they don’t have genuine control of Congress, they feel no particular compunction to vote in a way that reflects any honest plan for the country. Domestic spending is too high, so votes to cut it, however nonsensical when it comes to an coherent view of federal responsibility, are always the right thing to do.
The same pattern is even more apparent on issues like health care. Do Republicans all share the view that health care isn’t enumerated as a federal responsibility in the Constitution and therefore any federal health care program is illegitimate? No, and the ones who do are unlikely to talk about it in public. Do all the others reject the idea that universal access to health care is a worthy and legitimate public goal? That’s harder to say, though it was certainly fashionable pretty recently for Republicans to claim they had plans to achieve something like universal coverage, even if the details made the claim highly questionable.
But what all Republicans can agree on is that Democratic efforts to achieve universal health coverage, even if they are based on plans embraced by Republicans in the not-too-distant past, are terrible and need to be repealed immediately. As noted in my previous post, Republicans seem to feel little if any responsibility to outline what they’d do the day after ObamaCare is discarded.
Finally, there’s the Big Bertha of domestic policy disputes, the demand by conservatives for radical changes to Medicare, Medicaid and (more muted, at the moment at least) Social Security. Again, some conservatives clearly think the whole New Deal/Great Society legacy was fundamentally misbegotten and unconstitutional. Others (viz. Mitch Daniels) won’t say that, but will say these programs are inappropriate and unaffordable going forward. And still others claim that initiatives to radically reduce “entitlement” benefits (via a Medicaid block grant, Medicare vouchers, or Social Security privatization) are the only way to “save” these programs. Still, conservatives are more than willing to come together in support of proposals like Paul Ryan’s budget that get them part of the way or all the way towards their ultimate objectives.
So the question remains: does it really matter what conservatives really want in the way of ideal policies? Yes and no. Where conservatives are, as in the case of politicians like Michele Bachmann and Jim DeMint, among others, demonstrably in the grip of radical ideologies that are designed to produce a country characterized by theocracy, contempt for people in need, unfettered corporate power, and rampant militarism, then of course, progressives should make that clear. And where conservatives are demonstrably dishonest about their intentions, as with many “right-to-life” activists who weep crocodile tears for the “victims” of late-term abortions in the service of an agenda aimed at a total repeal of reproductive rights, including the use of many forms of contraception–progressives should expose the charade early and often. It’s also important to reveal what’s happening when Republican pols, whether or not they believe much of anything at all, choose to embrace the policies (or accept the litmus tests) of radicals strictly in order to achieve political power.
Beyond that, it’s probably a waste of time to worry too much about what conservatives actually want. It’s better to focus on showing what their polices would actually produce in real-world consequences. That’s bad enough.
This item is cross-posted from The New Republic.
Let’s say you are Mitt Romney, or Tim Pawlenty, or Michele Bachmann, or Rick Perry, and, on November 6 of next year, you are elected the forty-fifth president of the United States. For the sake of argument, let’s say your party still controls the House of Representatives and has taken control of the Senate as well (under the presidency of your running-mate Marco Rubio) by one seat. Maybe the economy has even begun growing at a slightly faster rate and unemployment is down a bit, though neither improvement occurred fast enough to give Barack Obama a second term. Life looks good, right?
Not necessarily. Given, among other things, the country’s highly polarized politics, the rise of the Tea Party, and your barely-there edge in public support over your predecessor, your fate as a Republican president doesn’t look too bright.
For starters, there are the many problems you must tackle that you inherited not just from Obama but from George W. Bush as well (you know, big deficits and debt, a shaky global financial system, health care costs still out of control, the retirement of the baby boom generation, steadily worsening inequality, a housing market that looks like it will never fully recover, and crises in international hot spots like the Middle East). On top of that, you made a few promises along the path to the White House that now must be redeemed or repudiated–neither of which will be easy. In particular, in the fiendish competition for the 2012 GOP nomination, you have sworn, among other things, to disable or repeal the Affordable Care Act (ACA); make the Bush tax cuts permanent, while also slashing corporate taxes; pare back environmental regulations; slash domestic appropriations and cap federal spending at a fixed percentage of GDP significantly lower than it has been for years; pass a constitutional amendment requiring a balanced federal budget; make Supreme Court appointments that would guarantee the reversal of Roe v. Wade; and pursue a “modernization” of the U.S. nuclear arsenal.
You must implement this agenda in a climate where the mainstream media have concluded via exit polls that you won the election strictly because of poor economic conditions and disappointment with Obama (with the latter manifested by poor turnout among traditionally Democratic constituencies) and thus have no real policy mandate. Simultaneously, the GOP’s conservative “base” is expecting a repeal of “liberal” policies enacted by both parties dating back to the New Deal; indeed, your already long list of promises isn’t long enough for them.
You plan to make an appeal to bipartisanship in your inaugural address, as virtually every president has done, but the well has been thoroughly poisoned by the GOP’s strident hostility to Obama for every single day of the previous four years. In particular, Republican obstructionist tactics in the preceding Senate have made any gambit for restoring majority rule to that chamber implausible, which, in turn, makes enactment of the more controversial elements of your platform implausible as well. Moreover, Republican control of both the executive and legislative branches of the federal government has created a siege mentality among virtually all Democrats in Washington, who are united–give or take a few random Blue Dogs or Fox-friendly pundits–in a desperate effort to defend the New Deal/Great Society legacy and exact revenge for the GOP’s behavior after their 2008 defeat.
What to do? Perhaps, you think, it will be possible to secure some Democratic cooperation for the “replace” part of the “repeal and replace” agenda for health care, given the leverage you have to unilaterally frustrate implementation of ACA via state waivers and other executive powers. This is important not only because redeeming your health care campaign pledge is emotionally the top priority for your Tea Party supporters, but also because “replace,” not “repeal,” must be central to your already virtually impossible fiscal and political goals. Indeed, just repealing the ACA without some additional health care cost-containment measures would, to use the old Al Gore phrase, “blow a hole in the deficit” of enormous proportions.
But you’re in a tough spot, to put it lightly: The single most effective post-ACA cost-containment measure–restoring the right of insurance companies to blatantly discriminate against people with pre-existing conditions–is wildly unpopular (there’s than mandate problem again!). And holding down public health care costs using the more direct method of limiting federal responsibility for them via a Paul Ryan-style Medicare “voucher” system is even more unpopular. (At least you recognized this during the 2012 campaign and slipped out of an earlier commitment to support Ryan’s scheme.) Your other options are, well, slim to none.
You have the same kind of problem on the revenue front, where failure to enact a real federal budget or achieve some sort of deal with Democrats could doom efforts to extend (or make permanent, as you promised) the Bush tax cuts, which is the key plank in your campaign platform of passing additional high-end and corporate tax cuts to help out “job-producers.” Sometimes, late at night, you secretly nourish hopes the Bush tax cuts will lapse, significantly shrinking long-term deficits, but you dare not mutter such heresy aloud, even to your spouse.
As you ponder these intractable conflicts in your own agenda, you can only hope that the first days of your administration aren’t devoted to an international crisis–or perhaps, worse yet, the retirement of a Supreme Court justice. That incautious speech you made in South Carolina back in December 2011 pledging to end “forty years of government-sanctioned death penalties for millions of innocent human beings” the moment a Supreme Court spot came open didn’t overshadow your general election campaign, but it sure could create a less than ideal climate for governance if it suddenly became relevant to an actual nomination and confirmation fight.
Maybe that inaugural address should include some rhetoric about a “fresh start for America.” You know, the kind that begins with forgetting everything you said for the previous two years.
A new Quinnipiac University poll conducted July 5-11, affirms the findings of recent polls — that the public will blame Republicans if the debt ceiling not negotiated in time to prevent an economic catastrophe. As Jordan Howard explains the findings in his HuffPo report:
A plurality of registered voters said congressional Republicans are to blame in the event the debt ceiling is not raised in a poll conducted by Quinnipiac University from July 5-11.
When asked to whom they would assign responsibility should the limit not be raised, 48 percent of respondents chose the congressional Republicans; 34 percent said they would blame the Obama administration.
These results echo a Pew Research Center poll conducted from June 16-19 which asked the same question as the Quinnipiac poll. According to that survey, 42 percent of respondents said they would blame Republicans in Congress if the debt ceiling were not raised; 33 percent chose the Obama Administration.
Among the other findings of the Quinnipiac poll:
The country is in a recession, 71 percent of American voters say, but by 54 – 27 percent they blame former President George W. Bush more than President Obama.
The president gets a 47 – 46 percent job approval rating, unchanged from the June 9 survey by the independent Quinnipiac (KWIN-uh-pe-ack) University. That tops a 64 – 28 percent disapproval for Democrats in Congress and a 65 – 26 percent disapproval for Republicans.
…Voters say 67 – 25 percent that an agreement to raise the debt ceiling should include tax hikes for the wealthy and corporations, not just spending cuts.
…By a 62 – 32 percent margin, American voters say it’s more important to reduce unemployment than to reduce the federal budget deficit. But they say 49 – 43 percent it’s more important to reduce unemployment than to reduce government spending.
Interestingly, Peter A. Brown, assistant director of the Quinnipiac University Polling institute, notes that “The key voting bloc, independents, say 49 – 24 percent that Bush is more responsible for the economy than Obama.” Independents are not much of a “voting bloc,” as Alan Abramowitz recently explained. But the 2-1 gap certainly suggests that even Republican ‘leaners’ are clear about who created the current economic decline.
Howard quotes GOP Senate Majority Leader Mitch McConnell: “If we go into default he [Obama] will say Republicans are making the economy worse…and all of a sudden we have co-ownership of a bad economy.”
They way things are going for Republicans, “co-ownership” sounds like wishful thinking.
Yes, it’s too early to make informed predictions about which party will have control of the House of Representatives after the 2012 elections. And much depends of the quality of individual candidates, many of whom are not yet selected. But knowing where Dems stand in polls and redistricting can be useful in formulating strategy.
Toward that end, Kyle Kondik, a political analyst at the U.Va. Center for Politics, has an interesting post, “Channeling Truman? The Race for the House” up at Larry J. Sabato’s Crystal Ball. Kondik weighs current redistricting snapshots and polls, and has this to say about Dem House prospects:
Democrats are focusing on the 61 districts that Obama carried in 2008 that are now represented by Republicans in the House (again, this is under old maps); other than two in Texas and one each in Nebraska and Kansas, all of these Obama/Republican districts are in states Obama carried. Generally, these seats are clustered around Chicago and across the Upper Midwest; between Philadelphia and Rochester; and across Florida and Southern California. Geographically, these are the places where Democrats need to make their move.
But he warns that “History is not in the Democrats’ favor: In 16 post-World War II presidential elections, the party of the winning presidential party has picked up an average of only about 13 House seats,” the grand exception being 1948, when Dems picked up “an eye-popping 76 House seats, thus reclaiming the House”.
Can it happen again? Kondik says
Democrats need less than a third — 24 — of the seats Truman’s Democrats won in 1948 to recapture the House, but it is still a very tall task.
…Can they do it? Paul Ryan’s budget plan, which would effectively change Medicare into a voucher system, gives Democrats a potentially potent weapon, especially among seniors, who are the most committed voters. And an economic recovery, combined with a weak GOP presidential candidate, could sweep Obama back into office with, if not Truman-like coattails, enough strength to move the House back into the Democratic column. Such a combination of sunny factors for the Democrats is an unlikely forecast, but in this era of wild weather, it is at least possible.
Kondik believes that Republicans are on track for a very small net gain in House seats as a result of redistricting, but warns that could be offset by Democratic redistricting success in Illinois and California. Another wild card that may help Dems, says Kondik, is Democratic control of the DOJ, which will hopefully challenge the GOP’s dilution of Black voting strength in redistricting. Kondik concludes,
So at this very early stage, the Crystal Ball would place a decent-sized bet on the Republicans to retain the lower chamber of Congress. Yet out of an abundance of caution — instilled by history’s sometimes erratic, fickle gyrations — we are not yet ready to write off Democratic chances in the House completely. There are too many land mines on the long and winding road to November 2012 for both parties to be absolutely sure of anything 481 days before America votes.
It remains unclear whether the theatrics of Republican House members in recent weeks will hurt their party in the 2012 House elections. Of course, economic recovery over the next 15 months remains the pivotal factor for Democrats. But it’s clear Dems can also benefit by vigorous enforcement of the Voting Rights Act with respect to redistricting, calling the GOP out on their proposals to weaken Medicare and Social Security and highlighting the Republicans’ failure to come up with any job-creating proposals other than tax cuts.
So as not to offend the delicate sensitivities of the infantile right, we now begin the search for acceptable euphemisms for taxes. From Carrie Budoff Brown’s Politico post, “Bridging the no-new-taxes divide“:
Increasing airline fees, eliminating ethanol subsidies, boosting Medicare premiums for wealthier seniors — all of these take money from someone’s pocket and send it to the U.S. Treasury. But not all Republicans would call these tax increases. They haven’t been summarily dismissed. And just enough in the GOP might even be able to stomach them, and more.
“I know how many angels can sit on a pin, but I don’t know what a tax increase is,” said Douglas Holtz-Eakin, president of the conservative American Action Forum and former economic adviser to Sen. John McCain’s presidential campaign. “There is a lot of language, and they will choose the language they need to get this done.”
But with so much at stake, Holtz-Eakin predicts that Republicans ultimately will agree to “$100 billion in fees and other stuff that aren’t labeled taxes but raise money for the federal government.”
Brown goes on to list other possible revenue sources, including cutting farm and maybe even – gasp – oil and gas subsidies, along with raising various user fees. There is talk of new billions in fees from Fannie Mae and Freddie Mac. Another idea being bandied about, reports Brown, is tweaking the inflation calculation for federal benefits, including Social Security. Many Republicans like the idea of selling off “surplus” federal properties and auctioning the wireless spectrum. There’s even a proposal to jack up postage rates, which I imagine might prompt the tea partyers get out their tri-corners and go ballistic one more time.
Call these proposals “revenue enhancement,” or what you will, but these are not taxes, you understand.
I get it that face-saving is a necessary part of politics in a democracy. But looking ahead, Dems have some work to do in demystifying the “T” word to the point that the conservative party need not shrink in horror at the mere mention of it. It may be that demystifying the “G” word comes first, as Andrew Levison has argued — reforming government and figuring out new ways to get people involved in helping to make government policy as stakeholders, not just tax-payers.
So let a hundred euphemisms for ‘taxes” bloom in the short run. But as soon as the present crisis is resolved, it will be time to get serious about changing attitudes toward government and holding obstructionists accountable.
According to a just-released Gallup Poll conducted 7/7-10, an overwhelming majority of Americans favor a mix of spending cuts and tax increases to address the deficit, contrary to the Republicans refusal to consider any tax hikes whatsoever.
As Nate Silver explains it in his Five Thirty Eight blog:
Few Americans, however, take the view that spending cuts alone should be made in a deal, with no tax increases at all. In fact, only 26 percent of the Republican voters surveyed in Gallup’s poll took that position, along with 20 percent of voters overall.
We can also use the Gallup poll to tease out what mix of tax increases and spending cuts the public would like to see in a deal. Assume that the people who told Gallup that they wanted “mostly” cuts would prefer a 3-to-1 ratio of spending reductions to tax increases, and that those who said they wanted mostly tax increases would prefer a 3-to-1 ratio in the opposite direction. (The other choices that Gallup provided in the poll — an equal mix of tax increases and spending cuts or a deal that consisted entirely of one or the other — are straightforward to interpret.)
The average Republican voter, based on this data, wants a mix of 26 percent tax increases to 74 percent spending cuts. The average independent voter prefers a 34-to-66 mix, while the average Democratic voter wants a 46-to-54 mix…
But the no-tax position of the House Republicans is absurdly out of step, not only with the public, but with Republican voters in particular. As Silver notes,
Consider that, according to the Gallup poll, Republican voters want the deal to consist of 26 percent tax increases, and Democratic voters 46 percent — a gap of 20 percentage points. If Republicans in the House insist upon zero tax increases, there is a larger ideological gap between House Republicans and Republican voters than there is between Republican voters and Democratic ones.
Noting the the House Republicans seem wedded to their no-tax pledge, regardless of public opinion, Silver concludes of the debt ceiling negotiations, “…Democrats have little reason to capitulate either: they are on the right side of public opinion.”
This item by TDS Co-Editor William Galston is cross-posted from The New Republic.
Ever since it became clear that the pace of the economic recovery was falling short of expectations, two competing narratives have vied to dominate our politics. Movement conservatives argue that the weight of a government that “spends too much, taxes too much, and borrows too much” is suffocating the private sector and that new laws and regulations have throttled investment and job creation by creating uncertainty about the costs of doing business. Keynesian liberals, meanwhile, counter that the problem is the collapse of demand and that the government’s failure to offer a large enough stimulus is consigning us to a rate of growth not easy to distinguish from stagnation.
What if they’re both wrong? That’s the claim of Amir Sufi, a finance professor at the University of Chicago’s Booth School of Business. The data tell a compelling story, he argues: “The main factor responsible for both the severity of the recession and the subsequent weakness of the economic recovery is the deplorable weakness of the U.S. household balance sheet,” which is, Sufi shows, “in worse condition than at any other point in history since the Great Depression.”
Because Sufi’s argument makes so much intuitive sense, I started digging into the data for myself. And the information I found supports his thesis.
For instance, according to reports issues quarterly by the Federal Reserve Board of New York, household debt rose from $4.6 trillion in 1999 to $12.5 trillion in early 2008. After three years of painful deleveraging (mainly through home foreclosures and reductions in credit card balances), it still stands at $11.5 trillion–roughly where it was at the beginning of 2007.
To understand the burden this imposes on households, let’s look at a key measure: the ratio of household debt to disposable income. Between 1965 and 1984, the ratio remained steady at 64 percent. Between 1985 and 2000, it rose virtually without interruption to 97 percent. And then, it shot into the stratosphere, peaking at 133 percent in 2007. Four years later, according to the Federal Reserve Bank of San Francisco it has come down only modestly: Household debt still stands at 118 percent of disposable income.
The official figures confirm the widespread belief that mortgage debt is the core of the problem. In 1999, mortgages accounted for 69 percent of household debt. Today, it’s 74 percent, of a total that has more than doubled. Worse, the conventional wisdom that households used their homes as piggy banks during the boom turns out to be correct. During most of the 1990s, equity extracted from homes through home equity loans amounted to about 1 percent of disposable income. By the peak of the bubble in 2006, that figure had risen to a rate of $800 billion per year–a stunning 9 percent of disposable income. And we know that all that extracted equity was spent, because the personal savings rate collapsed to near-zero during that period. When housing prices collapsed, households were left with a mountain of debt, and little equity with which to offset it. Not surprisingly, equity withdrawals also collapsed, to -1 percent, by early 2008.
What’s more, consider that it has been 42 months since the peak of the business cycle, and 24 months since the trough. At a comparable point in the aftermath of the two prior recessions (1990-1991 and 2001), real household net worth per person had fully recovered. But, today, real per capita household net worth stands more than 15 percent below its peak. Similarly, at this point in the prior two recoveries, real personal consumption expenditures per person had reached and exceeded their pre-recession peak. According to a “report”:http://www.frbsf.org/publications/economics/letter/2011/el2011-21.html just out from the San Francisco Fed, consumption per person today is still 1.6 percent below its 2007 peak and is growing very slowly.
