After reading a few days worth of carping about Joe Biden’s performance, I decided enough’s enough and responded at New York:
Joe Biden has been president of the United States for 43 days. He inherited power from a predecessor who was trying to overturn the 2020 election results via insurrection just two weeks before Inaugural Day, and whose appointees refused the kind of routine transition cooperation other administrations took for granted. His party has a four-vote margin of control in the House, and only controls the Senate via the vice presidential tie-breaking vote (along with a power-sharing arrangement with Republicans). Democratic control of the Senate was not assured until the wee hours of January 6 when the results of the Georgia runoff were clear. Biden took office in the midst of a COVID-19 winter surge, a national crisis over vaccine distribution, and flagging economic indicators.
Biden named all his major appointees well before taking office, and as recommended by every expert, pushed for early confirmation of his national security team, which he quickly secured. After some preliminary discussions with Republicans that demonstrated no real possibility of GOP support for anything like the emergency $1.9 trillion COVID-19 relief and stimulus package he had promised, and noting the votes weren’t there in the Senate for significant filibuster reform, Biden took the only avenue open to him. He instructed his congressional allies to pursue the budget reconciliation vehicle to enact his COVID package, with the goal of enacting it by mid-March, when federal supplemental unemployment insurance would run out. Going the reconciliation route meant exposing the package to scrutiny by the Senate parliamentarian, It also virtually guaranteed total opposition from congressional Republicans, which in turn meant Senate Democratic unanimity would be essential.
The House passed the massive and complex reconciliation bill on February 27, right on schedule, with just two Democratic defections, around the same time as the Senate parliamentarian, to no one’s great surprise, deemed a $15 minimum wage provision (already opposed by two Senate Democrats) out of bounds for reconciliation. The Senate is moving ahead with a modified reconciliation bill, and the confirmation of Biden’s Cabinet is chugging ahead slowly but steadily. Like every recent president, he’s had to withdraw at least one nominee – in his case Neera Tanden for the Office of Management and Budget, though the administration’s pick for deputy OMB director is winning bipartisan praise and may be substituted smoothly for Tanden.
Add in his efforts to goose vaccine distribution — which has more than doubled since he took office — and any fair assessment of Biden’s first 43 days should be very positive. But the man is currently being beset by criticism from multiple directions. Republicans, of course, have united in denouncing Biden’s refusal to surrender his agenda in order to secure bipartisan “unity” as a sign that he’s indeed the radical socialist – or perhaps the stooge of radical socialists – that Donald Trump always said he was. Progressives are incensed by what happened on the minimum wage, though it was very predictable. And media critics are treating his confirmation record as a rolling disaster rather than a mild annoyance, given the context of a federal executive branch that was all but running itself for much of the last four years.
To be clear, I found fault with Biden’s presidential candidacy early and often. I didn’t vote for him in California’s 2020 primary. I worried a lot about Biden’s fetish for bipartisanship. I support a $15 minimum wage, and as a former Senate employee, have minimal respect for the upper chamber’s self-important traditions. But c’mon: what, specifically, is the alternative path he could have pursued the last 43 days? Republican criticism is not worthy of any serious attention: the GOP is playing the same old tapes it recorded in 2009 when Barack Obama (and his sidekick Biden) spent far too much time chasing Republican senators around Washington in search of compromises they never intended to make. While they are entitled to oppose Biden’s agenda, they are not entitled to kill it.
Progressive criticism of Biden feels formulaic. Years and years of investment in the rhetoric of the eternal “fight” and the belief that outrage shapes outcomes in politics and government have led to the habit of seeing anything other than total subscription to the left’s views as a sell-out. Yes, Kamala Harris could theoretically overrule the Senate parliamentarian on the minimum wage issue, but to what end? So long as Joe Manchin and Kyrsten Sinema oppose the $15 minimum wage, any Harris power play could easily be countered by a successful Republican amendment to strike the language in question, and perhaps other items as well. And if the idea is to play chicken with dissident Democrats over the fate of the entire reconciliation bill, is a $15 minimum wage really worth risking a $1.9 trillion package absolutely stuffed with subsidies for struggling low-income Americans? Are Fight for 15 hardliners perhaps conflating ends and means here?
Media carping about Biden’s legislative record so far is frankly just ridiculous. Presumably writing about the obscure and complicated details of reconciliation bills is hard and unexciting work that readers may find uninteresting, while treating Tanden’s travails as an existential crisis for the Biden administration provides drama, but isn’t at all true. The reality is that Biden’s Cabinet nominees are rolling through the Senate with strong confirmation votes (all but one received at least 64 votes), despite a steadily more partisan atmosphere for confirmations in recent presidencies. The COVID-19 bill is actually getting through Congress at a breakneck pace despite its unprecedented size and complexity. Trump’s first reconciliation bill (which was principally aimed at repealing Obamacare) didn’t pass the House until May 4, 2017, and never got through the Senate. Yes, Obama got a stimulus bill through Congress in February 2009, but it was less than half the size, much simpler, and more to the point, there were 59 Senate Democrats in office when it passed, which meant he didn’t even have to use reconciliation.
There’s really no exact precedent for Biden’s situation, particularly given the atmosphere of partisanship in Washington and the whole country right now, and the narrow window he and his party possess – in terms of political capital and time – to get important things done. He should not be judged on any one legislative provision or any one Cabinet nomination. So far the wins far outweigh the losses and omissions. Give the 46th president a break.
I think everyone should be very skeptical of the Paulson plan. Here’s why:
The root cause of the credit “freeze” is the inability of the market to determine the correct price of mortgage-backed securities, not the increase in the number of foreclosures. [If mortgage-backed securities didn’t exist, then the market would know exactly which securities were at risk and assign an appropriate price to them. While many companies and individuals would suffer real financial loss, markets and the broader economy would continue normally.] Without price clarity, risk is assessed at a “worst-case” level across all assets that involve collateralized debt securities, and buyers become scarce or non-existent. Without buyers (i.e., without a market price), per accounting rules, financial institutions are forced to write-down CDS’s at “fire-sale” prices. This triggers a series of actions that are either required by federal and state regulations (e.g., minimum capital requirements for banks) or market logic (e.g., risk aversion). A vicious downward spiral is thus set in motion, with the end result being that those with money don’t want to loan it to those who want money, and the economy slows to a halt.
Here are ten questions Henry Paulson should answer before any plan is approved:
1. Given the opacity of collateralized debt securities, how in the world can we – or the entities holding them – truly understand the problem we face?
2. Given that less than 3% of all mortgages are in foreclosure – an historically high and therefore troubling number, but certainly not a disaster – why are we having this problem at all? Why don’t the markets discount mortgage-backed securities by 10-25%, or whatever number seems appropriate to the level of risk? Are these securities so inscrutable that we can’t even determine a ballpark risk level? I find it illogical and ludicrous that smart, capable financial minds cannot figure out a financial instrument created by one of their own.
3. What is the scope of the “freeze”? What percentage of the debt markets is affected? What are the characteristics of the affected sections, e.g., commercial banks, investment banks, hedge funds?
4. What other solutions to the credit freeze were considered and why were they rejected?
5. Why is $700B to $1T the “right” number? How was that determined?
6. Are there smaller, less severe stop-gap measures that can be quickly implemented to buy more time to fully consider all options and/or think through all the potential consequences of the current solution?
7. If your proposal is implemented as is, or close to it, what ability would the Treasury have to deal any future monetary threats?
8. If your proposal is implemented, how will you determine the price at which to buy the troubled assets? Be as specific as possible.
9. What can you say to the 97% of mortgage holders who are not in foreclosure, who have made sacrifices to maintain their mortgages in good standing? Why should they be happy with this proposal, or confident that potential future threats can be adequately addressed?
10. Why can’t we implement a mortgage refinancing plan to address at-risk mortgages without bailing out the financial institutions that created, sold and/or bought them? In other words, why is it essential that CDS assets must be removed from the books before they can be accurately assessed?
Congressional Democrats, including Barack Obama, have not proven they truly understand the problem, nor are they offering any real alternatives. Like the Iraq War, we are facing a murky issue and are totally dependent on the opinion of a few people for both the facts and possible solutions.
All Democrats should push for 1) more time, 2) more facts, 3) more specifics about the bailout plan, 4) more oversight, and 5) more deliberation of alternatives. I’m not convinced that the economy will crash if this specific bailout plan isn’t approved by Friday. And I believe there’s a better way to open up these derivatives and accurately assess their value. In the end, no matter what we do, the economy is going to suffer. It’s just a matter how much and for how long.
I saw this brewing yesterday as well, glad you touched on it. The best that can come of scrapping the Paulson Plan and the Dems pushing a tough-on-Wall-St. plan is the potential for taxpayers to earn back off of their investment…
Say, for instance, the market does recover, America has a Green Industry explosion (or whatever will fix our industry/economy) and then when these bailed-out banks and companies eventually turn huge profits we’ll have a huge infusion to the government to rebuild and refocus our infrastructure. A powerful and calculated plan to generate revenue for the country, based loosely on the idea of ‘bailouts’ and coinciding with a national push to recovery could actually be, in a decade’s time, a beautiful silver lining to this debacle.
Here’s hoping.