Jonathan Kantrowitz

THE TEN WORST

Berlusconi meltdown. While the outside world has long been mystified by the political longevity of Italy’s comically exuberant three-time prime minister, media tycoon Silvio Berlusconi, the high approval ratings he earned at home by his raffish charm and domestic policy successes sagged this year amid sex scandals involving starlets and call girls and court annulment of his specially tailored immunity from corruption charges. Berlusconi may not be the most simpatico partner in NATO on a personal level for the cool, restrained Barack Obama, yet as head of its leading Mediterranean member he was quick to pledge one of the alliance’s largest troop increases for Afghanistan, which his weakening grip on Rome’s right-of-center coalition may imperil.

Democracy U-turn in Honduras. Long a model of the classic banana republic before settling into the rhythms of a sleepy constitutional democracy, Honduras seemed to revert to the past when military chiefs and the traditional political class deposed president Manuel Zelaya and hustled him out of the country after his late-term conversion to Chavez-style leftism. Most of Latin America’s leaders and the Organization of American States demanded the immediate restoration of Zelaya as a precondition for legitimate presidential elections late in the year, but Obama wobbled, allowing the de facto rulers to cling to power and stage elections that most of the governments in the increasingly left-leaning region denounced as illegitimate.

Double jeopardy in Sudan. The Sudanese government expelled international relief organizations in response to the International Criminal Court’s indictment – its first of a sitting head of state – of president Omar al-Bashir for masterminding a counterinsurgency campaign of atrocities and genocide in Darfur, yet it prudently so ratcheted down the level of violence that the commander of the strained but indispensable U.N.-African Union peacekeeping force there could declare it no longer qualified as a “war.” At the same time, the comprehensive peace accord between Khartoum and the breakaway south frayed, with a suspicious surge of tribal violence in the region ahead of the country’s scheduled 2010 elections and a fateful 2011 referendum on southern independence that threatens to re-ignite the long, bloody North-South civil war.

Global economy on the rocks. In a remarkable show of coordinated economic policymaking, the world’s leading economic powers – notably the United States, Europe, China, and Japan – undertook emergency “stimulus” spending that averted another great depression, but unemployment still spiked in the U.S. and developing world, while smaller fry, from Iceland and Ireland to Latvia and Dubai, went down in the undertow. Despite agreement that lax financial regulation, especially by a Washington in the grip of laissez-faire ideology, was a principal cause of the meltdown, the Obama administration rejected European and Asian calls for international financial supervision, and even the president’s plan for domestic re-regulation only narrowly passed the lower house of Congress and stalled in the upper.

Iran upheaval. The Tehran regime’s arrant fraud in the June presidential election (unchecked by U.N. oversight, in contrast to Afghanistan’s) triggered massive street protests and a deep split in the Islamic republic’s clerical establishment. The protests persisted despite repeated violent repression that revealed the regime’s militarization under president Mahmoud Ahmadinejhad, triggering such deep disillusionment that by year’s end opposition militants no longer pressed to overturn the election swindle but the entire regime. The Obama administration deftly avoided becoming embroiled in the Persian imbroglio, but the embattled regime’s torpedoing of its own nuclear enrichment plan with the IAEA seems likely to prompt a tightening international noose in the new year.

Israeli isolation. A furious but strategically vacuous Israeli war in Gaza during the expiring days of the Bush administration failed – barely – to win a new term for Jerusalem’s Kadima-led government, prompting a decimated Labor Party to switch loyalties to Binyamin Netanyahu’s and Avigdor Lieberman’s right-wing majority that sidetracked President Obama’s ambitious agenda to end the Israeli-Palestinian conflict. The result was increasing Israeli isolation, with Turkey estranged and pressures from the European Union and American Jews in J Street for more robust measures to overcome peace paralysis. Palestinians could not accept the new government’s refusal to resume peace negotiations where its predecessors had left off or to halt colonization across the 1967 Green Line; yet Netanyahu’s grudging acceptance of a two-state end-goal and partial suspension of settlements – on the heels of the two previous Likud prime ministers’ conversion to realism – signaled the continuing erosion of rightist zealots’ project of a Greater Israel.

Law of Sea adrift. The danger to the continued survival of polar bears from global warming’s rapid melting of the polar icecap may pull at the public’s heartstrings, but it is the opening of new waterways across the previously impassable Arctic Ocean – and who will control them – that gives Navy planners ulcers. Arctic-bordering nations are asserting claims to the mineral and oil resources under the once frozen ocean – spotlighted by the Russian stunt in 2007 of planting a flag on the sea bottom at the North Pole – but peaceable resolution of the claims is hobbled by the U.S. Senate’s continuing failure to approve ratification of the Law of the Sea convention, which even President Bush had supported.

Mexico drug war. America’s southerly NAFTA partner, Mexico, was convulsed this year by escalation of a three-year war between richly funded and heavily armed drug cartels and a president in the capital, Felipe Calderon, determined to eradicate them and their tentacles that penetrate deeply into Mexico’s police, judiciary, and army. With 14,000 people killed thus far – fully 1,800 in Ciudad Juarez in the first nine months of this year alone, more than the U.S. military has lost in eight years in Afghanistan – despairing Mexicans blame drug buyers and gun sellers north of the border for fueling the narco-civil war, a view Secretary of State Hillary Clinton seemed to acknowledge in vowing more vigorous U.S. action on both fronts.

Palestinian deep freeze. Despite Arab efforts to patch together a facade of Palestinian unity, the divisions between Fatah – still dominant in the West Bank and East Jerusalem – and Hamas, controlling a battered and blockaded Gaza, became even more poisonous, as Palestinian Authority president Mahmood Abbas’s term draws to an end with no prospect of Palestine-wide elections to fill his post or elect a new legislature. Palestinian militants scorned the paltry results of Abbas’s commitment to peaceful negotiations with Israel, a charge that Israelis – who for years had stonewalled Abbas’s entreaties for a release of Palestinian political prisoners – seemed poised to confirm by a massive swap of prisoners in exchange for a Hamas-abducted Israeli soldier.

Poverty uptick threatens millennium goals. The tremors from Wall Street’s crisis triggered not only an spike in the U.S. poverty rate, but a jump of at least 55 million people worldwide living in absolute poverty (under $1.25 a day) from the decade’s downward trajectory and threatening achievement by 2015 of the Millennium Development Goal for poverty reduction in many countries. While overall development assistance rose by 10 percent last year, the U.N. reported that much of the increase went to such conflict-ridden countries as Iraq and Afghanistan, leaving many of the world’s poorest countries to stagnate unaided while rising food prices put the very survival of the desperately poor at risk.

– - – -

To many progressives, one of the most galvanizing aspects of Barack Obama’s campaign for the presidency was his pledge to roll back the executive excesses of the Bush-Cheney era and restore a sensible balance between national security and civil liberties in American political life. “We reject as false the choice between our safety and our ideals,” the newly elected president declared in his inaugural address. And after eight years of secrecy and skullduggery in the name of national security, Obama’s stated determination to get the country back on track engendered an upswell of devotion that helped sweep him into office, and an almost impossibly high set of expectations.

A year on, there is no question that matters have improved dramatically in some important areas when it comes to America’s conduct of the ongoing “war on terror.” But in other areas, the administration has opted to retain key components of the very Bush policies that candidate Obama decried.

Torture and “Enhanced Interrogation Techniques”

The unequivocal high point of the year for civil libertarians, and the most definitive break with Bush administration policy, came on January 22, when the new president issued an executive order instructing the CIA to immediately cease using “enhanced interrogation techniques.” The speed and forceful clarity of this single act put an end, at the stroke of a pen, to what was perhaps the most heinous and reviled policy of the Bush years, restoring, in the process, a commitment to American values and to the Geneva Conventions – and redeeming, in an instant, some of the nation’s diminished moral stature on the international stage.

Rendition and Secret Facilities

In the same executive order, Obama vowed to reform the practice of “extraordinary rendition,” in which suspects are flown to “black site” prisons or to third-country detention facilities, where they can be interrogated and held without trial. He committed to close the CIA’s black sites, and in April the agency informed congress that the facilities had indeed been closed.

But on rendition, the new administration was more cautious. In the executive order, Obama created a task force to study the tactic and insure that it not result in “the transfer of individuals to other nations to face torture.” In August, the administration announced that the CIA would continue to send captured individuals to third countries for detention and interrogation. The agency agreed to monitor the treatment of those detainees and insist upon “diplomatic assurances” from receiving countries that detainees won’t be tortured.

This certainly marks an improvement, given that in years past the high likelihood of torture by authorities in these countries seems to have been the very point of rendition. But turning over individuals captured by the United States for interrogation in countries like Afghanistan or Egypt still creates a situation in which, all “diplomatic assurances” notwithstanding, abuses will be difficult to avoid. And just last month it emerged that at least one black site continues to operate – a windowless facility at Bagram Air Base in Afghanistan, known to the detainees held there as “the black jail.”

Detention/Guantanamo

Guantanamo is a kind of policy Rubik’s Cube, the single thorniest issue that Obama inherited from his predecessor. From the beginning, he confronted the dilemma with clarity and resolve, announcing in January that he would shut down the facility by the end of the year. But the ensuing months revealed how complex and intractable a process that was, and in November the administration acknowledged that it wasn’t going to make the deadline.

The question bedeviling the White House is what to do with the Guantanamo detainees, some of whom are surely innocent individuals mistakenly ensnared in a system that is anything but transparent, others of whom are among the most dangerous terrorists on the planet. When he came into office, Obama halted the military commissions that had been established to try Guantanamo detainees. But in May he announced that he would revive them. What’s more, he made clear that due in part to the interrogation tactics employed by the Bush administration, in at least some cases, there will be detainees “who cannot be prosecuted for past crimes but who nonetheless pose a threat to the security of the United States,” and that in those instances, a policy of indefinite detention will endure.

At a glance, the news in November that five of the detainees, including Khalid Sheikh Mohammed, would be transferred to New York and tried in federal court, was a victory for the rule of law. But on closer inspection, the gesture seemed a bit ad hoc: Over two hundred other detainees will either face military commissions or preventive detention. The trick with the rule of law is that this sort of pragmatic, split-the-difference compromise, in which a civilian trial is arranged only for those suspects that you know you can convict, hardly counts as full-throated adherence. To announce that a handful of high-profile detainees will be tried in federal court as a matter of principle has a certain symbolic value, to be sure. But when considered in light of the other detainees who will instead be subjected to the same Bush-era mechanisms of “wartime justice,” it rings hollow.

State Secrets

Another key area in which the administration has backtracked from Obama’s fiery campaign rhetoric is the state secrets privilege, which legislators and legal scholars agree was widely abused by the Bush justice department. Despite Obama’s vow to curtail executive secrecy, his justice department has continued to invoke the privilege in a handful of ongoing cases, to a point where it was criticized by a San Francisco judge for doing so.

Attorney General Eric Holder spent his first months in office studying the use of the privilege, and in September, he announced a new set of guidelines that would govern when the privilege can be invoked in the future. Holder’s reforms should create more oversight and control in the form of self-policing by the justice department – which is a very welcome development. But as with so many of the problematic legacies of the Bush administration, this is, at heart, a separation-of-powers issue, and executive branch solutions simply won’t suffice. Real reform will come only in legislation that mandates comprehensive judicial review of state secrets claims. And it remains to be seen whether Obama will support that legislation.

A New Year

In fairness to the administration, it is early days. And there is so much to undo. And many of the trickiest problems are legacy dilemmas that the Bush administration created. And in handling the economic crisis and attempting to reform healthcare, the White House has had to ration its energy – and its political capital.

But Obama himself has written and spoken eloquently about the dangers of drift – that peculiar inexorability that can take hold when it comes to executive power and the prerogatives of national security. Candidate Obama saw that danger, saw the dysfunction it wrought in our political system over eight long years, and made a commitment to respect the rule of law, protect civil liberties, and put the nation back on track.

It’s a commitment that President Obama should strive to honor in the coming years.

First it was insurance companies, then it was banks and that was followed by auto companies. Now, the federal government is putting U.S. taxpayers and utility customers at new risk under a controversial U.S. Department of Energy (DOE) loan guarantee program that is slated to award $18.5 billion, with Atlanta-based Southern Company predicted to be first on the list for program funds to build two new nuclear reactors at Plant Vogtle in Waynesboro, Georgia.

Ironically, the DOE’s “top choice” for the nuclear reactor loan guarantees, which are backed by U.S. taxpayers in the event of defaults, is the very same Plant Vogtle that helped to kill the previous nuclear power boom in the United States in the 1970s and 1980s. Huge cost overruns at the original Plant Vogtle – which escalated from $660 million for four reactors to a whopping $8.87 billion for two – likely played a role in putting the brakes on nuclear expansion plans pursued decades ago in the United States.

Will history repeat itself on Plant Vogtle cost overruns?

Higher bills and costly delays may already be in the works at Plant Vogtle. According to news accounts in early December 2009: “The proposed construction of two new nuclear reactors at Plant Vogtle near Waynesboro could likely have cost overruns and possibly face delays, according to testimony released by the Georgia Public Service Commission. The group monitoring the progress of the new reactors is also being denied access to crucial information about the process, and Georgia Power is not revising economic evaluations based on a variety of factors that include a reduced demand for electricity and cheaper alternatives to nuclear energy, the document says.”

Such developments for the proposed new Plant Vogtle reactors could parallel the current fiasco in San Antonio, Texas, where another would-be DOE loan guarantee is facing local rejection of a new reactor project that is plagued with a $5 billion cost overrun that amounts to 27 percent of the initially projected budget.

Dr. Stephen A. Smith, executive director of the Southern Alliance for Clean Energy, points out: “Nuclear power is most certainly not the best path to clean and low-cost energy for the United States. Instead, the first step should be reducing our energy consumption in this country and efficiently using the energy that we do consume, not spending hundreds of billions of Americans’ hard-earned dollars on risky new nuclear reactors that will pad the pockets of the nuclear industry even more. Utilities are doing everything they can to shift all of the risks onto ratepayers and U.S. taxpayers. Why? Because the utilities can’t afford to do it any other way. The proponents for new nuclear reactors are essentially proponents for more taxpayer-funded bailouts for irresponsible corporations that continue to make bad energy decisions.”

Mark Cooper, senior fellow for economic analysis at the Institute for Energy and the Environment at Vermont Law School, says: “2010 will be the seventh year of the so-called ‘Nuclear Renaissance,’ but it is shaping up to be a lot like the U.S. nuclear industry of the 1980s, a decade of no new orders, multiple delays and cancellations, hefty defaults, and emerging cheaper alternatives. Of 26 new nuclear reactor license applications submitted to the Nuclear Regulatory Commission since 2007, 19 have been cancelled or delayed and every private sector project has suffered a downgrade by credit rating agencies. The reality is that capital markets will not finance new reactors because demand growth has slowed, reactors cost much more than available alternatives and they face too many technology, marketplace, and policy risks; so nuclear advocates have demanded a massive increase in direct federal subsidies to bail the industry out. What we are looking at is the prospect of ‘nuclear socialism’ that could only go farther if it involved outright state ownership of the industry.”

The conclusion is inescapable: loan guarantees will not fix the insurmountable obstacles in the path of a so-called new nuclear “renaissance” in the United States.

We need to fully embrace renewable energy and energy efficiency and conservation. Unlike nuclear reactors, solar and wind are truly clean – they are emission free when they’re producing electricity, no carbon, no deadly nuclear waste that remains highly radioactive longer than human civilizations have even existed. And don’t forget that clean renewable energy creates jobs, lots of jobs, and lots of jobs right here in the United States. Energy efficiency is far, far cheaper than building new nuclear reactors and helps reduce carbon emissions immediately, all while saving consumers and businesses money.

More info:

“PSC Staffers Criticize Georgia Power”

“CPS Energy seeks $32 billion in South Texas Project (nuclear power plant) damages”

“Experts: Three Latest industry setbacks further dim nuclear ‘renaissance,’ taxpayer-backed loan guarantees can’t fix fundamental problems with new reactors”

From Linda McMahon’s blog:

On Sunday, the Hartford Courant’s Kevin Rennie published a very eye-opening, must-read column here titled “Simmons’ Curious Affinity for Carter.” The column centers around a relatively recent letter Simmons sent to the former President in which he not only admits to having voted for Carter for President, but also “heaps praise” on him.

“I can only say, Mr. President, that the courage, character and integrity you have shown over the many years of your extraordinary career makes us all proud to have voted for you so many years ago…” wrote Simmons, according to Rennie. In the letter, Simmons goes on to say, “Jimmy Carter is the best…”

The Washington Times’ Amanda Carpenter also picked up the story here: “Former Rep. Rob Simmons…may be former Democratic President Jimmy Carter’s biggest Republican fan.” The report goes on to note that Simmons’ support for Carter is just the latest in a string of questionable stances Simmons has taken over his career as a political insider, stances that include support for Card Check legislation, cap-and-trade, and partial-birth abortion.

Simmons, for his part, doesn’t deny having written the letter (which also includes, according to Carpenter, a handwritten note to Carter, “near his signature at the bottom of the letter,” that reads: “Thanks so much for all you have done.”).

By Naomi Freundlich and Maggie Mahar

This year the rhetoric around health care reform reached historic levels. Barely a week went by without pundits dissecting some new fact, policy detail or wording change implicit in the various reform plans emerging from Congress. The result was a barrage of media reports, often conflicting, that heralded the demise or success of reform on a regular basis. Twisted facts, reactionary politics and just plain scare tactics have been pervasive.

Below, “The 10 Most Destructive Lies about Health Care Reform in 2009″ and ” The Ten Most Constructive Insights, Suggestions and Questions.”

Heath Care Reform: The 10 Most Destructive Lies of 2009

1. Seniors and the disabled “will have to stand in front of Obama’s ‘death panel’ so his bureaucrats can decide, based on a subjective judgment of their ‘level of productivity in society,’ whether they are worthy of health care.”

Sarah Palin made these comments on her Facebook page , responding to a provision in the House health care bill that would provide compensation to doctors who consult with patients about end-of-life care. The lie quickly spread – repeated at town hall meetings, tea parties, on Fox TV and throughout the Conservative blogosphere.

2) “You lie!” Joe Wilson’s angry shout-out to President Obama in the middle of his speech before the joint session of Congress made headlines this fall. Wilson was responding to Obama’s promise that health reform will not include coverage for illegal immigrants.

3) “Despite public statements by Pres. Barack Obama that ‘no federal dollars will be used to fund abortion,’ all of the major bills under consideration would put the federal government into the business of subsidizing elective abortion on a massive scale.” Minnesota Citizens Concerned for Life .

“The Kennedy bill would result in the greatest expansion of abortion since Roe v. Wade.” according to National Right to Life Legislative Director Douglas Johnson

This charge, made by Conservative groups like the Family Research Council (which ran an ad with a distraught older man telling his wife that Medicare won’t pay for his back surgery because the government is spending too much on abortions) helped fuel opposition to reform.

4) “I have a message for you — You’re gonna die sooner!”

Dec. 1 2009, Senator Tom Coburn (R-OK) on the floor of the Senate warning senior citizens. Coburn was speaking about proposed Medicare cuts that could total billions of dollars. In fact, savings would come from removing the waste and over-treatment that plague the program.

5) “Health care reform will mean women won’t be able to get mammograms.”

Carly Fiorina, candidate for U.S. Senate from California made this statement during a weekly Republican address. She exploits her experience as a breast cancer survivor to make her case against health reform:

“Will a bureaucrat determine that my life isn’t worth saving?,” she asked before suggesting that the Senate health care bill would allow the Task Force to ration cancer treatments.

6) The Department of Veterans Affairs has “a manual out there telling our veterans stuff like, ‘Are you really of value to your community?’ You know, encouraging them to commit suicide.” (Michael Steele)

7) “Take your AARP card, cut it in half and send it back. They’ve betrayed you,” McCain told seniors after the group endorsed Medicare cuts. The Senator proposed an amendment that would “strip” the cuts from legislation – even though he had no intention of voting for the bill anyway.

“President Obama … wants to mandate circumcision.” (Rush Limbaugh)

9) “Obamacare Could Kill You,” David Catron, writing in The Spectator warns that, a Federal Health Board will be used to make life and death decisions based on cost-effectiveness — deciding, for example when a drug’s expense has become too high to justify giving it to dying cancer patients.

10) A data-storing microchip “would be implanted in the majority of people who opt to become covered by the public health care option.” (chain e-mail Jamison Foser, County Fair, November 22, 2009 ( “The greatest threat to America’s fiscal health is not Social Security.”

2) President Barack Obama said in a March speech at the White House. “It’s not the investments that we’ve made to rescue our economy during this crisis. By a wide margin, the biggest threat to our nation’s balance sheet is the skyrocketing cost of health care. It’s not even close.”

3) “Having Scott lead the charge against healthcare reform is like tapping Bernie Madoff to campaign against tighter securities regulation.” Christopher Hayes writing in the Nation, commenting on Rick Scott, the founder of Conservatives for Patients Rights, who is best known as the former CEO of Columbia/HCA, the for-profit hospital chain that was forced to pay $1.7 billion to settle the largest health care fraud lawsuit in history.

4) “Most Americans would be delighted to have the quality of care found in places like Rochester, Minnesota, or Seattle, Washington, or Durham, North Carolina – all of which have world-class hospitals and costs that fall below the national average. If we brought the cost curve in the expensive places down to their level, Medicare’s problems (indeed, almost all the federal government’s budget problems for the next fifty years) would be solved. The difficulty is how to go about it.” Dr. Atul Gawnde.

5) “If No Republicans Will Join, Why Should the Democrats Negotiate with . … Nobody?” asked Chris Matthews after grilling Republican Orrin Hatch on what it would take to get him to vote for health care reform.

“Would you sign on to any health reform bill this year?” Matthews queried. “Assume they dropped the public option and put in tort reform would you sign on? … or is this just a stupid negotiation? Are the Democrats just negotiating with themselves?”

6) “Name any stakeholder – hospital, physician, nurse, insurer, pharmaceutical manufacturer, supplier, even patients’ groups – every single one of them says, ‘Oh, we need change! We need change!’ But, when it comes to specifics, every single one of them demands to be kept whole or made better off.”

“We are stuck in ‘the Tragedy of the Commons. The smart strategy for each person separately is not the best strategy for all people together. What is good for ‘me’ is not good for ‘us.’ Just like the villagers, health care stakeholders are eroding a common good by doing what makes sense for each of them, separately. In the short run, everyone wins. In the long term, everyone loses.” Dr. Donald Berwick, delivering the keynote address at Institute for Health Care I mprovement’s (IHI) 21st Annual National Forum on Quality and Improvement in Health Care.

7) “Here, along the banks of the Rio Grande, in the Square Dance Capital of the World, a medical community has come to treat patients the way subprime-mortgage lenders treated home buyers: as profit centers.” Dr. Atul Gawande, commenting on over-treatment in McAllen, Texas in “The Cost Conundrum.”

Over the past year, “the profit margin for health insurance companies was a modest 3.4 percent. Among the large, for-profit health insurers, profit margins line up with the industry as a whole: UnitedHealthGroup, the biggest health insurer, had a 4.1 percent profit margin over the past 12 months. WellPoint, the next biggest, had a 4 percent profit margin. Aetna, Cigna, and Humana came in below that.”

By contrast, “Pharmaceutical companies have a profit margin of 16.4 percent, seventh highest of the 215 industries that Morningstar tracks . . . The big money isn’t in the insurance industry.” (Rick Newman, writing in U.S. News & World Report.)

9) “An Independent Medicare advisory commission of doctors and medical experts charged with identifying waste can help encourage the adoption of common-sense best practices by doctors and medical professionals throughout the system – everything from reducing hospital infection rates to encouraging better coordination between teams of doctors.” President Obama, in a speech to Congress just after Labor Day.

10) “Health Bill Alone Won’t Stem Costs: White House” Reuters, reporting on White House Budget Director Peter Orszag’s comments on health care legislation. Orszag “indicated that other actions outside of Congress would still be needed to improve how medical care is delivered, including the Senate’s proposed independent commission to oversee parts of Medicare.” (

By Greg Anrig

At the outset of 2009, President-elect Obama awaited his inauguration with the U.S. economy in a near free fall — more than a half a million jobs were disappearing monthly, consumption and investment levels were plummeting, home foreclosures were soaring, credit was frozen, and no remote sign of a turnaround was in sight. Obama and his administration would end up pursuing a wide assortment of ambitious actions to stop the bleeding that, at least for the time being, appear to have accomplished that goal.

In the absence of those steps — particularly the stimulus legislation and the bailout of the financial sector — we would be in the midst of a still severe economic downturn and perhaps even a depression. Instead, economic growth has resumed and the rate monthly job losses has at least tapered off. The economy is far from out of the woods, however, and it’s entirely possible that unemployment will remain high for an extended period unless another round of ambitious governmental initiatives are pursued. Sorting out which policies have worked best and worst during the crisis, to the extent they can be judged in the middle of a story that’s still unfolding, can help to point the way toward next steps that will improve the odds of a happy ending.

Moves That Helped

No Republican members of the House of Representatives and only three Republican Senators voted for the $787 billion American Recovery and Reinvestment Act, which Obama signed into law in February. A recent analysis by the Congressional Budget Office concluded that the stimulus legislation resulted in between 600,000 to 1.6 million more jobs and a GDP between 1.2 percent and 3.2 per higher than would have otherwise been the case. Getting the most bang for the buck in adding to economic growth, according to the CBO, were the elements of the package that provided direct and quick support to state and local governments, purchases of good and services by the federal government, and transfers to lower-income individuals through payments like additional unemployment insurance. Mark Zandi, chief economist of Moody’s Economy.com told the New York Times, “In my view, without the stimulus, GDP would still be negative and unemployment would be firmly over 11 percent.”

Another key component to the administration’s response that appears to have worked in the most important respects was the politically unpopular bailout of the financial sector, which actually began last year, through the so-called Troubled Asset Relief Program (TARP). Initially used to purchase so-called “toxic assets” to improve the balance sheets of imperiled major financial institutions, the program evolved to encompass a combination of equity purchases, loans, and guarantees to stabilize the financial sector. It also entailed major governmental investments and engagement in the nation’s desperate auto industry.

The Congressional Oversight Panel, the Government Accountability Office, and the Special Inspector General for TARP all recently concluded that TARP played an important role in successfully stabilizing financial markets and restoring the flow of credit. Inter-bank lending, which essentially shut down during the crisis, has returned to normal levels. Other lending has also resumed at a reasonably health rate, with the 21 largest banks receiving federal support extending more than $2.2 trillion in new loans since receiving TARP funds. Many of the banks that benefited from TARP have already repaid some or all of the government’s money. Problems persist in the financial sector, as well as the auto industry, but the TARP-related interventions clearly helped to ameliorate the crisis.

Responses That Didn’t Help Much

While the top-line results of the government’s response to the economic crisis look pretty decent so far, you don’t have to look far beneath the surface to start finding plenty of problems and mistakes. For example, many elements of the stimulus bill have not been nearly as cost-effective as the immediate aid to state and local governments, federal purchases, and added unemployment insurance. The CBO found that tax cuts, particularly those that went to upper-income households through an increase in the alternative minimum tax exemption, contributed little to the economy because the money was largely saved. The extension of the first-time homebuyer credit also was largely a waste of money.

Moreover, many costly elements of the stimulus package are not yet far down the spending pipeline, in part because they are contingent on states formulating proposals that meet federal approval. The Education Department’s “Race to the Top” program is one example. While those contingent programs may yet prove to be useful at accomplishing particular policy goals, the time lags they entail delay any positive effects they may have on the economy during a period when joblessness remains in double digits. Considering that stimulus support for state and local governments closed only 30 to 40 percent of their shortfalls, states still have had to dampen their economies by making sizable spending reductions and raising taxes. By trying to simultaneously stimulate the economy and pursue broader long-term educational, energy and other policy goals, ARRA produced less immediate bang for the buck than it probably should have. Moreover, as some critics pointed out at the time, its size appears to not be ample enough to jumpstart the economy and decent job growth. With most stimulus money due to run out by the end of 2010, a strong case can be made for additional federal spending, this time much more narrowly targeted toward the categories that have already proven to be most effective — especially helping to keep afloat drowning state and local governments.

Similarly, the TARP program’s success in achieving its main purpose of stabilizing the financial markets and lending imposed no costs on the leadership of firms whose actions brought the world economy to the brink of collapse. Nothing about TARP’s implementation seems likely to deter a replay of a similar scenario in the future in which taxpayers bail out extremely well large financial institutions and their extremely well compensated executives for taking excessive risks with relatively little cost to them. A year after the crisis, most of the same CEOs and leadership at the huge financial institutions that were disastrously managed remain in place. They remain enormously well compensated and their firms continue to engage in highly leveraged, high risk transactions. The financial regulatory bill proposed by Connecticut Senator Christopher Dodd includes a number of useful reforms and is stronger than the legislation that barely passed the House of Representatives with only Democratic support. But the Senate is likely to significantly water down Dodd’s plan, and prospects are highly uncertain for regulatory reform. The main question, and in many respects the toughest regulatory challenge both politically and substantively, is how to address the basic problem of too-big-to-fail firms that can engage in highly risky, profitable activity backed by implicit taxpayer support when things head south.

Likewise, little has been done to meaningfully help homeowners who were victimized by mortgage lenders who acted unlawfully, or the much larger numbers facing foreclosure in the wake of the real estate bubble’s collapse. Proposals to significantly reduce painful and costly foreclosures by allowing judges to work out so-called “cramdown” modifications of mortgage terms have been rejected in Congress. In contrast to the highly generous federal support for financial firms, the relative absence of public policy responses aimed at alleviating the pain of homeowners caught in the sudden downdraft in real estate values has left millions of households facing severe hardship without a cushion. While it is true that anyone who takes out a mortgage bears responsibility for recognizing the financial risks associated with that action, the government also bears responsibility for failing to police fraudulent lending practices, and perpetuating policies that contributed to the housing bubble in the first place.

Another policy response worth noting was the “cash-for-clunkers” program, in which consumers received government rebates during July and August if they traded in their cars for more fuel-efficient replacements. A study by Edmunds.com, an automotive research organization, found that of the 690,000 vehicles sold, the program led to only 125,000 transactions that wouldn’t have otherwise occurred, and that the average cost to taxpayers per vehicle sold was $24,000. While car dealerships and their employees benefited from the surge in activity during that brief period, the overall impact on the economy relative to the cost of the program appears to have been quite modest, notwithstanding claims to the contrary by the White House. Researchers are still assessing the environmental benefits, but those also appear to be limited and more costly than other policies to achieve the same result would have been.

Overall, the year 2009 would have been far worse economically if the stimulus bill and financial sector bailout hadn’t occurred. But a lot of significant, costly policy mistakes, including inaction on some of the most important problems like underwater homeowners and too-big-too-fail investment institutions, leaves abundant room for improvement in the still precarious months ahead.

Governor M. Jodi Rell vetoed both of the legislature’s deficit bills
yesterday, calling them “feeble” attempts to solve the state’s budget
shortfall. She called instead for lawmakers to grant her the authority
to make additional cuts to vital services, between 10% and 15% of any
appropriation if the deficit is between 3% and 5%, while at the same
time refusing to agree to any new revenue generation.

Giving the governor more power to make harmful cuts to public services
when people are struggling in a down economy would be unconscionable.

The State Employees Bargaining Agent Coalition (SEBAC) has repeatedly
offered to collaborate with the governor to engage public service
workers who have specific insights on ways to increase state
government’s efficiency. These “front line workers” have years of
experience in their agencies and have been ready to provide the
administration with clear programmatic ideas on how the state can be
more effective.

Governor Rell’s inadequate attempts to achieve efficiencies have
proved fruitless. Her Contracting Standards Board, whose mission is to
improve state contracting practices, has not met once in 2009. In
addition, her administration’s outsourcing of services from Birth to
Three’s Early Connections is costing the state millions rather than
saving needed funds.

It is vital that the governor and the legislature address the
structural change needed to fix Connecticut’s fiscal crisis. The
governor’s proposed band-aid not only gives her unusual powers over
the budgetary process, it won’t solve the problem. Cutting all
appropriations won’t balance the budget. Governor Rell is staunchly
protecting multi-million dollar estates from even one dollar in taxes
while she cuts programs that provide diapers for struggling families
and the state’s economy spirals downward.

It is time that all the parties come together to provide real
solutions, real revenue generation and a clear future for
Connecticut’s economic recovery.

By JCW, CT Blue

Fool me once…
December 21st, 2009

It’s almost enough to fill one with despair.

What’s one definition of insanity? Doing the same thing over and over and expecting a different result.

What clichés or common phrases are running through my mind?

Those who cannot learn from history are doomed to repeat it
It’s the same old song
Here we go again.

What brings these musings on?

Senate Banking Committee chairman Christopher Dodd, who one month ago proposed an overhaul of financial regulations that was hailed by many consumer activists, has all but jettisoned that proposal following Republican objections and has initiated talks for a new approach designed to satisfy some of his fiercest GOP critics.

Dodd’s strategy has raised concerns among consumer activists who were counting on him to come up with a tougher bill than the one recently passed by the House, and now worry that the entire measure will be weakened.

But the Connecticut Democrat, in an interview in which he laid out his strategy, said it would be too risky to launch another legislative effort that might repeat the Senate’s experience with in the health care debate, in which single senators have forced major rewrites or threaten to defeat the measure.

Yes, Chris Dodd is about to water down a bill that was probably not all that good to begin with in order to get Republican votes. How many votes will he get? None. If he gets no votes will he restore the bill to its present, more palatable wording? No. So in exchange for no votes we will get a shitty bill. Just like health care.

Did I say just like health care? This will be even worse, because this is a bill, as both Paul Krugman and Nate Silver have pointed out, that is tailor made to break the back of the filibuster. Even the Democrats must have the ability to win a war of words against a party that will be, and should be easily portrayed as being, the handmaidens of the bankers, hedge fund managers and other assorted crooks and slimeballs that got us into this mess. This bill represents not just a chance for the Democrats to fix our economic system, but to portray Republican intransigence for what it is. This is the bill on which the country would applaud them for going nuclear if that’s what it takes.

Instead, we can look forward to months of stories about Chris Dodd trolling for Republican votes that he is never going to get, with RIchard Shelby and Judd Gregg, playing the roles of Chuck Grassley and Olympia Snowe.

I hope I’m wrong. I hope Dodd is just trying to set them up. Neither his words nor recent history give us much hope.