In the fall of 2008, decades of finance-first, bankers-know-best economic policies coalesced to create one of the worst economic crises in history, one that the banks themselves could not survive without staggering levels of government support.
Yet astonishingly, nearly two years after the crash, Wall Street is still setting the economic agenda in Washington. As Congress begins to examine broader economic policy, lawmakers are under heavy Wall Street pressure to reduce the federal budget deficit-even though that could mean deepening the jobs crisis without any substantive economic benefits.
Small-bore reforms
At the same time, the financial reform bill that Congress is on the verge of passing leaves quite a bit to be desired. As the editors of The Nation emphasize, that legislation includes several small-bore fixes to ease the damage caused by Wall Street excess, but almost nothing to actually curb the excesses themselves. The capital markets casinos will largely be left untouched. Congress still has time to improve the bill over the next month as the House and Senate iron out their differences, and many useful reforms remain in play.
Nevertheless, Wall Street's lobbyists have succeeded in taking the most important reforms off the table. We will not break up the biggest banks this year, nor will we tax reckless financial speculation. We aren't even banning economically essential banks from participating in risky securities businesses.
Et tu, Buffet?
As Annie Lowrey notes for The Washington Independent, the crisis has even discredited Warren Buffett, one the few financial superstars who previously had a reputation as a "straight-shooter" that invested in responsible enterprises.
Buffett was once a harsh critic of credit rating agencies, the firms who slapped top ratings on toxic mortgage-backed securities and derivatives. But Buffett himself is also a top shareholder in Moody's, one of the worst ratings agencies. The Financial Crisis Inquiry Commission had to compel Buffett's testimony at a recent hearing via subpoena after Buffett turned down multiple requests to appear. At the hearing itself, Buffett did everything he could to pass the buck from himself and Moody's to any other possible target.
Slashing the deficit
Wall Street's ugly influence on economic policy extends far beyond the realm of bank regulation itself. Right now, financial elites are pushing hard on a right-wing plan to slash the federal budget deficit, and even many moderate Democrats are coming out in support of reduced government spending.
This strategy is a tremendous political blunder, as Steve Benen emphasizes for The Washington Monthly. It's true that the deficit does not poll very well-but the deficit is only one side of the issue. Cutting the deficit means slashing federal support for jobs-we can help the economy or we can slash the deficit, but we cannot do both at the same time.
Nearly everyone believes that creating jobs should be a top priority for the government, but if politicians only ask questions about the deficit, they won't hear answers about the economy. The political imperative is clear, as Benen notes:
This really shouldn't be complicated: invest in more job creation, help struggling states as they keep laying off workers, and make clear to voters that the economy is more important than the deficit. Do this immediately, without apology.
Replacing Social Security with credit cards?
Wall Street loves cutting social services in the name of deficit reduction. Every public good that can be efficiently provided for by the government can also be inefficiently provided by the private sector-replacing public benefits with corporate profits. The bank lobby would like nothing more than to replace Social Security with credit cards for senior citizens. Wall Street doesn't make a dime on the government's Social Security payments-but they can make a killing on a privatized market.
Weak job growth=Weak private sector
Lest there be any question about whether or not the government needs to take strong action to strengthen the labor market, take a look at Friday's jobs report. As Tim Fernholz notes for The American Prospect, this report was the most disappointing piece of economic news in months. While the economy gained 431,000 new jobs during the month, 411,000 of them were temporary hires by the U.S. Census, meaning the private sector is not able to support much new hiring.
There's a critical lesson there: The only serious engine of job growth in the month of May was the federal government. Absent government hiring, the economy is not improving at all. There is an almost bottomless supply of critical social needs that require work right now, but no private-sector momentum to meet those needs.
The BP oil catastrophe should underscore how important new, green energy is to the U.S. economy-yet U.S. efforts to develop green energy solutions have fallen far behind those of China and other industrial powerhouse nations. Major federal investment into the research and implementation of green energy would be good for our environment and good for our economy.
Don't let social services suffer
But astoundingly, the advice on the world economy currently coming from top policymakers at the Federal Reserve, the International Monetary Fund and European central banks is echoing the bank lobby line: Slash social programs now, and let the job market fend for itself. As Dean Baker emphasizes for AlterNet, these are the exact same policymakers who missed the housing bubble, made the wrong calls on bank regulation and sent the global economy into freefall.
There has been little change in personnel and no acknowledgment of error at the central banks whose incompetence was responsible for the crisis . . . . their agenda seems to be the same everywhere, cut back retirement benefits, reduce public support for health care, weaken unions and make ordinary workers take pay cuts.
In short, Wall Street and the Wall Street policy agenda remain ascendant, despite economic catastrophe. In the Great Depression, the government actually learned its lesson-we regulated the banks, created Social Security and put millions to work through government hiring programs. That same basic agenda is needed today. Failing to meet it could well mean decades of economic decline.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
Defying BBC and others' severe pessimism, Argentina's economy performed well from 2002 forward, after it decided to default on its debt in late 2001. So, Greece, why not just skip to the Argentina story from the default forward? Why go through your own version of the hell of Argentina's 1999 to 2001, IMF-imposed austerity? Dean Baker:
Argentina's economy shrank in the first quarter of 2002, the quarter immediately following the December default, and then began growing robustly. It continued to have robust growth for 5 more years until it got caught up in the world recession. If we were having an honest debate over Greece, then everyone would be talking about Argentina's remarkable turnaround.
Now the fact seems to be that Greece has bought itself at most a year before its debt is restructured anyway. The Financial Times:
However, most of the lawyers, bankers, and emerging market investors who have worked on the dozens of sovereign defaults over the past three decades have not changed their view on the fundamentals of the distressed European sovereigns. Among them, the betting is that Europe and the International Monetary Fund have bought no more than another six months to a year before a "restructuring".
So, why not skip the year of irrational and severe austerity? Joe Stiglitz:
What worries me about the rescue package that has been put together is that it is accompanied by severe austerity measures that are likely to lead to a weaker European economy. A weaker European economy is going to increase the deficit so that in fact the deficit reduction that people hope for will not fully be realized. There may be some, but it will be limited.
The risk is that Europe goes into the kind of death spiral that Argentina went in when it had a fixed exchange rate with the United States. It did not want to abandon that fixed exchange rate, there was no assistance of a substantial kind coming. Eventually concretionary measures were imposed and the deficit reduction was not what they had hoped. Finally it abandoned the currency, the fixed exchange rate, and it defaulted on the debt."
I.e., why not skip today to Euro-escape devaluation (hopefully!) and default and then to that real nice growth stage? . . .
This is the third of three diaries published this weekend which excerpt portions of my August 2000 report, "The Empire Strikes Back: Police Repression of Protest From Seattle To L.A.". This diary presents a more comprehensive account of what actually happened in Washington DC surrounding the anti-World Bank/IMF demonstrations, which resulted in the $13 million settlement announced last Monday.
Washington, D.C.
The A-16 demonstrations against the World Bank/IMF on April 16 and 17, 2000 saw a dramatic escalation in state repression of fundamental constitutional rights. There was a coordinated preemptive plan to stifle and disrupt constitutionally protected rights to free speech and assembly, which included a wide range of acts that were individually illegal, unconstitutional and/or actionable on civil law, including an illegal raid on the Convergence Center, the headquarters for groups involved in the protests, and the confiscation of property that prevented its use in the demonstrations.
On July 27, the ACLU, National Lawyers Guild and Partnership for Civil Justice filed a lawsuit covering all these activities on behalf of organizations and individuals involved in the protests, including Fifty Years is Enough, the International Action Center, and the Mobilization for Global Justice.
The suit contained 10 counts: One count for the conspiracy to disrupt First Amendment rights, one count for the raid on the Convergence Center, four for mass false arrest (First Amendment, Fourth Amendment, false arrest, false imprisonment), one for the exclusion ("No Constitution") zone, and three for excess force (First Amendment, Fourth Amendment, assault and battery).
The lawsuit charges that the conspiracy to disrupt First Amendment rights included "intimidation, harassment, dissemination of false information portraying plaintiffs as violent, street closures, confiscation of political materials, preemptive mass false arrests and seizures, and unnecessary lengthy detention of arrestees in inhumane conditions." This included
Stopping & frisking individual protesters without reasonable suspicion or consent.
Searched demonstration organizers or their vehicles without probable cause or consent
Making pretextual visits to demonstration organizers' places of residence.
Stopping demonstration organizers on the street, showing them photos taken of them, naming their associates, and otherwise making government surveillance known to them.
Massing large numbers of uniformed and non-uniformed officers near the Convergence Center and other places where activists met, and subjecting them to surveillance.
Infiltrating demonstrators' organizations and informal groups with agents posing as political activists.
Flying and hovering government helicopters at low altitudes over the Convergence Center and the residences and property of protesters.
Causing George Washington University to ban overnight guests in its dormitories during the period of the protests and prohibiting demonstrators from using GWU facilities promised to them.
Causing the American University to cancel an assembly and panel, including Green Party Presidential candidate Ralph Nader, who was scheduled to speak on globalization, the World Bank and the IMF.
Causing the Washington Metropolitan Area Transit Authority to (1) close Metro Stations demonstrators were expected to use, and (2) prohibit passengers from carrying political banners and signs, which is customarily allowed.
All these actions were taken before a single demonstrator appeared on the streets (though some continued afterwards), and they represented a chilling intrusion into the private lives of activists, and into the normal functioning of civil society.
On Friday, we learned that the U.S. unemployment rate officially broke 10% for the first time since the early Reagan years. This is about as bad as it gets for a modern, developed economy. No economic force takes a heavier toll on a society than rampant joblessness, and few personal setbacks take a deeper psychological toll than being out of a job for months on end. If Congress and President Obama don't do something to create jobs fast, both are going to pay a hefty political price when next year's mid-term elections roll around.
So how bad is it? In October, the economy shed 190,000 jobs and the unemployment rate jumped from 9.8% to 10.2%. That percentage is the most optimistic reading of the labor market in Friday's report. If you take people who want full-time jobs but are settling for part-time work, then add those who have simply given up on finding a job, the rate is a massive 17.5%.
The problem is not that either Obama or Congress have failed to act on the problem, but rather that they have not done enough. When Congress was moving on Obama's $787 billion economic stimulus package back in February, we were shedding upwards of 700,000 jobs a month. So the stimulus package has worked-it's probably helped keep unemployment from jumping to 12% or 13%. But this is cold comfort to the nation's 15.7 million unemployed, 5.6 million of whom have been out of a job for more than six months.
As Robert Reich notes for Salon, Obama's economic advisers dramatically underestimated how bad things would get when they crafted the stimulus package. As a result, the package was too small and unemployment has remained high. Obama needs to go back to Congress and demand more economic relief funding. Republicans will continue to whine about government spending to excuse their obstructionism, of course, and conservative Democrats will probably start sweating, too-Sen. Ben Nelson (D-NE) helped cut back the original stimulus bill in February to help boost his "centrist" credentials. This of course had nothing to do with economics or policy. Government spending is what saves the economy in a recession. In a downturn as severe as this one, it takes a lot of spending to turn things around.
But as Reich notes, Nelson and his cohorts will have a lot more to worry about in the 2010 elections if the economy doesn't actually improve over the next year. And few economists think it will. The Congressional Budget Office, which is run by a conservative economist named Douglas Elmendorf, projects an average unemployment rate of over 10% in 2010. That's worse than this year. Democrats from swing districts need to support economic relief packages. Continued economic malaise will severely hurt them at the polls.
Congress finally took some action on joblessness on Thursday, voting to extend unemployment benefits for an additional 14 weeks. If we want the economy to recover, we need people to spend money, but if people aren't working, they don't have any money to spend. So the government cuts people checks to help them get by and stimulate a demand for goods and services. Even most conservative economists thinks this is a good idea.
But as Kevin Drum notes for Mother Jones, the soundness of the policy did nothing to prevent Republicans from fighting the effort to extend benefits tooth-and-nail. The bill had to overcome three-that's right, three-filibusters in the Senate from Republicans, who held up the bill for weeks for no apparent reason. In a blog post for The Washington Monthly, Steve Benen explains the economic cost of this obstructionism: In the weeks of delay, 200,000 people looking for work stopped receiving benefits.
But extending unemployment benefits will not solve our economic woes. The total program is just $2.4 billion, a drop in the bucket compared to the trillions of dollars the government put up to salvage Wall Street. $2.4 billion is not enough to reverse the unemployment trend. Cutting the checks certainly helps, but as Matthew Rothschild emphasizes for The Progressive, we need an economic policy that actually puts people back to work. We've known for months that the stimulus was too small and watched the labor market continue to deteriorate. We need more than tweaks at the economic margins, we need a robust job creation plan.
As Stephen Franklin notes for Working In These Times, we already know that the recession has created a significant jump in the nation's poverty rate. According to official government statistics, the rate climbed from 12.5% to 13.2% in 2008, the largest increase since 1991. But the National Academy of Science thinks the government statistics are misleading, as they account for rising costs associated with medical care, transportation, child care and different regional living standards, as Franklin notes. Taking these factors into account, the National Academy of Sciences calculates the actual poverty rate to be 15.8%. That's an additional 7 million people living in poverty, for a total of over 47 million. That's more than the entire population of the New York, Los Angeles, Chicago, and Philadelphia metropolitan areas combined. What's worse, we don't have poverty statistics for this year, when the most severe economic damage was been dealt.
Workers are facing tough economic prospects around the world. Writing for The Nation, Kristina Rizga details Latvia's economic turmoil. Just like the US, overexcited bankers in Latvia inflated a massive real estate bubble that took down the entire economy when it burst. But with the bubble burst, much of the country is now out of a job and stuck with a mortgage worth far less than what they paid for it. It's almost exactly the same story we've seen at home.
No domestic economic problem is more pressing than our epic levels of unemployment. We need another round of stimulus to get people working again. If not, we'll see the same public unrest here as in Eastern Europe.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
The economic free-fall is finally slowing down, although nobody expects the recovery to be very pleasant. Job losses and foreclosures are expected to increase well into next year. But even if our economic system gets back to normal, it's important to remember that gross inequalities are embedded in the global order. At home, minorities face significant barriers to economic security, while abroad, children in poor countries are denied access to basic nutrition. This is especially disheartening in the wake of the G-20 meeting in Pittsburgh, which demonstrated that the world's economic leaders are more focused on bailing out banks than eradicating global poverty.
Robert Reich sums up the domestic economic scenario succinctly for Salon. The stock market is humming along, even as most Americans are tightening their belts. It's a counterintuitive situation: Wall Street is celebrating an economic recovery, but the consumers that drive our economy are still cutting back. Reich explains that the government has stepped in to fill the hole caused by consumer spending. Business executives may scream "Socialism!" when the tax man comes around, but without massive government help, those same CEOs would be watching their earnings and companies collapse.
Without the jobs and tax cuts created by President Barack Obama's economic stimulus package, we'd see more red ink from just about every industry. The entire U.S. mortgage market is currently supported by the federal government via Fannie Mae and Freddie Mac, while other special initiatives like the Cash for Clunkers program brought the auto industry out of its recession-induced coma this summer.
The trouble is, while a few programs have been good for ordinary citizens, most of the government's economic salvage operations are aimed at giant corporations. Of all the paradoxes in today's economy, the most significant can be found in the financial sector. Bank stocks are up, even though banks are in serious trouble. Their customers are broke, foreclosures are soaring, and analysts are predicting a fresh round of multi-billion-dollar losses on commercial real estate loans soon. So what makes an investor want to buy a bank stock right now? Nothing but the government's limitless willingness to bail out banks.
How much bailout money did the government actually spend? We've all heard about the $700 billion Troubled Asset Relief Program (TARP), but the real haul for bankers is much, much bigger, as Nomi Prins and Christopher Hayes detail in a piece for The Nation. A whopping $17.5 trillion has been dedicated to subsidies, guarantees, below-market-rate loans, and other special perks for the financial industry. That's roughly one-fourth of the entire global economic output for a full year, and more than the entire annual productivity of the U.S.
Prins and Hayes make use of a clever thought experiment: What if, instead of spending the money on big institutions, the money had gone to a small-time gambler? It's an apt comparison. Taxpayer money went to financial speculators who used our homes and neighborhoods as poker chips in a global casino. The dozen or so bailouts the government has enacted seem absurd when we think of them as cheap financing for bets on the craps table. The number of programs is staggering. Bank executives love to proclaim that their banks didn't really need TARP money, they just accepted it because the government wanted them to. Next time you hear that boast (sometimes it sounds more like a whine), remember that every big bank in the country issued debt guaranteed by the government, then scored ridiculously cheap loans from the Federal Reserve while others got federal help through AIG, Fannie and Freddie.
"A fraction of the $17.5 trillion bailout could have been used to cut the principal of homeowners' mortgages (using homes, even devalued ones, as collateral) and cover student loans at zero percent interest," Prins and Hayes write. "Rather than pouring it into the top layers-the banks-a people's bailout would have cost less and been more humane. And it likely would have prevented the ongoing increase in defaults, foreclosures and general economic anxiety."
There are very good reasons to maintain a healthy financial sector, but only if banks actually do something useful. Banks are supposed to lend money to enable socially productive economic activity. This bailout money has not been spent on anything socially productive. Instead, it's covered losses from predatory lending and boneheaded speculation.
The dominant cause of the recession was the collapse of an $8 trillion housing bubble, which banks helped inflate with all outrageous loans. For decades, the value of a family's house was the foundation of most American middle-class wealth. When home prices took a nosedive, so did the spending power of every homeowner. Even borrowers who had affordable mortgage payments were hit hard. For borrowers stuck with expensive, predatory mortgages, the result was a wave of foreclosures. Writing for Mother Jones, Andy Kroll highlights a hard reality: Recovery in the housing market will not lead to middle-class financial security. It will be at least a decade before home prices reach pre-crash levels.
It's critical to remember how the recession is deepening existing inequalities, particularly along racial lines. In a post for In These Times, Michelle Chen explains how African Americans and Latinos are consistently paid less than whites during boom times, and are pushed even further down the ladder when things go bust. Communities of color are more likely to be targeted by predatory lending, which can devastate entire neighborhoods for generations. That means people of color are more likely to be foreclosed on, more likely to be laid off, and less likely to have access to basic necessities like health insurance.
The statistics are stark. In a story for New America Media, Christina Fernandez-Pereda, notes that while the overall unemployment stands at 9.7%, for minorities, the actual number is much higher. A full 15.1% of Blacks are unemployed, while unemployment among Asian Americans has doubled since early 2007. A full third of Latinos between the ages of 16 and 29 are unemployed.
The bank bailout has done nothing to improve the status of the global poor. The G-20 made grand promises to help those who need it most in developing countries this year, but so far, the talk has resulted in very little action. As Hayley Hathaway explains at Sojourners, only $50 billion has been dedicated to the 78 countries where humanitarian risk is greatest. As Hathaway notes, that's less than 25% of the TARP money received by the 20 largest U.S. banks.
Without major action, between 1.4 million and 2.8 million children will die of malnutrition in the next five years. Instead of pushing major humanitarian aid, the G-20 has promised $750 billion to the International Monetary Fund. The IMF was supposed to act as an international lender of last resort-if a nation's financial woes got really bad, they could get a loan from the IMF while they restructured. But IMF money ends up flowing to private-sector banks, and governments in need are forced to cut spending on programs that help the poor. When the G-20 met in Pittsburgh last week, a major topic of discussion involved giving developing nations a greater voice in IMF policies. But despite this talk, wealthy nations remain committed to the status quo, protecting the interests of their bankers eyeing future international bailouts.
For most people, it will be a long time before our economic recovery is a reality. But as the economy crawls out of the ditch, it's critical to build our future on a stronger foundation, one where we don't allow millions children to starve and where skin color does not determine economic security.
Chris Bowers took major exception to an article I recently wrote supporting US funding for the IMF. I was motivated to write the article by the neocon rants equating money for the IMF to money down the drain - despite the fact that the IMF was bailing out countries that the US would certainly not let fail, at a fraction of the cost of us trying to do it alone. As I wrote, that is an argument that I don't consider very serious.
But some progressives in Congress also wanted to tie the IMF funding to specific changes in how the IMF conducts its business, with an eye toward more sensitivity to poor countries and greater transparency. I am very sympathetic to these goals, and this argument IS serious.
I think we should give the new Administration a chance to engage, however. It is sometimes hard to remember, but we are coming off of eight years in which the US disparaged and belittled multilateral organizations and often ignored them. The Administration now, wisely, wants to reengage. From the IMF, the US wants not only to continue to save countries from bankruptcy, but also to become a forum for examining China's undervalued currency. In pursuing a broader agenda, the Administration can and has pushed for reforms, with some success, and we should give that approach some time to work. It shows more respect for a multilateral process that involves many countries than does categorical US demands. Moreover, if we attach hefty conditions, other countries might too, and that will complicate the whole process greatly.
Second, we are still in the throes of a once-in-a-century economic crisis. The IMF has already relaxed some of its conditions to ensure that it can act quickly and not cause additional social harm. But I fear that some of the new requirements that the members of congress want, like requiring Parliamentary approval for loan packages, could slow the process down too much at this juncture, and, in the end, cause more harm.
Finally, the US has been pushing hard for underdeveloped countries to get more of a say in IMF decisions. That pressure has had resulted in a marginal increase in voice for the underrepresented, with the promise of more to come. The answer to the problem of badly designed loan packages for poor countries is for poor countries themselves to have a greater hand in decision-making.
I wrote this as a personal reflection point; I don't presume to know or be suggesting any statistical or methodological pretext in this post. I just wanted to raise the observations of one node in the network.
I wonder what happened to all of my colleagues who said they were opposed to the ongoing wars in Iraq and Afghanistan. I wonder what happened to my colleagues who voted with me as I opposed every war supplemental request under the previous administration. It seems, with very few exceptions, they have changed their position on the war now that the White House has changed hands. I find this troubling. As I have said while opposing previous war funding requests, a vote to fund the war is a vote in favor of the war. Congress exercises its constitutional prerogatives through the power of the purse.
As a lifelong Texas Democrat, I don't know if there's anything that pains me more than having to cite Ron Paul at the beginning of my first post written for OpenLeft. But the man has a point -- what the heck just happened?
I read the national blogs -- the "short head" of the political blogosphere -- regularly, but not fervently. I browse the stories on Google Reader, go to several sites to comment on interesting posts, but my real focus is on state politics. I write for Burnt Orange Report down in Texas, and if I only have 30 minutes a day to focus on blogging politics, I'll focus on state politics and not really pay attention to national politics.
This is all by way of saying that I just lose some stories. I just do. And, for whatever reason -- my recent graduation from grad school, job hunting, blah blah -- I had no idea that nearly 2/3 of progressives who pledged not to fund the war have totally changed their minds until KT got all of us over at BOR involved.
But now what? I can do little more than read the coverage. And that's what this post is about -- the different tones in coverage that are now recorded and part of the "history" of this particular Congressional milestone. But I'm not talking about Democrat vs. Republican (as all the major papers will report), or even Democrats vs. Democrat (which is the more obvious discussion for Democrats to have). No, I'm talking about the difference in tones among Democrats that wanted the "No" vote, including:
These are not the whole spectrum of tones, I'm sure -- just the ones I interacted with right away when I was reading about this tonight. And I don't mean to pigeonhole any/all of these voices as solely existing in that tone. Those descriptors are relevant to this set of observations on this issue, with the hope that a simple case-study may generate an interesting discussion.
So here's the question: in light of the fact that I wish I had done more and am displeased by the outcome, how do I react/respond to the various rhetoric of the coverage provided by those whose goals I agree with?
One of the biggest memes the netroots is constantly fighting against is the idea that we mindlessly participate in an "echo chamber." Yet I would argue that each of those posts has decidedly different tones, and that each tone influences an activists' perception on the work that was done in distinctly different ways.
Ultimately, the dividing line among these voices has little to do with any talking points -- because each group supported the same side of the same issue. Instead, the dividing line amongs the "progressives of the progressives" appears to be those who appreciate emergence politics, and those who don't.
By a vote of 226-202, the IMF-war supplemental has passed the House. The roll call will appear here in about an hour. Of note, 32 Democrats voted nay, and zero five Republicans voted in favor (some republicans must have switched at the end, because the C-SPAN screen was reading zero Republicans). Three members from each party did not vote.
The Progressive Caucus attempt to reform the IMF has come up about a dozen votes short. I now expect all the liberal policy analysts who admitted the IMF was flawed, but who still urged Congress to provide blank check IMF funding, to begin working furiously to apply pressure to reform the IMF.
Given what was at stake--increasing Progressive influence and ending the Washington Consensus--this is definitely disappointing. However, it is still impressive how close this effort came, that the Democratic leadership was delayed for as long as they were, and that President Obama had to eventually start whipping votes himself. While the desired outcome did not take place, this is still an advance for Progressive Caucus influence, and a sign that they are a force to be reckoned with.
Even though I definitely could have helped more, and even though this defeat is in no way the fault of the people who worked so hard to fight the supplemental, I am pretty sick of moral victories. Let's work to make sure there are none of those the rest of the year.
Update: Congress Matters has the list of Democratic "nay" votes, along with a handful of Republican "yea" votes that must have switched at the end.
The serious people at The Center for American Progress published an argument today that the IMF needs to be reformed, but that Congress should pass IMF funding without any guarantees of reform. The argument is very serious (emphasis mine):
Opposition is coming from both sides of the political spectrum. There is the usual neo-con fearmongering that this money is a "giveaway"-more on why this is silly below. There are also progressives who argue, with reason, that the IMF should be less strict in its demands from poor countries because past IMF conditions on loans to developing economies often caused great pain and were ultimately unproductive. All sides are demanding greater transparency in the IMF's lending practices and governance.
Much room remains for improvement at the IMF, but we need to ante up. Congress should deliver the funds we've pledged, while also keeping up the pressure for reform.
The article goes on to list five reasons for passing IMF funding. None of these reasons explain how IMF loans, which the article admits have often caused "great pain" and been unproductive, will become productive in the future. Further, there is no explanation for how more pressure for reform can be applied to the IMF once the funding is passed. There is this quote though (emphasis mine):
2. We are going to pay one way or the other. Let's be serious. We aren't going to let Pakistan's economy collapse, or for that matter Hungary's, Romania's, or Guatemala's. The potential national security consequences of any of those countries failing are too dire, not to mention the ultimately higher economic costs to America. Better the IMF prop them up-as they have-than us shoulder an even higher burden in funds and hassle.
3. This is a chance to show leadership again. American economic leadership has taken a serious beating lately. The world blames us for this crisis. This is a chance to do the right thing when countries are in need and gain back some credibility as an economic leader. Let's not be the last country to pay what we pledged.
Get serious, huh? Serious, like telling people to drop their demands to change the IMF, but to keep up their pressure to reform the IMF? Serious, like telling people that IMF loans have often caused great pain and were unproductive but, in order to prevent pain, we should fund the IMF without any changes to it? Serious, like arguing that passing IMF funding will demonstrate American economic leadership, even though several new governments have arisen in South America largely in response to popular sentiment opposing the American-led economic policies of the IMF?
It is infuriating how many Washington policy analysts will, when their arguments have no real persuasive value and are overtly contradictory, simply resort to calling opponents of their policy "not serious." This is especially the case when three-dozen progressive members of the House of Representatives are holding up IMF funding until four specific reforms are instituted by the IMF. What those Progressives are doing is actually "serious," since they are backing up their calls for reform with specific demands and meaningful action. By contrast, saying that an institution is hurting people and needs to be reformed, but simultaneously declaring that we need to drop all demands for reform, is fundamentally unserious.
The most interesting American political story unfolding today is the fight in the House over the Afghanistan--Iraq--IMF--Cash for Clunkers--Torture Photos supplemental funding bill. There is a lot at stake in this bill, which still might not have the votes to pass. Here is why it is worth watching:
Will the Progressive--Republican coalition hold? The reason this bill is in trouble is because of an alliance between House Progressives and House Republicans. The main objection from both camps is opposition to the IMF funding. Thirty-three House Progressives circulated a letter indicating that they would vote against any blank-check IMF funding, which was attached to the bill in the Senate. House Republicans have also reversed their once overwhelming support for the supplemental, due to the attachment of IMF funding.
If the supplemental is defeated, it means that the war funding will have to be passed separately from the IMF funding. This would be the first successful defeat of Democratic legislation by a Progressive--Republican alliance since 1999. It would also signal a new path to Progressive Caucus influence over future Democratic legislation. As Jane Hamsher writes:
Make them separate these bills so the IMF can come out from behind the war funding and we can have an honest discussion about whether we really need a $108 billion European bank bailout right now.
I'm feeling more hopeful about a public plan, though. If Obama will make calls for this, surely he'll do so for healthcare.
Progressives have been working to develop such influence for quite some time now. Defeating
Will the IMF status quo be changed? If the IMF is forced to be voted upon separately from the war funding, it might mean an end to the status quo of the IMF itself. This is because the same Progressive-Republican alliance can form to prevent IMF funding when it is considered by itself. However, House Progressives have indicated, through the above mentioned letter, that they would vote for IMF funding if certain strings and reforms were attached to the funding.
The four bullet points outlined in the letter would effectively put an end to the era of the "IMF riot," and make a real dent in the so-called Washington consensus. It would mean that many of the demands made by anti-World Bank and IMF protests ten years ago will have been enshrined into U.S. law. That would be a truly remarkable progressive victory over international neoliberal economic policy, and really change the world.
This is a big vote. If Congress can't get anything done without the approval of an emerging Progressive block, then Progressives will suddenly have the ability to make real change both at home and abroad.
No matter what happens, it is pretty impressive that a few dozen Progressives, and a coalition of blogs, managed to hold up White House approved legislation this long.
On Tuesday President Obama proposed that any increases in federal spending on anything useful, such as healthcare or retirement security, must be balanced by cuts and savings to something else useful, such as healthcare or retirement security.
"The pay-as-you-go rule is very simple," Obama said. "Congress can only spend a dollar if it saves a dollar elsewhere." Except that it's not so simple. Obama would make an exception to allow Bush's tax cuts for millionaires to be extended past their 2010 expiration date, as well as to prevent the alternative-minimum tax from impacting the overclass. Still, the White House insists that everything is very simple:
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The serious people at The Center for American Progress published an argument today that the IMF needs to be reformed, but that Congress should pass IMF funding without any guarantees of reform.