The Cuckleburr Times » John F. Wasik

Inside Scoop: The Real Barack Obama Revealed!

John F. Wasik — Fri, 09 Oct 2009 19:51:43 +0000

Socialist. Communist. Hitler. Racist. The Joker. Has any president in recent memory been called so many names so quickly in his tenure?

It took a second term for George W. Bush, Bill Clinton and Richard Nixon to achieve pariah status among their detractors. President Obama is getting the primary-schoolyard name-calling treatment in his first eight months.

Yet I predict President Obama will defy all of these malicious and ridiculously undeserved labels to achieve something few maligned chief executives have been able to accomplish: He will establish social capitalism as a new guiding political philosophy for the world’s largest economy.

If Obama succeeds – and I believe he will – he may be able to diffuse the tired old monikers of liberal, socialist and centrist. Put those stickers in a drawer. They don’t precisely describe Barack Obama.

As I discovered in researching my book The Audacity of Help: Obama’s Economic Plan and the Remaking of America (www.audacityofhelp.net), President Obama has espoused a hybrid political philosophy. As a student of history, I’d say he’s closer to Teddy Roosevelt than Franklin Delano Roosevelt. Yet he’s got a “Green Deal” working instead of a “Square” or “New” deal.

Like Teddy and Franklin Roosevelt, President Obama is keenly aware of history and is a man of his times. Unlike his Square and New Deal predecessors, though, Obama has professed no desire to break up corporations or take them to court – even when you can make a strong argument for reducing the size of the largest financial service companies.

Inheriting the worst debacle since the Great Depression, Obama has chosen the path of a social capitalist. He has laid the groundwork for government being a responsible steward. Not interested in nationalizing anything, he wants to bolster banks to make them healthy then move onto other national priorities.

As part of his Green Deal philosophy, clearly economic growth is more important than controlling boardrooms and executive compensation. This is his University of Chicago intellectual background speaking.

President Obama told CNBC he has a “strong inclination” against a second stimulus package, although he’s hoping that the first stimulus plan can spur private-sector jobs in roadbuilding, green energy, broadband, electrical grid modernization, high-speed rail, medical research and thousands of other projects throughout the country. Some of those promises have come to fruition, but a long-range plan on infrastructure repair and development is necessary if we’re going to compete with China and the rest of the global economy.

If anything, the Obama stimulus and budget plans have provided significant but not overly generous seed money for all of these areas in the hope that private industry will replace the nearly 7 million jobs lost since the recession began in December, 2007. As such, in terms of sheer dollars, the Obama Administration (particularly the Department of Energy) has become the largest venture capital entity in the country.

If Obama was a true socialist, he would have broken up the strangleholds that major insurers have in most state and local markets in health insurance and reduced the size of the largest banks – or taken them over. Even his financial services reform proposal pretty much leaves powerful insurance companies alone, even though their abuses in health-insurance claims, annuity and securities sales have been profligate.

Refocusing on the economy, Obama is hewing close to his blueprint for financial reforms to save capitalism from itself.

Keep in mind that other than the disappearance of Bear Stearns, Lehman Brothers, Merrill Lynch, Countrywide Financial, Washington Mutual, Wachovia Securities and dozens of smaller banks, little has changed on Wall Street.

The biggest banks got bigger (Bank of America, Wells Fargo, et al). The government has veer from the “too big to fail” philosophy, which means we could have another global meltdown again. Nevertheless, Wall Street likes the deregulated status quo and is lobbying intensely to kill financial reform.

“I don’t think they’re going to succeed in killing it,” Obama said bravely of his effort to push through financial reforms. “I’m going to stop them from killing it.”

Yet Obama’s social capitalism will prevail because wiser global financial forces will demand it. We’ve already seen the devastation of unfettered free-market capitalism. Just look at the 1870s, 1890s, 1929-41, 1974, 1999-2002 and the disaster last year. The next global iceberg collision will make 1930 look like a Disney musical.

While I’m not sure booms, busts and bubbles can be managed, we can certainly devise better warning systems and investor safeguards. No matter what you call Obama, here’s his most boiled-down mantra: Protect the weak from the ravages of greed. In the words of T.R, “bully” to that.

©2009 John F. Wasik, author of The Audacity of Help: Obama’s Economic Plan and the Remaking of America

John F. Wasik, author of The Audacity of Help: Obama’s Economic Plan and the Remaking of America, is the author of twelve books, including The Cul-de-Sac Syndrome and The Merchant of Power. He speaks widely and writes a weekly Bloomberg News column that reaches readers of five continents and which earned him the 2009 Peter Lisagor award for journalism. He lives in Chicago.

For more information please visit www.audacityofhelp.net

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Get Ready for “Son” of Stimulus Plan

John F. Wasik — Wed, 09 Sep 2009 17:09:14 +0000

So, where are the jobs? Even as the fog seems to be lifting over housing, manufacturing and the financial sector, the unemployment rate continues to float ever higher.

Despite the largest economic bailout in America history, the jobless rate soared to 9.7 percent in August. All told, nearly 7 million jobs have been lost since December 2007. Wasn’t that $787 billion stimulus package supposed to make this awful number go down?

The stimulus plan is like trying to weld a plate onto the hull gash in the Titanic after it hit an iceberg. Once you set aside the money spent on economic triage — more than a half a trillion dollars — you have a long-term investment in social and physical capital. As I discovered in researching my new book The Audacity of Help: Obama’s Economic Plan and the Remaking of the America , much of the legislation was a combination economic band-aid and long-term therapy.

While it may not be reflected in the unemployment numbers, there is visible progress from the stimulus spending. About $60 billion of the $288 billion in promised tax cuts has flowed into the pockets of most middle- and lower-class Americans. Another $84 billion of a nearly half-trillion dollars in capital improvements spending has been doled out. Roads are being repaved, bridges are being rebuilt and thousands of public works projects are underway, resulting in about 2 million jobs, reports IHS Global Insight, a consulting firm.

Where Money Was Spent

Let’s start with the largest chunk of the stimulus program: Tax relief, which accounted for $288 billion of the spending. Those on fixed-income received a one-time payment of $250. That’s not much help when Social Security payments, indexed to the consumer price index (CPI), were expected to remain flat. It would be ideal if the CPI reflected the true cost of living that incorporates higher medical costs, all taxes and transportation, but it doesn’t.

Sorry, you can’t turn in your clunker for a bigger check to cover higher out-of-pocket medical or insurance bills. Most everyone else saw a slight increase in their take-home pay as withholding taxes were dropped a bit, although it only added up to a few dollars a week. A more salient way of boosting incomes would be to grant a holiday on payroll taxes for a few days or weeks, but that’s not what Congress and the Obama Administration decided to do.

The next-biggest portion of the stimulus spending — $144 billion — was for “state and local fiscal relief.” Faced with the loss of state and local tax revenue, government agencies were facing massive teacher layoffs and shutting down public services without this band-aid measure.

This move saved more jobs than would have otherwise been lost, although it doesn’t address a more pernicious long-term problem. Property valuations, which are the basis for local real estate taxes, are continuing to fall. That means less money for schools, libraries, fire and police departments. How can public agencies replace this money? It’s an ongoing crisis that will translate into more program, service and job cuts (or tax hikes) later this year and into 2010. Get ready for “Son of Stimulus” when this reality gobsmacks Congress as it heads into mid-term elections next year.

Long-Term Investments

The saving grace of the Obama-designed stimulus is that it’s earnest about investing in infrastructure, research, energy and education.

$111 billion will be spent on infrastructure and science. This is everything from medical research, fixing roads and high-speed rail planning.
Some $53 billion will be spent on education and training and is broadly distributed to everything from Headstart for poor families to higher education (see www.ed.gov).
$43 billion will be spent on energy research for sorely needed technologies like efficient batteries.

What’s not clear about the stimulus spending is if the money allocated to specific projects is being spent efficiently or that it will match the number of jobs lost during the recession. Early indications are that it isn’t, although it will take time for nearly a trillion dollars to make it from the Treasury to a project in your community. The Obama Administration definitely needs to provide more information on its www.recovery.gov site to tell taxpayers how that money is being spent. There are maps that tell you which projects are funded and where, but more detail is needed. For now, a much better source is the nonprofit journalism group www.propublica.org.

The stimulus program will either be a down payment on a productive new shift in job creation — what I call social capitalism — or a bandage on a hemorrhage. In any case, such a transformation will take time and the waiting period will be increasingly painful for those losing their jobs.

For more information please visit www.audacityofhelp.net

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Homes Still Cost Too Much

John F. Wasik — Fri, 19 Jun 2009 23:37:16 +0000

You would think with home prices still dropping like hailstones in most areas, that homes would be bargains.

The present buyer’s market obscures a key fact about the housing crisis though: millions sought the refuge of cheap credit, subprime and adjustable loans during the boom because they were the easiest routes to homeownership in a time when house prices far outpaced income growth.

The sad fact is that the Great American Dream is still out of reach for far too many and it was the declining affordability of decent houses that was one of the triggers of the housing bust.

It’s not that home prices haven’t plummeted as banks unload foreclosed homes at fire-sale prices. The national median home price fell to $169,000 in the first quarter, according to the National Association of Realtors. Bank-owned properties are selling at 20-percent to 50-percent discounts.

“Contrary to popular belief,” says Jeffrey Lubell, executive director of the Center for Housing Policy, “the recent decline in home prices has not resolved the nation’s housing affordability problem.”

Homes cost too much even before the bubble, so home buyers were willing to do anything to get into the domicile of their dreams. After all, homeownership is an American birthright, or at least that promise was sold to Americans starting in 1946. “Buy as much house as you can afford!” That’s what the bankers and real estate agents were telling us for generations because of generous tax breaks and easy, often government-guaranteed financing.

Unfortunately the cost of land, homebuilding, taxes and homeownership far exceed what millions of households are able to cover with nearly stagnant personal income growth in this century. Inflation simply ate away at wages that just weren’t enough to pay ever-rising bills for property taxes, maintenance, health care, education and energy.

Even at the height of the boom, Harvard researchers at their Joint Center for Housing Studies found that almost 18 million households were paying more than half of their incomes for housing (about one-third is considered reasonable). They were also hit hard by rising energy costs, which rose twice as fast as total spending from 2004-2006.

That wasn’t always the best advice. The Harvard group last year found that “nowhere in America does a full-time minimum wage job cover the cost of a modest two-bedroom rental at 30 percent of income.” Those stranded in the low-wage service economy, left behind by the technological revolution of the 1990s, could barely afford to rent a decent place in most cities, much less buy.

Those families who are paying more than half of their budget for housing have little to nothing left over for healthcare, food, clothing and education. That hurts more than 14 million children living in low-income households, whose families had less than $600 per month on average for other essential expenses.

So was anyone surprised when brokers and subprime lenders targeted minority and low-to middle-income neighborhoods then walked away when they sold trillions of these mortgages to Wall Street and the largest banks? They were selling the American Dream!

From sparkling new suburbs in the Sun Belt to inner cities, cheap money and neutron-bomb adjustable loans meant nobody had to be house poor — at least for a year or two. Then the explosion hit and we’re still feeling the aftershocks.

Further exacerbating the affordability crisis was the tendency for municipalities to favor upscale, sprawling home developments over middle- and low-income housing. Since home values are directly fueling property tax income in most places, nearly every community can get more money for schools and public services. When you base property tax revenue on home valuations, bigger price tags translate into better-equipped schools, fire stations and libraries.

Yet building McMansion subdivisions only inflated the housing bubble and reduced the stock of affordable homes. From 2002-2005, home prices soared 45 percent in areas restricted to upscale building, versus 24 percent in unrestricted areas. Moreover, by creating these “spurbs,” sprawling urban areas unconnected to transportation and city centers except by endless highways, homeowners costs rose to catch up with needed infrastructure, schools and other public services.

The housing crisis has given us a rare opportunity to re-evaluate and re-invent the American Dream. As I note in my new book The Cul-de-Sac Syndrome, if we’re to increase the homeownership rate, government will have to create incentives to build more affordable housing.

We’ll also have to find a way to de-link property taxes from funding local services to reduce the number of overpriced homes in a handful of areas. Perhaps even eliminating tax breaks for mortgage interest would keep prices at realistic levels because you wouldn’t be subsidizing ever-larger mortgages.

Ultimately, though, the American home and community will have to be re-invented. Houses will need to be ultra-energy efficient to reduce long-term ownership costs and even produce their own energy. This can be done with factory-built, green homes.

Then we’ll have to build — or re-build — high density, walkable communities that are close to jobs and retail outlets. This is already happening throughout the U.S., although building and zoning codes need to change to allow this to happen on a large scale. Even more federal incentives are needed for green building.

We’ve just experienced a great teaching moment in history. The American Dream as we know it was not sustainable. Now we have the chance to make it affordable, ecologically sound and socially beneficial. It’s a rare opportunity.

©2009 John F. Wasik, author of Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream

John F. Wasik, author of Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream, is a personal finance columnist for Bloomberg News and the author of several books. His most recent book, The Merchant of Power, was praised by Studs Terkel and well reviewed by the New York Times. Wasik has won more than fifteen awards for consumer journalism including the 2008 Lisagor and several from the National Press Club. He has appeared on such national media as NBC, NPR, and PBS. He lives in Chicago. The Cul-de-Sac Syndrome is available at Amazon and all good bookstores.

For more information please visit www.johnwasik.com.