Obama's New Deal for America

Kudos to Sen. Obama for hard-wiring an empathetic connection to the beleaguered American middle class at last night's debate. His winning performance inspired me to go outside my normal national security box to consider how he could construct a greater economic recovery program to meet dead on the fear and apprehension that is undermining confidence in our future.

I believe now is the time for Obama to consider a bolder and more historic approach to the financial crisis by presenting to middle income Americans a step-by-step "big think" FDR-style New Deal program to add greatness and urgency to his economic recovery plan. Tough times call for urgent and big-think measures. Surely, we are in this era, once again.

In 1933, Franklin Delano Roosevelt unveiled a landmark economic recovery plan that created a "New Deal" for America's middle class and restored confidence to a hard-pressed nation. It was imaginative, bold and daring and lifted America up by its bootstraps and restored confidence and stability. It took several years, but it worked.

A similar type of "new deal" program aimed principally at the crux of our financial crisis -- the falling U.S. housing market -- is now urgently needed by our Democratic standard-bearer to create an indelibly understandable and comprehensive framework in the minds of voters that he has the most coherent and bold recovery program that gets at the very heart of what plunged our financial markets into chaos (aside from greedy Wall Street executives peddling credit default swaps, etc.) . Another financial infusion of funds to average Americans modeled after the last economic stimulus proposal may just be too insufficient to meet the emergency that will surely follow us well into 2009.

Accordingly, coupled with his affordable health care program, necessary tax reductions and renewable energy incentives the components of the Obama "New Deal" for middle-income America could include the following options:

-- Setting the table, so to speak: take one day out of the campaign to convene an emergency economic summit of key financial advisors, business leaders and economists to discuss and assess the credit and liquidity crisis with the objective of legitimating this "New Deal" style-emergency recovery program for the middle class, and present it in a easily comprehensible speech to the American people (fireplaces always a good backdrop).

Program elements would include a new across-the-board housing-focused economic stimulus package. It would be be designed to ensure that the plan is directed at incentivizing prospective and existing home buyers to re-enter/remain in the housing ownership market. Such a stimulus would include the following components:

1. A tax credit on 2009 taxes in the amount of $10,000 used to purchase a principal residence for qualifying buyers whose FICO scores are deemed above the sub-prime lending qualifications and who can meet reasonable credit worthiness and income qualifications to manage the special mortgage requirements noted below.

2. A government-guaranty fixed rate mortgage program offered through banks that would set a federally-mandated interest rate ceiling of 5.5% on 30 year fixed rate conforming mortgages. The fixed-rate mortgage would provide an adequate return to banks that would be compelled to hold these mortgages in to assure the government-backed guaranty (thus avoiding the securitization shenanigans that got us into the fix in the first place).

3. A tax credit in the amount of $3,000 on 2009 and 2010 taxes to cover moving and out-of-pocket costs (excluding points) for qualifying purchasers of principal residences.

-- Propose to offer banks that are holding delinquent but not defaulted mortgages a federally financed .875% discount off the then federal rate on short term borrowings in exchange for converting conforming adjustable rate mortgages to fixed rate mortgages plus a "payment holiday" of 90 days to enable borrowers to regain their financial footing. This is significantly different than McCain's plan for the federal government to purchase mortgages.

-- Create a new series of 3-5 year U.S. Treasury bonds targeted to be purchased by Americans participating in 401K plans through licensed asset managers who would be incentivized to promote the purchase of such bonds by receiving a personal tax credit in 2009 and 2010 for the amount of such bonds sold. Pre-redeemed bonds would be used to finance the housing stimulus package components and interest earned would be tax deductible if/if purchasers use bonds as collateral toward housing purchases or qualified renewable energy improvements in existing or newly purchased houses.

-- Given the escalating unemployment rate and the lack of financial incentive to maintain current employment levels, propose an new Unemployment Recovery Program that would extend existing unemployment benefits for unemployed whose benefits have lapsed, AND provide a two year tax credit to employers who maintain their 2008 full and part-time time employee roster at levels not less than two-thirds existing salary and benefits equal up to 33% of any salary reduction for each employee retained; provided that any former full time employee that was laid off due to the economic crisis is rehired at comparable levels.

-- For Americans aged 55 or older who have lost at least 20% of the value in any annuity, retirement or 401K plan in 2008 due to losses directly attributable to passive equity portfolio losses, establish a one-time 2009 and 2010 tax deduction equal to 50% of the loss up to a maximum of $50,000.

OK...I will keep my day job, but I hope that between now and the election this meager attempt at rolling up my inexperienced sleeves in Economic Recovery 101 will generate additional ideas so come inauguration day our new president demonstrates to the nation and the world an audacity for FDR-style leadership at a time of national crisis since he represents that best hope for a more secure financial future for our nation.

Comments

[ProudAmerican23]

You should worry anytime someone knocks on your door and says "Im from the government and Im here to help!"

[jmanlefty]

One problem with trying to cure the housing market. Actually McCain keeps saying we need to restore the values in housing? That can't happen, or we'll go thru this again in 5 years. First thing in the new deal should be, bailing out the banks, and then prosecuting every executive involved with credit default swaps. They were selling insurance without required reserves. We won't get our money back prosecuting, and in fact, it could get real expensive. Still, these guys need to spend time in jail. Prevents future problems.
Yes help people get a better rate on their note. Now lowering the principle they borrowed, will artificially keep home values up, and we'll go down again. Simply put, most American's live in too much house, for what they earn. Builders need to start building smaller homes. A home is an investment, yes. Still, it's something you use and live in. It's not a business investment, to generate profit. Like clothing, an auto, furniture, electronics etc.; it should be a depreciating asset? Well maintained maybe some appreciation, but not year after year. Americans expected to live in a $300,000 home for 6 years and flip it for $350,000?? That ain't "capitalism", but rather artificial manipulation? If Obama's or McCain's "New Deal" restores home values, all this bailout etc. will have been in vain. Get builders to build smaller homes. Get people to restore some of the older, smaller homes. Sell the big one at a discount.

[dadw5boys]

THEY HAVE BEEN LIEING TO YOU !!!!

WE CAN PRODUCE ENOUGH ELECTRIC POWER FROM WIND TO POWER THE ENTIRE COUNTRY. IT WILL TAKE A LOT OF WORK AND INVESTMENT BUT WITHIN 10 YEARS WE CAN STOP BURNING FOSSIL FUEL TO PRODUCE ELECTRIC POWER.

WE CAN PRODUCE OVER 2 MEGA JEWELS OF ELECTRIC POWER FROM WIND.

THE USA ONLY USES .5 MEGA JEWELS NOW !!!!!!!

BUT IT TAKE INFUSTRUCTURE AND THAT MEANS JOBS !!!!!!

[SoutheastReview]

The tragedy, and by this I mean the full-out, classical, hubris-filled, Greek-type meltdown that results from personal failings, of modern America is that this poster is correct; as a 'technical matter.' Unfortunately, all too many proponents of the ark-sustainable--in agriculture, in waste management, in energy, in community culture, and a dozen other economic bailiwicks--premise their observations of glorious possibility that we are not fulfilling with the insistence that "the marketplace will deliver us these miracles if we just get out of the way."

We all need to recognize what Adam Smith made clear, along with his ideological opponent Karl, a half century later. Marketplaces are creatures of politics, and corporate governance and political shenanigans always end up in bed together, their progeny a commitment to nukes and spooks and fetishes galore.

Thus, if we want to unleash the possibilities of renewable energy or any other sustainable and human scale technology, we have to grapple with the political and social matters. Unfortunately, at least from the perspective of many entrepreneurial sorts, this wrestling match is only winnable if we inaugurate more socially democratic forms while reining in the rule of the bourgeoisie. Otherwise, we will continue to complain and fail, instead of strategizing rationally to win something.

[Edicius4]

Today a statement was released signed by 100 distinguished and experienced economists at major American universities and research organizations, including five Nobel Prize winners Gary Becker, James Buchanan, Robert Mundell, Edward Prescott, and Vernon Smith. The economists explain why Barack Obama's proposals, including "misguided tax hikes," would "decrease the number of jobs in America." The prospects of such tax rate increases under Barack Obama are already harming the economy. The economists conclude that "Barack Obama's economic proposals are wrong for the American economy." The proposals "defy both economic reason and economic experience."

[cubalibre]

Thank you, finally someone that understands the folly of Obama's plan. He should be compared
to Hoover not Roosevelt because he wants to do exactly what Hoover did.

[research]

Cutting Government public works spending in a recession is what caused the depression. Low Top income taxes CAUSED the Bubble and the crash.

[research]

take a look at tax rates. The economy crashes after years of low top marginal taxes and thrives during 90% top margin income taxes.
http://www.hyperhistory.com/online_n2/connections_n2/great_depression.html
as we raised the top marginal tax to 92% from the depression causing 1925 lowereing of the top tax rate to 25%.

Low top income taxes cause bubbles and crashes.

Public works programs are universally recognized the the solution to depression.
http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

FDR increases taxes while using debt spending to rebuild infrastructure.

IT WORKED.

[doneright]

I do not believe the way forward from this economic crisis should be guaranteed government hand-outs. What exactly caused this crisis and what do we need to do to repair the economic system and our belief system so that it doesn't happen again.

US Savings Bonds used to be the preferred way to save. Today that is a laugh. But what has happened to the preferred method of saving. People have lost a third of thier savings. This same thing could happen if social security payments were invested in the stock market. Secured savings stablizes the financial system. There is no reason secured savings cannot earn a decent rate of return once the economy is structured to utilize these savings.

The cause of the Great Depression was the result of a credit debacle. It seems, nothing much has changed. We are a country, according to President Bush, addicted to cheap oil. We are probably addicted to other things as well. There simply is not enough restraint on spending. Yes, spending drives the economy, but unrestrained spending drives it into the ditch.

All of politics thrives on promices - promices the politicians cannot keep - but too often we believe them anyway because we don't want to face the truth. It is time we lived within our means and quit expecting the government or anyone else to bail us out when we get into trouble. It is all about shifting our beliefs to include reality.

[drzoon]

what number is that? what is the "within our means" number?

you see, its all good to say stuff like that, its great populist BS. but the truth is, it just doesn't work like that... and probably hasn't since we went to the french and dutch for loans to fight the revolution.

what we need is transparency. we need to be able to see what's going on in govt and banking. and de-reg has it's merits, but it so much more limited than people would think.

what we need to do is stop trying to call it something (ie capitalism), and we need to think about fair markets AS WELL AS free markets

[doneright]

OK fair enough, what is "within our means". When you borrow you are mortgaging the future. That is not to say that the future should never be mortgaged. I accept that it is an excepted way of doing business and if it is handled with discretion it is fine. The problem is when you throw plausibility to the wind and try to finesse the system for personal gain. That is what I understand happened and that is where regulations would apply to prevent such wild investing.

And when you say it doesn't work like that, I would say that is where you give too much credit to pragmatism: if it works it is right. Pragmatism does nothing to prepare you for the time when it fails to work. Everything was working fine for the investers and financial manipulators until the bubble burst. It is like building a house on the sand. It cannot stand through a storm. You have to base an economy on principles that withstand change and turmoil. And when you do, it also will work. The cliche that everything is connected, is true. When change comes to one part of the economy the rest of the financial system adjusts. The economy will works in a lot of different way, some of them sound and some not so sound. The unsound has been deministrated.

[AlsoSarah]

I think it is time for Americans to start to picture themselves as part of a global economy. We need to cooperate with all the global economies. We need to understand and take responsibility for how our actions here in the US affects other economies. Am I talking about regulation and accountability? Yes. We do need a complete new approach to how we do business. We all need to learn how to live within our means and finally, not to take more than what we need. I would suggest becoming a country of producers, educators, healers, builders, rather than a country of rampant consumers.

[Subiani]

One thing missing from your "new new deal" is the incredible opportunity we have to start investing in what we know will give us real returns--the green movement. Green is really a modern day version of the yankee mentality (or scottish)--eat it up, wear it out, make do and do without. it got plenty of people through the depression, so there is a huge lesson right there. By creating a wgp (workers green program) we can employ people in designing and building a national infrastructure that removed dependence on oil, creates (good) public transportation, and allows people to walk and bike as much as possible. think what a huge impact that would have on healthcare alone! I was just reading about insurance companies refusing to cover obese people because of their "pre-existing condition". We have to put emphasis on smaller, more efficient homes and put a social stigma on McMansions, insulate properly, etc etc. Oh, there is so much potential to make this country rock!

[realistic2008]

One solution which has been neglected is Bush and Co should be denied of any perks and benefits when he leaves office, in fact he should be forced to return everything he has received from the taxpayers before he is put in jail with all the thieves in Wall Street for the rest of ther rotten miserable lives. Now that will be real justice.

[kinimalia]

you mean the way we denied Nixon perks and privileges when he left office?

lol

[berrycooda]

Well, If Obama is promising a new deal....sounds like an old one that someone already thought of.

They spout more rhetoric about what America needs...We all know what it needs.
It needs to be fixed with more jobs for American workers with benefits that American workers have already sacrificed for.... Don't forget that the Dem. Pres. Clinton signed the Nafta agreement and it has grown progressively worse since then.

Both candidates are busy running the other one down and not too many ideas that will be immediate.
If Obama wants to give everybody $1000, does he think that the "average American" will do anything with it other than pay bills or stash it under the mattress. Only a certain few will run out and spend it on nonsense.
Sounds like we are getting more like a socialist society that we ran another country down for doing.
Give away to the people who (a lot of wouldn't work if you gave them a job) enyoy taking from the Gov't.
I don't mean seniors or disabled who mostly worked towards retirement etc. but the group who
constantly rape the government of entitlements just because they can.

[DrYRHead]

That was the problem, or the case, with the last so called stimulus checks. People mostly just paid the credit cards with the checks. Thus, it mostly went to the banks not the retailers.

As for NAFTA and other trade agreements, members of both parties are guilty of toting such. In the long run, thus far, Americans lost jobs to Mexico, and Mexicans lost jobs to China. It has become about what country can under bid another country as to how low their workers are paid.

[Diogenes08]

Master Carpenter Will Work For Food
I've spent 35 years as both an hourly-wage carpenter and general contractor in North Carolina. Although many of my peers are reactionary conservatives I freely admit that I have always done better under Democratic rule, even under Carter and the double-digit inflation he inherited from Gerald Ford.I vote accordingly.
But there is a componant to the housing mess that neither candidate is addressing: the total dominance of undocumented aliens in the housing workforce. In NC, Americans CAN NOT find work! Mega-builder companies have in common with Wall Street the credo of 'hang the country, just give me more profit'. Quality has plummeted. Illegals have no vested interest in producing a quailty product; half of their wages go back to Mexico. They don't spend money here. They don't pay taxes, and the contractors avoid matching contributions, so America loses 3 ways for a shoddy, overpriced home. But the megas are the only ones that can get loans..

I call the mega contractors traitorous. Hire Americans! Pay your fair share! Build a house that will stand for more than 3 years without needing new windows, roofing, and paint (I know; I fix them), and people will buy them.

Traitor I said, and traitor I meant. Make the hiring of illegals ILLEGAL, with stiff prison sentences for violators. This will go a long way toward increasing consumer confidence, and the taxes will surely help the deficit.

[rich5861]

I agree with you. Illegals are a major problem in the labor force. If a person is documented, then he has the right to work.....but if he is not documented, whomever is hiring him should not only be fined but put in jail!!! I have seen this in Georgia as well. In my mind, it is not different to hire an illegal to work here as it is to oursource American jobs overseas. I think companies that use people in India to answer their phones should be fined and be hit with a huge tax for doing so. Yes, we are the land of the free and people are supposed to be able to do what they want but this goes to the core of problem here....unemployment is out of control and will only get worse. We are not a free country anyway. The gov't tells us what we can put in our own bodies and regulates many of the wrong things that don't make a difference in anyones life. This illegal problem certainly does. Good luck to you!!

[DrYRHead]

Ironically the bad economy has slowed the number of illegals coming here, and it has caused an increase in the number going back to wherever they came from. Legal immigration has also slowed for the same reason: The economy now stinks.

As for out-sourced jobs are concerned, it is actually worse for the local economy. At least illegals spend some of their money here in the USA.

[adaugeo]

Immigration is definitely a contributing factor to economic challenges. In addition to hiring, there may be 5 million bad loans issued to non-citizens. Do We Really Need to Bail these folks out?

[tomdennen]

Journalism is observing and recording contemporary history keeping this in mind " one, we don"t learn much from history and, two, if the journalist does not learn, then his recording of contemporary history is flawed.

Several years ago, stories began emerging about the activities of the World Bank and the International Monetary Fund (IMF) in Third World countries. The institutions were offering these countries cheap, low-interest money that they knew could not be paid back.

When they defaulted, the banks in essence took over the economies, took over in debt repayments, the bulk of those countries" wealth by simply collecting the interest on the original loan.

And if the capital loan is never touched, the interest is indefinite.

That, we now agree, is history.

(On the up side, say my justifiable detractors, some thirty million Third World denizens have joined the economic middle class and a few leaders have swollen Swiss savings stashed away).

But their countries are in a debt trap, paying interest that eats up most of their Gross Domestic Product revenues.

Historic bells began ringing two or three years ago when a thing called sub prime mortgages began to appear in print because they were appearing on the red side of the balance sheets of large First World lending institutions that had been manipulating the banking system"s business methods: These inevitable default debts were bought, sold and resold as "highly leveraged optimal return" financial instruments and other fancy names.

Famliar? Once, accident; twice, coincidence. "Thrice, war!"

[Jer1957]

Sorry, but Obama is no FDR. Matter of fact, his sponsors in NYC and London,like speculators Soros and Rohatyn, want to eradicate FDR's legacy--which accounts for their lavish underwriting of Sen Obama's sophistical campaign.

A guy whose single largest bloc of contributors works for Goldman, Sachs claims to be the 'poor peoples' candidate?! (Check the FEC records!)

What would a Pres. Obama do when his hedge fund friends' exposure to the multi QUADRILLION dollar Derivatives Markets "unwinds?" That's the 800 lb gorilla in the room no one wants to talk about.

There is no way to bail that one out--short of hyper-inflation & storm-troopers.

[Levittown]

After the 100 days breaking in period one of the considerations for employment is the American roadway system There is much to do in this area. A draft that will take in many of the unemployed youth and break up the gangs that have become so prevalent across the country. Maybe a chance at better living conditions, and the opportunity for educational and learning technical skills is strong inducement. Restore the armed forces inventory by having our weakened auto industry to get government contracts for the motorized equipment. Our air power is in need of build up too. There are many avenues of need and only the government can unify American industry to get back on track and return to the United States of America and get rid of the United States of America, Inc.

[maab76]

We do not need to label new programs as CCC or WPA, but a "draft" to these types of programs could be used to rebuild the infrastructure of our country. It could also develop substantial public transit systems within the idea of the European trains, repair bridges, build schools and affordable housing. It may sound like socialism to many, but a true Democracy does not guarantee that everyone will be "rich", it will (hopefully) work to prevent anyone being POOR. We pride our economy as providing On-The-Job training. This would be a way to provide skill and knowledge experiences for those unable to afford even community college education. This is not a time to be envious of the educational opportunities others have obtained (Harvard for Obama), but to find the best available for ourselves as well as those most requested for hire. There is an opportunity to provide self-esteem through knowledge, decent employment, and the ability to pay ones' bills.

[rich5861]

No he is not another FDR. I don't think he has ever cheated on his wife and he seems to be able to grasp a situation and locate the probem and turn it around. That's what he did in reforming welfare in Illinois by putting people to work and at the same time saved the state millions of dollars. He will figure out what to do with this mess. Let's see, John McCain was a complete goof in college and graduated toward the bottom of his class while Obama was the President at Harvard. Let's see.......I wonder who would do a better job? If we learned anything from the transition from Clinton to Bush. Our President must be brilliant!! Clinton is brilliant and the things changed in our country for the better and Bush is.......well, you complete that sentence. We need someone who is smarter than you & me to lead our country out of this mess.

[LSP]

"Our President must be brilliant!!"

Absolutely. Since the election of George Bush, I have come to believe that candidates should be required to take an IQ test before even running. And it should be considered as one of the most important aspects of their qualifications.

[provoice]

One of the best things FDR did was to create the CCC... (Civilian Conservation Corps)... Not only did it provide employment for tens of thousands of Americans, but it helped establish vast forests, park lands and water-conservation projects.

They established 4000 work camps in all 48 states and the U.S. territories (at that time including Alaska, Hawaii and the Virgin Islands.) The camps were sent recruits from Welfare and Unemployment offices all across the country, and supervised by military officers. The recruits were required to send the majority of their pay home to their families.

Hopefully, a new president, presumably Obama, could establish a similar organization to help re-build the infrastructure of the nation... roads, bridges, railroads, dams, schools and even levees in low-lying places like New Orleans.

It would sure beat the heck out of sending out checks for people to go buy Chinese-manufactured goods from Walmart!

[maab76]

Family reports that a program similar to CCC is operating in the State of Minnesota. Can anyone provides more information? It speaks to the ecology as well as the economy.

[adaugeo]

Expensive Oil will drive Manufacturing back to the U.S. if we have the resources available to support it.
Wal-Marters may as well pay more for domestic goods, produced by Americans, in eco-friendly fashion than more expensive Asian goods with resource and product shipping across the globe.

[StephieL]

Not only did the CCC provide six million unemployed men and teenaged boys with meaningful work, but they were also much healthier, due to the regular meals they were served, as well as the hard physical labor they exerted performing vital tasks of infrastructure rebuilding.

When we consider the troubling issue of rampant obesity among American teenagers, a CCC-type program which includes physical labor, including the rebuilding of various infrastructure projects, as well as providing educational programs for men and teenaged boys who dropped out of high school, would go a long way towards improving the physical and intellectual health and well-being of millions of Americans.

[sawbiz]

There is a lot of thought expressed in all of these blogs. For this one particularly, a point of history: we were not in WWII until the country of Japan attacked us at Pearl Harbor, December 7, 1941. No country attacked us September 11, 2001--not any country named as a member of "The Axis of Evil"--nor any other country and especially not the countries of Iraq and Afganistan. Instead, we were attacked by people who were still fighting a religious based, tribal war which actually began in the time of The Old Testament, Torah, and Koran and was exasperated by the Crusades. This fighting has been going on for more than 2000 years. How can we possibly expect to "win" or "lose" it in the next century, let alone the next few years? Even if we could "win," what country would we "defeat?" Unlike WWII, the "Iraq War," has not only not helped our economy, it has helped to bring us to the brink of ruin.

[davia55]

Oh For Heavens Sakes....do you not realise he is going to promise anything he can to the middle class at this point because that is where the majority of his voters will come from.

God Help Us if he becomes President

[research]

Yup, McCain just promises stuff.

McCain will just continue the GOP BushCo disaster if he is elected.

At least with Obama and the Democrats average Americans will stand a chance.

[daddysboy]

We all remember the 'compassionate conservatism' that turned out to be anything but compassionate or conservative. All politicians will exaggerate their position in order to convince the electorate they are the right choice. It's when they lie outright that we should be concerned. There almost ISN'T a middle class thanks to the current policies that are fundamental to the republican party such as deregulation, lower taxes for the wealthiest citizens , and an aversion to social support of any kind. mccain represents a continuation of these policies or do you think he is suddenly going to have the opposite philosophy of the party he belongs to? When you add palin's anti-liberty stance on just about everything having to do with a woman's own body this pair stands to just about ruin everything Americans hold dear. Our government is in such a terrible state right now, it's possible that NOTHING can be done so I am not quite sure what is frightening about the possibility of change for the better that only Obama can bring to the table.

[Overd0g]

If you aren't a deadbeat, you're screwed no matter who wins.

[boophus]

Absolutely. God help us if McCain gets elected . More pee-on from the top. More republican crap that hasn't worked for any but the richest. More years of Bush except this time we get to spend our national economy farther in hole to fight against 4 to 6 more countries. More loss of freedom and democracy at home. More damage to constitution in the name of religion and corporations. Less privacy and more torture. More prison camps. More hate. More divisiveness. More isolation fromthe rest of the world who won't cry as we sink into an abyss because we have acted like they have to do what we want because we are so 'SPECIAL'.