How well the economy is doing on November 6, 2012, will likely be the single most important factor in how America votes.
And even though Republicans appear dead-set on blocking any legislative measure President Barack Obama comes up with that could actually stimulate growth, the president isn't entirely impotent when it comes to goosing the economy between now and Election Day -- on his own.
Several progressive thinkers contacted by The Huffington Post described six approaches Obama could still take unilaterally -- if he's willing to get a bit more assertive about things -- that could make an impact before November.
Obama himself has indicated he's thinking along these lines. "Now, there are steps that we can take absent congressional action," he said during a Friday press conference in France.
He cited the measures he approved in late October to reduce the burden of student loans. And, he said at the time: "We're going to keep on rolling out administrative steps that we can take that strengthen the economy."
But Obama wasn't exactly giddy about the prospects of executive action. Congress controls the purse strings, which means, as he put it: "If we're going to do something big to jumpstart the economy ... Congress is going to need to act."
Another caveat: Two days after the 2010 midterm elections, with a near-certain legislative deadlock looming, The Huffington Post spoke to a number of progressive leaders and compiled an entire agenda Obama could have pursued without Congress's help. Obama didn't adopt any part of it.
"By far the biggest thing President Obama can do right now is, rather than cutting a small-ball deal with the banks on the mortgage foreclosure stuff, to really use the leverage that we have -- because of all of their perjury, robosigning and the other illegal acts they committed -- to really put the squeeze on the banks and aggressively force them to write down more mortgages," said Mike Lux, a progressive strategist. "It's definitely within the power of the executive," Lux said. "I just think they have all kinds of leverage that they're not using." Many progressives see writing down the principal on underwater mortgages -- rather than just adjusting payments -- as essential to a housing market recovery. "And if we could stabilize and start to revive the housing market, it would make such a difference in the economy. It's like a black hole sucking everything down," Lux said. While Timothy Geithner's Department of Treasury has historically been seen as indisposed to aggressively pushing for principal writedowns, "I think that's not a fair assessment of where Treasury is anymore," said Sarah Wartell, who runs the policy program at the Center of American Progress and was deputy director of the National Economic Council in the Clinton administration. The first settlement coming down the pike, which deals with fraud in mortgage servicing, is currently expected to be in the $20-$25 billion range. But those negotiations are not over. And other settlements -- for instance about misrepresentations to investors -- "have the potential for being larger," Wartell said. Some of that money could be applied to principal writedowns. And the regulatory apparatus could be brought to bear more aggressively to support writedowns and a number of other related measures. "You could put the hammer down in a way that would accelerate each one of these initiatives," Wartell said. "If done right, this could move the dial a little bit." A recent report from The New Bottom Line, a coalition of community organizations, concluded that if the banks were to lower the principal balance on all underwater mortgages to current market value, it would cost about $700 billion -- or about $70 billion a year over 10 years. That may sound like a lot. But consider that banks have borrowed trillions of dollars from the federal government since the crisis hit -- and, in fact, are now hoarding a record $1.6 trillion in cash -- and it doesn't seem like quite so much.
"I think the more pressure we put on China to let their currency appreciate the better," said Jared Bernstein, a former economic adviser to Vice President Joe Biden who's now a fellow at the Center on Budget and Policy Priorities. "It can make a real difference." China has artificially kept its currency undervalued for decades -- a measure that makes its products 25 to 40 percent cheaper than they would be otherwise, according to most estimates. If the currency were allowed to rise, Chinese products and labor would become much more expensive. By some progressive estimates, this would bring hundreds of thousands of manufacturing jobs to the U.S. "He can go after China," said Leo Hindery, who heads the Smart Globalization Initiative at the New America Foundation. "He can also not be the resistance point on the Chinese currency bill." Indeed, in a rare burst of bipartisanship, the U.S. Senate in October voted 63-35 to support a bill that would impose tariffs on China unless it stops undervaluing its currency. Its backers say it has enough votes to pass in the House, too. So it's really Obama who's holding it up. He has said he prefers dialogue with China. Indeed, the Obama administration, like its predecessors, seems to think a less confrontational approach will bear fruit. But Lux isn't persuaded. "Every time we've pushed, China has moved a little bit. But we've never pushed long and hard," he said. Because China is such a major economic player, an increase in the value of its currency would also be a de facto lowering in the value of the dollar -- something which might sound like a bad for the U.S. economy, but which would actually be the opposite. A strong dollar acts like an enormous tax on U.S. exports and a massive subsidy for U.S. imports. A weaker one would boost exports and create jobs, particularly in the manufacturing sector.
"The president could issue executive orders right now that make it so that procurement and contracting tend to favor higher wage employers," said Lux. "That would be an immediate shot in the arm to the economy." "It would help the economy by forcing a large segment of American corporate industry to pay decent wages, which would increase demand, consumer purchasing power, and so forth," said Robert Kuttner, co-editor of the American Prospect. "You'd have more people with better jobs," Bernstein said. "If we can help more people get better jobs, we've helped the economy." For more than a year and a half, the Obama administration has been said to be considering a proposal to use the president's authority to purchase goods and services for the government to promote what's known as "high road" contracting. That would mean disqualifying companies that violate government labor, environmental and other rules, while giving a boost to those that offer better levels of pay, health coverage, pensions and so on. Federal government contracts for goods and services total over $400 billion annually. The National Employment Law Project argues that federal contracting "is financing millions of poverty wage jobs across our economy." The plan's champions include labor groups and the Center for American Progress. Bernstein said the idea has been extensively discussed in the White House. "We couldn't quite ever get it over the hump," he said. But he added that he "wouldn't be surprised" if it finally happens in the coming months. "We're still living under George Bush administration policies on procurement and contracting," Lux said.
Consider the comparative economic benefits of buying a Chinese-made product at a big-box store and a locally-made product at a locally-owned business. In the former case, some significant chunk of your purchase prices goes back to China to stimulate its economy -- and another chunk goes to some multi-national corporation's coffers. In the latter case, you may be spending a bit more, but more of the money stays in your community, where it can get spent again, creating jobs, propping up home values, and so on. Last August, President Obama spoke of his desire to "rebuild our economy around three simple words -- Made in America. That is what I'm committed to doing, and that's what I hope members of both parties will join me in doing in the days ahead and beyond." And in the midst of the American automaker bailouts of early 2009, he praised the U.S. carmarkers, saying: "If you are considering buying a car, I hope it will be an American car." But beyond that, the only four times Obama has even used the phrase "Buy American" -- according to the GPO compilation of presidential documents, at least -- were in reference to Canadian and Mexican concerns about provisions in the stimulus bill. He's never encouraged the public to do anything of the sort. "Buy American" was job-creation idea No. 11 in HuffPost's America Needs Jobs series last year. "I think Buy American, Buy Local, are neat ideas and a way for people to express a kind of economic solidarity with each other," said Bernstein. "The problem is, I'm not sure how practical it is," Bernstein said. "I'm afraid there are a lot of things where you couldn't buy American even if you wanted to." Very few consumer electronics are manufactured in the U.S. anymore, for instance. "And, in tough times, the price differential makes that a tough choice," Bernstein said. Nevertheless, buying local or banking local or buying from small businesses or buying directly from individuals clearly keeps the money -- and its effect on the economy -- nearby.
Small business hiring is key to any economic recovery. But so far, the nation's banks have largely refused to finance it. Some progressive thinkers have looking into ways Obama could use the powers of the federal government to encourage banks -- who are getting money almost for free from the Federal Reserve, but are just sitting on it -- to start actually lending it to business that will use it to create jobs. "One thing that he could do that would involve spending no money whatsoever, at least initially, is to loosen the terms for Small Business Administration guarantees," said Robert Pollin, an economist at the University of Massachusetts at Amherst. By guaranteeing more loans, or a larger proportion of them, or at lower fees, the federal government could reduce the risk so much that even the wariest banks would give more of them out. "That could help start the flow of this ridiculously large cash hoard that the banks are holding," Pollin said. According to the Federal Reserve (Table L.109, line 28), banks are sitting on $1.6 trillion in reserves -- or about 8,000 times the $20 billion they held in 2007. Ever since December 2008, the Federal Reserve has been lending banks loads of money at zero or near-zero interest in an attempt to stimulate growth. But the banks have been hoarding the cash, timid to lend it out. Increasing the guarantees would have a direct effect. "But it would also be a bully pulpit, announcing to the financial markets and small businesses that there are opportunities out there, and that the Small Business Administration is going to be aggressive in supporting these opportunities," Pollin said. It would be a way of saying "we want banks to start making loans to small businesses," he said. "And if that happens, it's bigger than any stimulus. It's bigger than Obama's jobs program." Even getting a third of the cash the banks are now hoarding into the hands of job creators would provide more stimulus than Obama's $447 billion jobs plan (which is going nowhere.) "Anything the Obama administration does to move the needle there is going to be significant," Pollin said.
Time and again, over the last couple years, when it was essential that Washington focus on job-creation and growing the economy, the town has instead been consumed by talk about deficits and austerity. But now, with the election coming up and the Occupy Wall Street movement changing the tenor of the national conversation with its populist, pro-middle class message, progressives are hoping Obama will put any talk of austerity measures on hold and instead call more attention to immediate needs. "He could stand up and say: 'You know, this was much more serious than we thought it was, and we can't begin to talk about serious budget-cutting until we get the economy back on track,' " Kuttner said. "He should talk about fiscal policy in terms of whether we're making the right choices to grow the economy," Wartell said -- not in terms of debt and deficit. "I think that's been missing," she said. Thanks to the Occupy movement, Wartell said, "I think that there's a difference between the last time we were having this conversation," Wartell said. "I think the president has the capacity to keep the conversation where the public wants it to be." It's also important for Obama to remind the nation that its current economic problems are not the result of deficit spending, but of a financial system that operated out of control, said Erica Payne, founder of the Agenda Project, a progressive public policy organization. "The best thing that he could now that there is this energy around Occupy Wall Street is go back and play the role he should have played in the first place, which is educating the American public on why we need our financial markets to act like markets and not like a monopoly," Payne said. For instance, she said, Obama should pressure Wall Street to finance job creators and ordinary people, instead of concocting exotic financial instruments in order to maximize their bonuses. "I think it's terrific politics," Kuttner said. "I think after Occupy Wall Street, a president who stood up and said the entire banking system is too big and too complex for its own good, and too big and too complex for the American public's good -- that would bring cheers everywhere but on Wall Street."
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