Where is President Obama?
Obama has been talking about a lot of things, lately. Like long-term structural changes to our health insurance markets, and cap and trade bills to address global issues of climate change. And of course there was the TARP bailout for the financial sector, the stimulus package, cash for clunkers, a whole raft of other things. Every so often there has been a White House summit: in fact, there have been eleven of them not counting the beer summit. Not to mention all the international summits and meetings, and let's not forget the Olympics.
Now, after eleven other summits, we are told it is time to have a summit to focus specifically on jobs. You think??
The administration and its cheerleaders insist that the first year has been a rousing success. Jacob Weisberg, over on Slate, cites pending health care legislation, the stimulus, and the reshaping of America's image abroad. The health care bill is important just because it will be passed; it doesn't matter if the bill isn't actually very good. On the stimulus, Weisberg quotes a McCain economic advisor as saying that without it unemployment would be over 11%. And on foreign policy ... well, he doesn't mention the Nobel Prize, but that's the basic idea.
All of which might be cause for celebration of the situation were less dire. But it is dire, and getting worse. Sunday's New York Times leads with a story about dramatic increases in the numbers of Americans who have to rely on food stamps. One in eight Americans uses food stamps today ... and one in four American children. In 2008 14.4% of American households experienced "food insecurity." That's 49 million people, among whom about a third experienced "very low food security." And that was when unemployment was at 7.2%, not 10.2%. But 10.2% is only the formal unemployment rate. If you include not only those collecting benefits but also those who are "discouraged" (no longer seeking work), those who are forced into part-time employment but want full-time employment, and so on, you get an effective unemployment rate of just over 17%.
The bailout was supposed to get credit flowing again, which was supposed to get small businesses back on their feet, which would then stimulate employment. It didn't work, because that's not what the banks chose to do with the money. Then there was the $787 billion stimulus; that was supposed to create jobs. It hasn't worked, either. Perhaps that shouldn't be surprising, as Obama's senior economic advisor seems to think that job-creation is a secondary concern to increasing GDP. "The primary objective of our policy," says Larry Summers, "is having more work done, more product produced and more people earning more income. It may be desirable to have a given amount of work shared among more people. But that's not as desirable as expanding the total amount of work." (Jared Bernstein, Vice President Biden's senior economic advisor, takes a different view.) Nonetheless, the administration claims that stimulus "created or saved" a million jobs. Even taking the administration's number at face value that clocks in at an average cost of $787,000 per job ... and almost no one takes the administration's number at face value, given its non-existent congressional districts and broad counterfactual assumptions.
The administration's mortgage program has been a near-total failure; no more than a few thousand mortgages have seen permanent modifications, while more than 14% of mortgages nationwide are either in foreclosure or delinquency, a number that climbs to one in four in places like Florida and Southern California. (What mortgage modifications there have been were directed at interest rather than principal and consequently do nothing to help people whose mortgages are underwater, which is a whole different problem.) The Treasury Department has just announced new efforts that will "include increased pressure on mortgage companies to accelerate loan modifications by highlighting firms that are lagging in that area" and providing cash incentives of $1,000 initially followed by $1,000 annually for up to three years for each mortgage that lenders permanently modify to lower monthly payments. It's almost funny, in a very black humor sort of way.
Today the mortgage problem and the unemployment problem are no longer separate issues. The Congressional Oversight Panel has concluded that today foreclosures have moved beyond the subprime mortgage market and are threatening homeowners who hold conventional, fixed-rate mortgages and put down solid down payments. The reason? Jobs. No jobs, no paychecks, no mortgage payments. In the words of one industry executive, "The subprime problem has regrettably morphed into an unemployment problem."
The problem all along has been that this administration tries to do everything indirectly, whether it's job creation, easing the credit crunch, or rescuing homeowners. Pour money into the banks and hope they start lending. Offer incentives to the banks holding the mortgages to refinance the interest payments. Hope that spreading money to states will stimulate demand which will then result in the creation of jobs. None of it has worked.
We've seen this indirect approach to job creation before: it was called the "trickle down" theory when Reagan sold it to us. Before that, Herbert Hoover had tried an indirect approach, too, the Reconstruction Finance Corporation was created to loan money to corporations in the hope that they would use it to create jobs. That didn't work well, either. You want people to have jobs? Create jobs, either by hiring people, or by providing money that private firms or local governments can only use to hire people. You want to save people's mortgages? Take over their mortgages. That was the New Deal approach. The WPA employed 2 million people on average, for a total of 8 million jobs at a total cost of $11 billion. The Public Works Administration spent $4.5 billion on construction projects that not only provided employment, they created an enormous amount of lasting value in the form of long-term investment in our national infrastructure. As for mortgages, 1/5 of all farm mortgages were held by the Farm Credit Administration, 1/6 of all home mortgages were held by the Home Owners' Loan Corp.
None of these things ended the Depression or solved the problem of unemployment, but they helped people. That's how you build approval ratings, and how you get political capital: from the bottom up. You establish the fact that you will help people, and then they support you when you tell them to follow your lead. Obama's approval rating is falling off a cliff: 48% overall, and a brutal 39% among White voters. When asked, voters say they would rather see the government cut the deficit. Why not, since most of them are not seeing anything gained by all the enormous spending?
People cannot focus on abstract, distant, complicated issues if they are afraid. It's not a new observation - Aristotle said it. People are afraid, and Obama is not addressing their fears. You can hear it any time you turn off the television. The voices saying: "The Nobel Peace Prize? Climate change? I don't have a job. I can't send my kids to college even if I can figure out what they are going to have to eat at the end of the month ... I voted for you. $2 trillion in bailouts and stimulus packages and 2,000 page health care bills and Asian trips and beer summits with Harvard professors ... I voted for you. Are you kidding me??"
You know what? Those voices have a point. We're the Democratic Party, dammit. Jobs and mortgages are supposed to be what we are about. Sure, there are lots of other things - big, historic, legacy-building, global things - but that's where we start, jobs and mortgages. That's who we are supposed to be.
I don't know whether it is too late, but it is very, very late in the day. Mr. President, where are you?