A Glimmer of Hope

Most Congressional hearings are not that scintillating. The ones you see on TV, with Roger Clemens testifying about steroids, Ben Bernanke, or some general back from the field, are the exceptions (and let's face it: they're pretty predictable too, with important people working hard to not say anything important). Mostly, it's a group of policy wonks or industry reps talking to members of Congress about some minutiae in a bill that may or may not go anywhere. At their worst, these hearings are scripted events where actors trot out their lines in order to move (or block) some legislation valuable (or hurtful) to their constituents.

At their best, however, a hearing can be a great example of good government in action, and as someone whose been testifying for years, let me tell you about one from last week that struck me as uniquely positive. My point is not simply to report on an unusually useful couple of hours in the halls of government. At the risk of over-extrapolating, I thought I saw a glimpse of what our political future might look like if we make the right choice on Nov. 4. And it provided a glimmer of hope.

The hearing was before the House Committee on Education and Labor, chaired by Rep. George Miller (D-CA). The topic was how to best craft a recovery package to accomplish two things: help those hurt by the troubled economy, and stimulate that economy back to life. The majority party gets to choose most of the witnesses, so this panel featured only one Republican witness and, uncharacteristically, not one Republican member of the committee showed up.

This sounds like glib snark, but I can tell you based on personal experience, that's one reason why this hearing worked well. Like I said, I've done these for years, and ever since Reagan, Republican witnesses in economic hearings almost always have one, and only one, theme: supply-side tax cuts (okay, lately they've added "drill, baby, drill," but that's a newcomer, and it's just about as compelling as their tax plan; oh yes, and "deregulation" shows up a lot too, though this is a bit of a non-starter right now, to put it mildly).

If you don't believe me, read the testimony at the above link by the R witness, William Beach from the conservative Heritage Foundation: high-end tax cuts (extend the Bush cuts, cut the capital gains rate, lower the corporate tax), find more oil, avoid "burdensome regulations."

That's almost all they bring to the table, regardless of the evidence, the topic, or outside circumstances. Case in point, this hearing was about a stimulus package that needs to move quickly off the mark, and Beach was pushing tax changes (extending the Bush cuts) that come into play at the end of 2010. It's the same supply-side agenda the Heritage folks push in good times and bad. Their only tool is a hammer, so it all looks like nails to them. Same with the oil thing. Does Beach not recognize that the price of gas is down well over a dollar nation-wide, yet we're still mired in recession?

As I wrote last week in this space, ideology that's impervious to facts is the last thing we need right now, and the fact that such thinking was vastly under-represented was one reason why this hearing worked.

The hearing began with testimony by Dana Stevens, a woman from New Jersey who's been unemployed since July. Since then she's applied for 143 jobs and gotten only seven interviews. She's an extremely impressive, articulate person, and she's even willing to take a pay cut, within reason given her financial needs.

But there's just no work out there. Hiring freezes are pervasive. Back in January of last year there were 1.5 job seekers per available job. Now that ratio has doubled--it's 3 to 1. Add in the six million people who are working fewer hours than they desire, and one in nine persons is un- or underemployed.

Economist Ron Blackwell and I presented facts like these, along with our views re the magnitude and composition of a recovery package. In order to offset a recession that is likely to drive unemployment to at least 8% by the end of next year (it's about 6% now), I think we need to spend roughly $50 billion to help strapped states, $50 billion on infrastructure (more on that below), and $50 billion on extending both unemployment insurance and food stamps. Beyond that, it might be useful to boost household incomes with direct payments, but that was the exclusive thrust of the last round of stimulus, and we should deemphasize such payments this round. Checks can help for awhile, no question, but people need jobs, and that's why many of us are bullish on infrastructure investment right now.

Here's where Professor Robert Pollin's testimony comes in. Do yourself a favor, and give this one a read (same link as above). It's a detailed road map of a vital public investment agenda, with an emphasis on green technologies. There are the usual candidates--schools, water management, roads, bridges--as well as building retrofits, smart grid electrical systems, and renewable energy. Moreover, Pollin shows that in terms of jobs, these investments get you a bigger bang for the buck than tax cuts, military spending, or "drill, baby, drill" (see his figure 1).

In a similar vein, Chris Hansen made a solid case for including the expansion of high speed broadband networks in an infrastructure agenda, providing access to areas that are still off this grid, a serious economic and social disadvantage in today's world.

(A related point in my testimony is that infrastructure investment has often been dismissed in the context of stimulus as having too long a lead time. Not so. There are tons of productive projects in all of these areas ready to go, if not already underway but starved for resources.)

But beyond the good information exchange, what stood out in this hearing was the discussion between the members of Congress and the panelists. These exchanges can too often reduce to partisans getting "experts" to confirm their biases: "Mr. X, you noted in your testimony that 2+2=5. Could you elaborate?"

In this case, members were genuinely seeking our insights into how to structure a recovery package, and providing their own amplification as to what parts made most sense to them. Reps. George Miller and Lynn Woolsey, clearly motivated by the deteriorating economy and rising unemployment, wanted to hear about ways we might extend unemployment insurance benefits to meet the needs of people like Ms. Stevens, including upping the "replacement rate"--the share of salary replaced by UI benefits (it rarely breaks 50%; I think now's a good time to go up to 70%, at least temporarily).

John Sarbanes (D-MD) picked up on a great Pollin point about "crowding in"--how sometimes government investment creates untapped markets that later draws in private investment. The internet is, of course, a classic example, and green technologies create the same possibilities, with even greater potential benefits.

Other members, like Dave Loebsack (D-IA) stressed how the recession is cutting into their state's revenues, and wanted to learn more about the actions states were taking. Unlike the Feds, states have to balance their budgets, and they're actively cutting services (and jobs), as well as raising fees and taxes, actions that will only serve to deepen the recession. Thus, unlike the earlier stimulus package, this one must include state fiscal relief.

Like I said, I don't want to get all starry-eyed here, but I couldn't help but wonder if the dynamics of this hearing--creative, open-minded thinking about solving problems in a progressive, even green, way--might be a tiny harbinger of a new era, where government actually works to solve problems, not create them. Is this, I asked myself, the way things might operate in an Obama era?

I know, this election is by no means over, and despite the favorable polls, I'm not one iota complacent about the outcome. It's just that this hearing revealed what may be a light at the end of the tunnel. Unless that's the headlights of the Straight-talk Express headed right for us.

(Note to readers: I'm going to take a break to work on the paperback edition of Crunch. I want to thank Ms. Huffington and the HP blogteam for the chance to post here on Sunday PM/Monday AM. See you after the election. I'm sure we'll have a lot more to talk about...)

Comments

[Yermammy]

I appreciate it, Jared. I wouldn't have a problem at all living in a camp trailer and working on some project, WPA style. I did it for years as a track worker for the Railroad. No big wup.

[MatoSka]

"John Sarbanes (D-MD) picked up on a great Pollin point about "crowding in"--how sometimes government investment creates untapped markets that later draws in private investment. The internet is, of course, a classic example, and green technologies create the same possibilities, with even greater potential benefits. "

i thought this was the most important contribution of the day. Dams and highways were thought to be such an investment at one point in tme as well. At issue is how can government invesment become an impartial facilitator when Congress is so tied to so many major (and at times competing) corporate interests itself. Or do we now just simply change the motto to: WHAT'S GOOD FOR BP CAPITAL IS GOOD FOR THE NATION"?

[DRaymond]

Youve struck on something I began to realize a while back. That for Republicans tax cuts were not an economic policy. If it were an economic policy it would change whether the economy is up or down or why. And as you note it doesn't. It is rather dogma and places like the Heritage Foundation aren't realy research institutions but rather churches of a sort preaching the dogma of supply side. Do you ever see these 'institutions' doing anything resembling genuine science?

[1observer]

Mr. Bernstein,

Your commentary is indeed an encouraging sign, but was the hearing comported less with incisive testimony, and more for an echo chamber? Whenever "hearings" don’t include an opponent, of course you have harmony. Within all this harmony were there results? You don't report any.

While you deride Republican witnesses and their supply side agenda, you don't refute their argument except in the instance of "crowding in". It is hard not to note that public funds for basic research – like the Internet, like putting man on the moon, like reducing dependence on oil - leads to innovation, productivity increases, and the creation of industries. Not just jobs.

Likewise, it is hard not to note that public funds for wealth redistribution through tax policy, through nationalization, and through the control of banks, leads to stagflation and job loss. And sometimes to civil war. That's world history, not ideology.

The truth is, we need a mix of socialist logic when it leads where private wealth dares not go, for military power, interstate highways, and a new energy infrastructure. But we also need a healthy portion of supply side reality where socialist logic is dysfunctional. Neither Party offers such a vision, let alone such a rational platform.

We in effect have only one Party. Call it, "Dumb and Dumber." I wish both Mr. Obama and Mr. McCain the very best, but I have very little hope that either is an agent of change we need.

1observer

[HyperInfluential]

There is a lot of truth in what you say, but we have to decide as a society what things are "off limits" as commodities. Should education be a product? Should healthcare? How about basic shelter, food, and clothing? Should we really say that those are COMPLETELY commodities, with no room for mercy for people who have no money to buy them, for whatever reason? If something is NEEDED by humans, they have to have it or they will suffer miserably and die, can that thing ever be a pure commodity in the same sense that an iPod is?

I think the major change we're seeing here is the people of America are no longer willing to tolerate massive suffering among our own people, especially when there is obviously so much wealth in our country. Depending on churches to form an ad hoc network of support, as Bush has advocated, is not rational; there is no logical reason why that would spontaneously form into an airtight safety net for all Americans. It's just silly to suggest that. We need rational policy that takes human suffering into account and forms good plans to alleviate it to the fullest extent possible.

[hozer]

Reading every page in this website--->
http://www.peswiki.com/index.php/Main_Page
...and watching this video might help accelerate a positive paradigm shift --->
http://ni4d.us/en/node/326

remember, Adversity Breeds Character

[Oldbuck]

I total agree with you supply side tax cuts have done nothing for the economy along with deregulation look what is has done for our economy. If left as is unemployment will rise even with Republicans so called tax cuts. The cure the unemployment we have to make direct investments into our infrastructure
rework our interstate highways and bridges if we don't hire someone from the outside like most Republicans would do. We would get some of this back in increased payroll taxes by the worker. It is proven that this money will increase several times.

One of the things that brother me is all the military contractors have not payed one damn dime in taxes on money earned most if not all are located offshore and do not pay any taxes there for this money is never tobe seen in the United States.

[PT6]

If an audit of "SOLE SOURCE Contracts for Vendors" in Iraq and the military in general were examined it would be as BIG a SCANDEL than Wall Street!

Much of the revenue is probably hidden Off-Shore!

One Sole Source Contract in Iraq to a Haliburton subsidiary did the following:

$40 for every soldier's meal in Iraq!
$99 for a single soldier's bag of laundry!

[pm247]

Let us fully nationalize all three of our most corrupt industries: Banking, Energy, and Health Care. Put the robber barons out of business once and for all.

[georgiaR]

I have one question - Are they still giving home loans to people that can't afford them??

[MarciL]

Private sector loans triggered subprime crisis:

http://www.mcclatchydc.com/homepage/story/53817.html

Wall Street crisis is culmination of 28 years of deregulation:

http://www.mcclatchydc.com/homepage/story/52559.html

[Merewen]

I need to point out that it wasn't that people couldn't afford REASONABLE loans. They were given crap! Plain and simple. I also looked into buying a home. A good credit, verifiable employment, 1 credit card, first time home buyers training and down payment and every mortgage company I went to WOULD NOT give me a fixed rate! No offers and when I asked they acted as if I was talking crazy. Finally I stopped because I got tired of them pulling my credit and it taking a hit. A good portion of the loans that were done with no verification were for flippers, rentals and vacation homes. Don't get it twisted. The people that were buying their first homes and using them as primary residents were shafted. The banks and the government know it.

[Halfandhalf]

Exactly, Merewen. This was the case for many. Even if you tried to refi or take out an equity loan, you were likely to get the sales pitch for interest-only or adjustable-rate loans, with a broker pointing out how much money you'd save the first X number of years, and wouldn't it be great to have all that money in the bank earning interest so you could use it later when the payments increased, etc. etc. Or talking about how much home values were likely to keep increasing, and therefore you could easily flip or sell before the loan payments ballooned. In CA, buyers trusted mortgage brokers over their own common sense, figuring brokers knew more about the market than they did. Not that I'm trying to demonize brokers--there are many reputable ones out there, I'm sure--but in the midst of everything that went wrong, the pushy sales pitches sure didn't help. Three years ago I insisted on a boring, fixed-rate, 30-year loan when I refi'd and people treated me like I was crazy for taking one when better short-term deals were available. Well, the next sentence goes without saying: boy, am I glad I (uncharact­eristicall­y) listened to common sense that time.

[HyperInfluential]

Shouldn't you be asking yourself why everyone who works hard can't afford a simple home to live in, a place to lay their head that they can paint and decorate as they choose, and maybe a little garden? Can you honestly say Jesus would not want all workers who give an honest day's work to have a home to call their own? It is not the workers' fault that the rich refuse to pay them enough to live a decent happy life. They are greedy, and that is simply their nature. They will not change their hearts, so the government must step in and order them to do what is decent and right.

What I want to know is, if we progressives finally succeed in implementing our "big scary" plan, and things are GOOD, I mean REALLY GOOD, will you change your mind? Or will it hurt your pride too much to admit you were wrong?

[Salz08]

Thank you so much for providing this insight into your glimmer of hope. I learn much from your posts here, as well as your other writings.

I'll look forward to your return to Huffpost and the emails letting me know you have a new post.

[tomas0808]

Thanks for the post. I am in a strange place. I feel a glimmer of hope but it is such an alien feeling to me that I'm not quite sure what to do. For most of my adult life (Reagan onwards) I have seen this crisis coming. Because of that I lost hope, especially because I had the experience of living in Norway and seeing the hope that a gov't that cares about all its citizens can inspire. I commend you. I know there are people working hard to fix this mess, people who want to return our gov't to a system by the people and for the people. It just hasn't been that way for so long.

[HyperInfluential]

We have to keep reminding ourselves that history is a long, long story. Just because nothing has changed in our lifetimes, or the lifetimes of our parents before us, does not mean nothing will ever change. That's just a fallacy of our limited perception in time, our one lifetime. History shows that over long periods of time, major shifts do occur, and it is our fate to be here during this one.

There had to be a day when the last powdered wig shop shut its doors for good. A day when the last velvet codpiece was sold. Perhaps soon there will be a day when the last Republican office closes its doors as well, and new parties move into the vacuum so we can finally have true multiparty dialogue instead of a two-puppet show. Once there are three or more parties, policy will get a lot better because a true marketplace of ideas will emerge.

[PT6]

Jared,

I am a recently retired professor of Business and Engineering from Princeton University and more recently University of San Francisco.

I think you are RIGHT! As Obama and Congress open up to New IDEAS this becomes Exciting!

My idea is to use the Internet and Automation to offer Cost Effective Government Solutions to meet opportunities like those included in your discussion!

A Central problem to our Economic Recovery is solving the Homeowner Walkaway Crisis!

Six Brand New Fundamental Facts are now clear:

1. Obama plans Cabinet Position in Technology
2. American Taxpayers Own Fannie, Freddie, interest in AIG, and a group of Banks!
3. Mortgage Companies and Banks are at The CENTER of the Housing and Financial CRISIS!
4. Crisis Continues: Homeowners can not Afford "TRICKY Adjustable Loans" and are Walking Away!
4. The Current FED RATE is 1.5%!
5. Technology and the Internet are Sophisticated Tools for Automating 98% of a Loans work!
__________­__________­__________­__________­__________­__________­__________­________
IDEA: Use the Internet, Automation, and New Taxpayer Owned Banks to provide direct low cost loans, Eliminating Corrupt Middle Men (i.e., Mortgage Companies and Banks)?
__________­__________­__________­__________­__________­__________­__________­________
Fixed rate new loans could be very low, perhaps 2.5% to 3.5%, to Provide the New Taxpayer Owned Banks with a "1% to 2% margin!"

Why such low rates? Because Middle men Removed and Direct from Government using FED Money Rate of 1.5%!

If they can FUND Corrupt Banks they can Fund American Mortgages!

[MatoSka]

Investing in technology infrastructure, like high speed broadband, will certainly help the middle class as Obama has advertized. Unfortunately it will not employ signifiant numbers of the poor and working class. Likewise, its payoff would be focused on corporate users. It is not my intention to argue against it here because a lot depends on the implementation.

I suggest that banks and mortgage companies are not as corrupt as you characterize them. They exist in a competitive environment and when it is a legally accepted practice to bundle mortgages and sell them in financial markets and there are no regulations to the contrary, then capital, like water will flow where it can. The problem arose as much from the rating of the loans as it did from their being sold. Also, diversifiation of banking into financial investment created an inevitable scenario raising risk and required appropriate regulation to accompany the change.

The prospect of increasing the use of shared value appreciation notes on a voluntary basis is a similar risky scenario at least from the lenders perspective. Also, a homebuyer who ties him or herself down to the property for the entire length of the loan, as would be required, could limit his or her own social mobility by remaining in the same home. Forced housing and forced financing make poor economics.

[PT6]

Much of what you say has some truth about the ratings of bundled loans! And the Investment Banks ran a lot of the mortgage operations as MONEY Machines.

Why when technology is available should so many middle men take so much profit from a loan?

Obviously, without technology and the internet this would not be possible.

We need efficiency not layers upon layers of fees.

Also, most mortgage companies are already shut down or running with very few people so the further loss of jobs is minimal.

[starlady7]

PT6 -

I don't know much about economics, but what you propose and have outlined feels like that might be starting down the right track. I think if mortgages could be a fixed rate of 2.5 to 3.5 this would have a stablizing effect on the housing market. But not to just new loans,,,also in particular to people already holding mortgages with inflated, 'tricky adjustable" interest rates. If these existing mortgages can be lessened as suggested for new loans, more people could afford to pay and stay!

As to the middle men, I think eliminating that cost would be good, sort of like buying direct.

To Jared: Thank you so much for this article. I have been frustrated for a long time about the log jam in Congress, due to the Republican agenda as you so concisely pointed out. And that point needs to be broadcast loudy.
The Republicans have a very narrow view and seem to think 'on your own ' philosophy is the way to go. They think of their own pockets before they think of the country as a whole. If " Big Business" gets the breaks then everything will be okay, without any thought of how to renew and improve the country. It is important to reinvest in the country to keep our country strong and not all about making the wealthy, richer. Unless all of the people are allowed to prosper eventually the wealth going to the top bleeds the rest of us dry!

[anandakos]

PT6,

The federal government can NOT borrow money to back mortgages for 1.5%. It can borrow money for three MONTHS at 1.5%. The 30 year Treasury is currently costing about 4.3%, and if you add the "1% to 2% margin" you advocate (and is necessary.­...) to that, you're in the current 30-year fixed range of about 6%. Borrowing short to lend long is exactly the behavior that caused the current crisis.

Basically all the government can really do is make more money available since at this time there are very limited private funds available for mortgages and make it available to a larger cross-section of society. It would be foolish and VERY unfair to existing mortgage holders if it were to offer such a huge subsidy as that you are advocating.

[OldPete]

"Crunch" is a wonderful book. Thankyou, Mr. Bernstein, for laying out the economics of everyday life so clearly and elegantly.

[Isher]

I do hope we have some room left for spending. These Republicans have put us up against the wall as far as debt goes.

[jukesgrrl]

Thanks for your post. There is SO MUCH work to do. I appreciate your discussing it in a positive light.

[PapaPig]

Jared, I saw the committee meeting on a replay on C-SPAN this weekend. I was amazed and now I know why, there were no Republicans present to push corporate agenda's.

Your testimony was brilliant. A very large percent of it was on my list if asked to testify (they never would). But the point is there are a lot of us out here that know where we need to go and you nailed it and delivered it to the committee.

Thank you, good luck on the book and hurry back to the Post.