There's all the usual post-election palaver that happens after a Democratic loss: Republican and right-wing triumphalism, the pro-corporate wing of the Democratic party and conventional wisdom pundits arguing that Democrats should "turn to the center" (by which they mean the Washington center -- cutting Social Security, doing more trade deals, not antagonizing Wall Street -- as opposed to what the center is for voters), and progressives arguing that Obama should stand strong on Democratic values and not cave to the Republican agenda. There's also a classic dynamic where some Democrats are urgently calling on people not to attack each other or the president, to try to keep the party from looking like it is in disarray, and others wanting to really engage in that old centrist versus left debate and critique.
I have been thinking hard about all this in part because it's the obvious thing everyone is thinking and talking about and in part because I am doing a lot of panels and media interviews right now -- the latest one yesterday at Harvard where I did left-right panel with Bill Kristol on analyzing the elections. Interestingly, while Kristol and I naturally disagreed on the substance and political dynamics on many key issues -- Afghanistan, tax cuts for the rich, health care among the big ones that came up -- we agreed on the essential point that Obama can only survive by reconnecting with both the Democratic base and working class swing voters by being more populist on jobs, banking issues, and Social Security/Medicare (Republicans get honest while speaking academically in the weeks immediately after the elections -- like Lee Atwater, also speaking at Harvard after the 1988 election, Kristol agreed that the swing vote in national elections is a working class populist vote).
At the end of the day, though, I keep coming back to one thing. Political positioning is significant, and I continue to believe populist rhetoric and substance on issues helps. Energizing the base and doing more to turn out Democratic base voters in 2012 will be important. But ultimately there will be only one way for Obama and the Democrats to come back in 2012, and that is for the economy to be substantially better. The thing Washington insiders always seem to glide over is the level of economic pain that is out there. The real unemployment rate is far higher than the official numbers because they don't include part-time and temporary workers still looking for full time jobs as well as those who are too discouraged to look for work. Incomes have been flat while a lot of everyday costs for things like groceries, gas and utilities, health care, and college tuition are a lot higher than they were a few years ago. Pensions and savings wiped out by the stock market collapse still haven't recovered for most people. And the housing crisis -- 25 percent or more of homeowners are in real trouble, and housing prices are staying down -- looms like a massive New York skyscraper towering over everything else.
Traditional Democratic ideas around Keynesian solutions for jumpstarting the economy, which we tried some of but not nearly enough, are politically dead with the incoming Congress. That means there is only one thing that will help revive this economy right now and give working-class homeowners some tangible benefits: getting these underwater mortgages written down so that people can stay in their homes. It is the only thing that will stabilize the housing market, and the only major lift to the economic well being of middle class voters. It will mean the big banks taking a big hit financially, but not many folks will shed a lot of tears about that. And here's the deal: Treasury, Federal Housing Administration, other regulators, and the Justice Department can make this happen without Congress doing a thing (which they won't). It would mean a big shift in administration policy, but I have come to believe it is the one thing that they can clearly do to give a major boost to the economic fortunes of the stressed out middle class. And if they do it, I hope they do it full-out, not by muddling through.
The political urgency of this is shown by the two most important statistics that explain the fate of Democrats on Tuesday are these:
-In 2008, Obama won the votes of people who said their personal economic situation had gotten worse by a 43 percent margin. In 2010, Democrats lost those voters by 29 percent. By the way, the number who said things were worse for them? 40 percent. That is an incredibly big swing in such a massive slice of the electorate, one on a scale that I don't remember in 25 years of looking at exit polls.
-People were asked by exit pollsters who they most blamed for the bad economy. Obama was only third on that list with 24%, while Bush was actually higher with 29%. Pretty much everyone who said Obama voted Republican, and everyone who said Bush voted Democratic. But the number one culprit on the list, the one that working class swing votes landed on, was Wall Street, at 35 percent. Guess who that swing group blaming Wall Street? Yup, the Republicans won 56 percent of their votes. Pretty ironic: These voters get right who was most to blame for our economic problems, but they don't feel like Obama has done enough about setting things right.
Better positioning, turning out base voters, having a unified party effort: it's all great. But Barack Obama will not win in 2012 unless he brings back the voters who turned against him in the two statistics above (which obviously were mainly overlapping voters). He won't win without reviving the economy at least to some extent, and that won't happen with another stimulus: It will have to happen by going to the heart of the problem, which is the housing market. This debate we are about to have on the foreclosure issue because of the problems the big banks created is actually an opportunity for Democrats to seize the initiative. They can take dramatic and effective action without having to do anything with the new Congress. It is the best thing they can do for themselves politically and economically. Let's hope they are bold and aggressive in fighting for the middle class on this issue.
If there is a problem, used to be that you could go and renegotiate the loan terms so both parties could benefit. Nope, not any more-banks are for whatever reason refusing to do this with homeowners. And considering that most homeowners are very responsible people who have fallen on brief hard times, they probably would pay the original loan amount if they just got a reduction in interest or a longer term for paying back.
But noooooooooooooo...cannot do that.
Move out, rent a house someplace and pay for it. Let someone who can own the house buy it and take care of it and watch property values stabilize.
It does not take 9 years to foreclose on anyone.
It takes a minimum of 320 days (Arizona) to a maximum of 518 days (Florida.) The average is 438 days.
The process can start as little as one month after the first failed payment and typically is three to six months of missed payments.
The republiCAN'TS passed this pending tax increase 10 years ago when using reconciliation to pass the GWB cuts in the first place. John McCain originally came out against those cuts.It's why the tax cuts expire but health care reform DOESN'T; it's deficit neutral or saves OUR country money.
This middle-class tax-payer has for months been making the challenge I'd rather give up my GWB tax-cuts than see them also extended for the top 2% to 3%, and continuing the transfer of working and middle-class tax dollars to the already wealthiest by the hundreds of billions. After the GWB cuts took effect, Warren Buffet decried that he paid less in taxes than his middle class secretary. Not one hypocritical tea patsy has yet come forward to answer my challenge and also say to let 'their' working or middle class GWB tax cut also expire - tough it's the correct thing to do for OUR country's debt and deficit.
If republiCAN'TS want no compromise the I think they should get their wish and CONgress should do what they like best, NOTHING. I say just go with the REPUBLICAN'T TAX HIKE - as originally voted for BY THEM, and let them ALL expire.
Come on you hypocritical right-wingers, I'm willing to put my money where your mouth is; LET 'ALL' GWB TAX CUTS EXPIRE!
Go for it!
The house I'm in is only worth 66% of what it was 3 years ago. Do I get compensated for the "loss"?
What about those who are still paying mortgages, but whose houses aren't under water? Do they get compensated for the loss of their home's market value from the bubble high? Do they get the principal amount of their mortgages written down?
And then there are those who are underwater but consider paying their mortgages the honorable thing to do since they are the ones who incurred the debt. In one case I know of, it was using the house as an ATM that caused the problem. Nonetheless, she still insists on paying even though the payments are painful and she's kicking herself for getting into the mess.
It isn't just the financial sector that will be impacted by a mortgage write-down. It's all of us.
Auldphart
Only one thing, indeed!
Happy Dae·
http://ShoeStringGenealogy.com
In the 1940s and 50s - when families were larger, homes were smaller - much smaller:
At the beginning of the last century, the average home was 700 to 1,200 square feet. In 1950 the average home was 1,000 square feet growing to an average size of 2,000 square feet in 2000. Costs in 1900 were about $5,000, $11,000 in 1950 and $200,000 last year. An interesting fact revealed in the [National Association of Home Builders (NAHB)] report is that although homes have grown in size, lot sizes have begun to significantly decrease in size. In 1990, the average lot size was 14,680 square feet; the first year data was available for comparison. Just eight years later the average lot size was 12,870. In its profile of a typical new home in 2010, the report suggests the average lot size will shrink by another 1,000 square feet while the house size will increase to 2,200 or more square feet.
http://www.moyak.com/papers/house-sizes.html
How 'progressives' can talk sustainability while encouraging people to remain in houses they can't afford and don't need? They should be pushing to build compact affordable housing for these people, not having them in rural mega-mansions they can't afford, just to keep the tax base up.
The problem is there's a surplus of houses right now. Building new houses isn't really going to help, especially with a significant inventory of larger houses on the market.
We've been sold a bill of goods over the last 60 years and that bill of goods can be summed up as "more and bigger is better". It's also more expensive, but somehow that message never seems to make it to conciousness. Not everybody's bought into that mantra, but enough have to make it a real problem. Big house, multiple cars, maybe a boat, TV's in every room, state-of-the-art sound system. It adds up rapidly.
BTW, compact does not necessarily mean affordable. We live in an 1100 sq ft, 2 BR, 1.5 BA house on a 1/4 acre lot. However, it would go for over $500k if put up for sale and that's down about 1/3 from what it would have gone for 3 years ago. Fortunately, it's paid for.
Auldphart
So you would have someone who bought a yacht when he needed a rowboat pay for the maintenance and fuel expenses on a yacht, rather than see it sold to someone who could afford to maintain it and pay taxes on it?
That makes no sense whatsoever.
"We've been sold a bill of goods over the last 60 years ....."
All the more reason to STOP the madness rather than subsidizing it, don't you think?
"BTW, compact does not necessarily mean affordable. We live in an 1100 sq ft, 2 BR, 1.5 BA house on a 1/4 acre lot. However, it would go for over $500k if put up for sale and that's down about 1/3 from what it would have gone for 3 years ago. Fortunately, it's paid for."
If it wasn't affordable, it wouldn't be paid for, now would it be? But certainly, it wouldn't be affordable for everyone. But there are decent small homes available in many states for $100/sq ft or less.
http://www.homes.com/listing/122706658/3065_Derling_Rd_AKRON_OH_44319
The home my grandparents bought was small but had a massive backyard. So they were buying the same lot as someone now-just a different sized house on the land.
Politics is a contact sport. Obama does not want his his buddies on Wall Street to suffer from any contact. That might interfere with his ambitious campaign for multimillions on the corporate speech circuit following his Democrat destruction reign of weakness.
The Healthcare debacle in this country is not the segment I was addressing. The US healthcare situation remains as a testiment to greed , no one should ever have to be in the position of those "5 million" you quote.
However, our house is paid for. In fact, everything we own is paid for. I know people who have incomes significantly below ours that are surviving quite well. I know people who have lost theri jobs in the last couple of years who are not fighting off the wolf at the door because they didn't spend every last penny they earned and then some while employed
There are a lot of people out there that don't know how to handle money. I've got a couple of siblings like that although both are still employed. My wife has a cousin who came within a hairsbreadth of losing her home. It wasn't because of health expenses or job loss (she has had a hob with health benefits for the last 30 years) but because she used her house as if it were an ATM and when everything went south, she ended up with a house worth less than she owes and mortgage payments and credit card debts she can barely pay. Fortunately, she's a highly responsible adult who intends to pay off her debt, secured and otherwise.
Auldphart
Whether or not the banks are in the catbird seat is not as important as you seem to think. There are people who actually borrow LESS than they "qualify" for since doing so is financially prudent.
We used to have a mortgage. It was paid off years ago. We've never used our property as an ATM to cash out equity. The banks have always been in the catbird seat, we just didn' listen to their siren call to borrow, borrow and then borrow some more.
It would be far more productive if HP offered financial advice rather than wailing and gnashing teeth about how evil Wall Street is. Complaining about the devil doesn't help a damned bit. Knowing how to avoid being ensnared by the devil does especially since the devil's always going to be there.
BTW, it's LOSER, not LOOSER. LOOSER means less tight while LOSER means one who doesn't win.
Auldphart
Tom-Oakland
Anyway, I told this to our two illustrious CA. Senators, and got nothing back, except the usual BS thank you writing letter, that address nothing I was talking of.
So we REWARD those who most over-extended themselves. Tell me how this is not enabling bad behavior.....
The program would look at each area of the country and cut the mortgage value to equal the real today value on the property. It would not touch interest rates or length of time on the mortgage. This program would allow the banks to take off from taxes 25% of the lost value of the property. The real outcome would end the mortgage crisis, keep people in 80% of the homes and give the investors up the line the ability to still back the loans.
The American parity, working for Americans not the banks nor investors, shocking I know.
Banks will just come back and demand more bailouts or "the entire world economy will collapse".
Been there, done that.
If the government would just get out of the way, no bailouts, no special favors to any bank or investment house, then the banks would very likely work with mortage owners to reduce principle as they would have no other choice but do that or foreclose, and put those loans on the red side of their profit/loss statements.
Just wait until the investigations of the Administration begin - you'll be wishing the Blue Dogs were back.