A Different Recession

A Different Recession
The Old Remedies Won't Work This Time
By Harold MeyersonWednesday, January 16, 2008; Page A15 (The Washington Post)

In a normal recession, the to-do list is clear. Copies of Keynes are dusted off, the Fed lowers interest rates, the president and Congress cut taxes and hike spending. In time, purchasing, production and loans perk up, and Keynes is placed back on the shelf. No larger alterations to the economy are made, because our economy, but for the occasional bump in the road, is fundamentally sound.

This has been the drill in every recession since World War II.

Republicans and Democrats argue over whose taxes should be cut the most and which projects should be funded, but, under public pressure to do something, they usually find some mutually acceptable midpoint and enact a stimulus package. Even in today's hyperpartisan Washington, the odds still favor such a deal.

This time, though, don't expect that to be the end of the story -- because the coming recession will not be normal, and our economy is not fundamentally sound. This time around, the nation will have to craft new versions of some of the reforms that Franklin Roosevelt created to steer the nation out of the Great Depression -- not because anything like a major depression looms but because we face an economy that's been warped by two developments we've not seen since FDR's time.

The first of these is the stagnation of ordinary Americans' incomes, a phenomenon that began back in the 1970s and that American families have offset by having both spouses work and by drawing on the rising value of their homes. With housing values toppling, no more spouses to send into the workplace, and prices of gas, college and health care continuing to rise, consumers are played out. December was the cruelest month that American retailers have seen in many years, and, as Michael Barbaro and Louis Uchitelle reported in Monday's New York Times, delinquency rates on credit cards, auto loans and mortgages have all been rising steeply for the past year.

What's alarming is that this slump in purchasing power doesn't appear to be merely cyclical. Wages have been flat-lining for a long time now, the housing bubble isn't going to be reinflated anytime soon, and the upward pressure on oil prices is only going to mount. As in Roosevelt's time, we need a policy that boosts incomes and finds new solutions for our energy needs.
FDR's long-term income remedies included Social Security, the Wagner Act (which made it possible for many workers to join unions) and public works projects -- including a massive electrification of rural America. A comparable set of solutions today would include the passage of the Employee Free Choice Act, which would enable workers in nonexportable service-sector jobs to unionize without fear of being fired. It would include a massive, federally financed program to retrofit America, creating several million "green jobs" in the process.

On these issues, there's a clear difference between the two parties.

Barack Obama, Hillary Clinton, John Edwards and the congressional Democrats favor these measures; the Republicans oppose them (though John McCain at least has begun speaking about creating green jobs).

What Republicans favor is simply more tax cuts, which will do nothing to address our deeper problems of income distribution and energy dependence.

The second way in which the current downturn echoes the Depression is the role played by our deregulated financial sector. Now, as then, the financial foundations of our leading banks and other lending institutions have turned out to be made of mush. Now, as then, this news has come as an appalling surprise not just to consumers but to many of the banks themselves. Now, as then, the banks created such complex and deliberately opaque financial vehicles -- all devised to make them a buck every time they swapped some paper -- that they long ago lost track of the paper's true value.

In his time, Roosevelt, through the Securities and Exchange Act and other legislation, compelled banks to be both more prudent and transparent. Over the past 30 years, however, Wall Street has created a host of new, unregulated institutions (such as private equity companies) and devices (such as the bundled, and bungled, resale of mortgages into ever-larger investment pools). Now it's time to enforce some transparency and prudence regarding financial institutions that have been gambling with other people's money and lives.

When it comes to reining in Wall Street, however, the Democrats have been AWOL almost as much as the Republicans have been -- not least because their presidential candidates get so much money from Wall Street. By refusing to take on the Street, however, they forfeit what could be a potent issue this fall and lay the groundwork for yet another recession.

Article About Goodlatte's Broken Promise On Term Limits (2002)

Copyright 2002 The Daily News Leader (Staunton, VA)All Rights Reserved The Daily News Leader (Staunton, VA)
July 28, 2002 Sunday

Staunton, VA- U.S. Rep. Bob Goodlatte ended months of speculation about his political future Saturday morning, telling a gathering of 6th District Republicans that he intends to seek office after his next term in Congress ends in 2004.

The announcement nullifies a 12-year term-limit pledge Goodlatte, R-6th, made in 1992 when first running for office. "While it is too soon to launch any future campaign, I intend to stand for re-election beyond this year," Goodlatte said, much to the delight of the party faithful crammed into the Staunton City Council chambers.

Frank Nolen, chairman of the Augusta County Democratic Party and a former state senator, was surprised by Goodlatte's announcement."I thought he'd be a man of his word and keep his word," Nolen said. "I'm disappointed with him." Goodlatte, who will be unopposed in November in his bid for a sixth term, supported failed attempts to mandate term limits after Republicans took control of the House in 1994.

Since then, Goodlatte said he has come to the conclusion that term limits can only be effective if they are applied universally. "If only conservatives continue to leave after six or 12 years, then liberals will continue to become more powerful through their knowledge and seniority," he said.Nolen was not satisfied with Goodlatte's explanation."He didn't mention that when he said (he would serve 12 years)," Nolen said. "He knew at the time he couldn't impose them on everyone." While Goodlatte said he still supports term limits, Del. Chris Saxman, R-Staunton, said he opposes mandatory limits and was pleased with Goodlatte's announcement."I'm sure many people will think he's gone back on his word, but I've never thought term limits were a good idea for the legislative or executive branches of government," Saxman said. Though Goodlatte said he was urged by many throughout the district to run again in 2004, he does anticipate a possible negative backlash. "Obviously when somebody changes their mind on something voters are going to have to pass judgment on that," he said.Bill Thomas, a 16-year resident of Rockbridge County, said he was pleased that Goodlatte will continue to run for Congress."I think he's done an excellent job, and I would hate to see him not run," Thomas said. "He's got a right to change his mind. I don't think that (term-limit pledge) got him elected." Nolen said Goodlatte's decision to continue to seek office was for "mostly personal" reasons, but said the aborted term-limit pledge will not be a major issue for Democrats in 2004. "It won't help us mobilize anyone," he said. "It's much easier to get someone to run for an open seat than against an incumbent."In his five previous bids for office, Goodlatte has run unopposed twice and taken no less than 60 percent of the vote in his three contested races. Pat Haley, chairman of the Staunton Republican Committee, thinks Goodlatte will continue to be a strong candidate.