Elizabeth Warren on the Disappearing American Middle Class

Elizabeth Warren, the Harvard Law Professor who may become head of a Consumer Financial Protection Agency if it passes Congress, paints a scary picture in the Huffington Post about the future of the American middle class.

This paragraph really struck me:

Pundits talk about "populist rage" as a way to trivialize the anger and fear coursing through the middle class. But they have it wrong. Families understand with crystalline clarity that the rules they have played by are not the same rules that govern Wall Street. They understand that no American family is "too big to fail." They recognize that business models have shifted and that big banks are pulling out all the stops to squeeze families and boost revenues. They understand that their economic security is under assault and that leaving consumer debt effectively unregulated does not work.

Sounds like a sentiment that Obama could harness more effectively to create change. And Warren seems like the right person to lead that movement.

George Packer Review of Obama

New Yorker writer and blogger George Packer offers some good observations on Obama's presidency thus far, as part of his "Interesting Times" book tour. Worth a look:

Obama's Troubles on Interesting Times

Key quote: "But as President, Obama seems, very strangely, to have forgotten that his most important constituency is not his small circle of advisers but his three hundred million countrymen. Apart from a few excellent speeches, he has stopped explaining to the public what he’s doing. He seems to disappear into himself for days and weeks at a time."

Campaign Finance Reform: Worth a Look

Right now, the major theme of coverage of national politics is a discussion of the implacable partisanship that rules Washington today. The procedural nightmares that are rotting away the creativity of the Senate and Sarah Palin's return to the limelight seem to confirm that the left-right split is the main factor in politics today.

Rather than partisan, however, much of the inability of Congress to solve key problems today stems from the influence of big money coming into federal campaigns. So far, special interests have already contributed $252 million to candidates for the U.S. House and $163 million for the U.S. Senate. That puts campaign money on the same pace as the 2006 mid-term election, even in this harsh economic time. And that doesn't include the $2.5 billion spent on lobbying.

The usual suspects have been throwing money into the machine, hoping to elect candidates sympathetic to their interests or buy off opposition and more ambitious reform plans. Here is a list of the top industry contributors this year, according to Open Secrets.org:

• Securities and Investment Companies: $22.2 million
  
• Healthcare Professionals: $20.9 million
  
• Real Estate: $20.1 million
• Oil and Electric Utilities: $14.4 million
  
• Insurance: $11.8 million
  
• Lobbyists: $10.7 million

For some more detailed analysis, please check out the really great work of the folks at Americans for Campaign Reform.

President Obama seems to be mulling a second stimulus package. He could do worse than to include a major push for the Fair Elections Now Act. The bill, which is moving forward in both the House and Senate, would allow candidates to choose citizen-funded campaigns instead of special interest money. Candidates could opt to raise small donations of $100 or less and receive public matching funds at a match of $4 to $1 for doing so. The "fair elections" concept has worked in many states and could provide a way to clean some of the special interest money out of Congress.

A real battle for campaign reform could go a long way towards ensuring that the Obama administration can pass strong climate and financial regulation legislation and jump start a stalled reform tide.

Time Out for Financial Crisis and Regulation

America is dealing with, by my count, four major crises: Unemployment, Afghanistan, health care, and climate change. Just behind that are some major problems like a rising portion of Americans living without enough food, Islamic extremism, and a massive increase in public debt. Oh, and then there's the withdrawal from Iraq.

In between all that, Congress is trying to reform the financial system. This is not a fortuitous confluence of events. Wall Street regulation is incredibly complicated, really important to global economic well-being, and problematic because Washington is awash with political contributions from securities and investment firms (over $2 billion since 1990, according Americans for Campaign Reform).

Two major proposals exist to clean up the problems in our financial system, which attempt to fulfill President Obama's road map for regulation (regulating derivatives, strengthening consumer protection, ending "too big to fail," and creating a new, more powerful bank regulator). The first bills comes from Representative Barney Frank's House Financial Services Committee. The second, bolder measure comes from Senator Chris Dodd. A good summary of the differences can be found at Bloomberg.com.

Most progressive observers prefer the Dodd bill. Senator Dodd would create greater and stronger regulation for derivatives, a strong consumer protection model, strip the Federal Reserve of its bank regulation powers in favor of a new single bank regulator, and a unified regulatory council to monitor and warn against systemic risks. Still, the Dodd bill doesn't really stand a prayer of making it through the Senate, so the Frank bill may emerge as more important. And the longer we delay, the greater the chance the financial industry will be able to avoid any real change.

That said, we probably need to get educated as a public and really try to understand the threat that the current lax regulatory situation creates for our society. I recommend reading a few things.

• John Galbraith's "The Speculative Episode." Galbraith's essay does a great job of outlining the common elements of major investment failures, particularly the "mass psychology of the speculative mood." A preventative defense against being seduced by the next financial run.
• Second, Matt Taibbi's Wall Street's Naked Swindle, which outlines suspicious circumstances surrounding the collapse of the investment bank Bear Stearns
• Lastly, Read Special Inspector General Neil Barofsky's report on AIG.

On the whole, I think what these demonstrate is that the amount of economic power controlled by a few large companies is vast and dangerous. And perhaps then we can begin to craft a safer, more democratic version form of investment and finance. Congress can't do it alone.

The 2000s: A Lost Decade

David Segal tries to get a good idea of the 2000s and if there is a pithy name that represents that decade that is coming to an end in this week's New York Times. He doesn't really find any consensus on what to call the era, but all in all, people tend to believe that we have a more serious outlook in 2009 than in 2000 and perhaps missed out on some good opportunities for reform.

Science fiction writer David Brin has a pretty stark take that resonated with me:

“I would recommend the Noughty-aughts,” he said. “ ‘Nought’ as in zero. ‘Aught’ as in nothing. Both words contain essentially nothing, because this was an era when no progress was made.”

He continues:

Mr. Brin looks at the ’00s as a great lost opportunity, the decade when “the drug high of self-righteousness poisoned our inherent American joy in pragmatic problem solving.” We missed the chance to solve the problem of global warming, to fix our crumbling infrastructure, to find ways for the United States to become a font of new products for the entire world.

Instead, he says, we were sidetracked by our response to 9/11, which he considers stupid and costly. Ever since the decade began, “it’s been whining and crying and moaning, and retreat from ambition,” he says. “On the grand scale of things, our descendants will look at us as a bunch of crybabies.”

Afghan Ambassador Opposes Escalation

Karl Eikenberry, a former general and ambassador to Afghanistan, joins the ranks of dissenters toward General Stanley McChrystal's expanded mission, because of corruption and the poor political situation:

In his communications with Washington, Eikenberry has expressed deep reservations about Karzai's erratic behavior and Afghan government corruption, particularly in the senior ranks of the Karzai government, said U.S. officials familiar with the cables. Since Karzai was officially declared re-elected last week, U.S. diplomats have seen little sign that the Afghan president plans to address the problems of corruption they have raised repeatedly with him.

He also urged more support for the civilian mission there.

In the cables, Eikenberry also expressed frustration with the relative paucity of money set aside for spending on development and reconstruction this year in Afghanistan, a country wrecked by three decades of war. Earlier this summer he asked for $2.5 billion in nonmilitary spending for 2010, a 60 percent increase over what Obama had requested from Congress. But the request has languished even as the administration has debated spending tens of billions of dollars on new troops.

The ambassador also has worried that sending tens of thousands of additional U.S. troops would increase the Afghan government's dependence on U.S. support at a time when its own security forces should be taking on more responsibility for fighting. Prior to serving as the commander of U.S. forces in Afghanistan, Eikenberry was in charge of the Afghan army training program.

Apparently President Obama will be making his decision about a troop increase soon. My inclination is against an expanded mission in Afghanistan, but the policy process seems to be relatively open and fair. Big improvement over the Bush years.

Two Must Read Articles

If you don't read Rolling Stone, you probably haven't had a chance to read Matt Taibbi's piece about Wall Street fraud and the collapse of Bear Stearns, "Naked Swindle." It's essential reading and hopefully something people within the White House and Congress pick up on.

Bob Herbert, usually spot on, has some words for President Obama. I drew from his work in an earlier post about unemployment and Afghanistan. The president has to juggle a lot of things, but hitting the right chord on these two fundamental challenges is absolutely essential.

Rahm Emanuel on Health Care

He makes a good point:

“Let’s be honest,” Rahm Emanuel said in a recent interview. “The goal isn’t to see whether I can pass this through the executive board of the Brookings Institution. I’m passing it through the United States Congress with people who represent constituents.”

More analysis on the last health care bill hustling here.