Our Town & The United States of America

It's no secret I'm a living cliche at times and do enjoy the Sunday Morning Times, mainly its in-depth front-page reporting, and the always thought-provoking writing of their theater-turned-Sunday-columnist-culture-critic Frank Rich.

This morning, Rich provides insight into our collective national moment by highlighting the resurgent play, Our Town, the famous 1938 play performed by many talented and/or under-resourced theatres because it requires no set and a large cast of extras (a prescription for high school and community production if there ever was one).

But this morning Rich reminds us why the play is also enduring - its timeless call to a collective sense of ourselves and our nation, captured in these times by Barack Obama's famous refrain, "We are the United States of America," that has resonated with many Americans. Sometimes, though, we could do well to "remember" history so that we are not condemned...

Writes Rich:

“WHEREVER you come near the human race, there’s layers and layers of nonsense,” says the Stage Manager in Thornton Wilder’s “Our Town.” Those words were first heard by New York audiences in February 1938, as America continued to reel from hard times. The Times’s front page told of 100,000 auto workers protesting layoffs in Detroit and of a Republican official attacking the New Deal as “fascist.” Though no one was buying cars, F.D.R. had the gall to endorse a mammoth transcontinental highway construction program to put men back to work.

He continues to frame our current moment with references to Warren Buffet, AIG, and Bernie Madoff:

We’re still working our way through the aftershocks of the orgy of irresponsibility and greed that brought America to this nadir. In his recent letter to shareholders, a chastened Warren Buffett likened our financial institutions’ recklessness to venereal disease. Even the innocent were infected because “it’s not just whom you sleep with” but also “whom they” — unnamed huge financial institutions — “are sleeping with,” he wrote. Indeed, our government is in the morally untenable position of rewarding the most promiscuous carrier of them all, A.I.G., with as much as $180 billion in taxpayers’ cash transfusions (so far) precisely because it can’t be disentangled from all the careless (and unidentified) trading partners sharing its infection.

Buffett’s sermon coincided with the public soul searching of another national sage, Elie Wiesel, who joined a Portfolio magazine panel discussion on Bernie Madoff. Some $37 million of Wiesel’s charitable foundation and personal wealth vanished in Madoff’s Ponzi scheme. “We gave him everything,” Wiesel told the audience. “We thought he was God.”

Rich argues next a fundamental point discussed on this site. The American economy has no hope of recovery until we see a massive return of jobs and job confidence to restore broad-based consumer-driven markets, the cornerstone of real estate spending and values as well. A primary driver of the severity of this current crisis is the concentration of so little of our collective national income in the vast middleclass and working Americans, which I personally define as those earning less than $250,000 taxable income per year. Rich:

The simplest explanation for why America’s reality got so distorted is the economic imbalance that Barack Obama now wants to remedy with policies that his critics deride as “socialist” (“fascist” can’t be far behind): the obscene widening of income inequality between the very rich and everyone else since the 1970s. “There is something wrong when we allow the playing field to be tilted so far in the favor of so few,” the president said in his budget message. He was calling for fundamental fairness, not class warfare. America hasn’t seen such gaping inequality since the Gilded Age and 1920s boom that preceded the Great Depression.

From the link behind "such gaping inequality" above is the following chart demonstrating the magnitude of the widening gap:

The chart shows the share of the richest 10 percent of the American population in total income – an indicator that closely tracks many other measures of economic inequality – over the past 90 years, as estimated by the economists Thomas Piketty and Emmanuel Saez. I’ve added labels indicating four key periods. These are:

The Long Gilded Age: Historians generally say that the Gilded Age gave way to the Progressive Era around 1900. In many important ways, though, the Gilded Age continued right through to the New Deal. As far as we can tell, income remained about as unequally distributed as it had been the late 19th century – or as it is today. Public policy did little to limit extremes of wealth and poverty, mainly because the political dominance of the elite remained intact; the politics of the era, in which working Americans were divided by racial, religious, and cultural issues, have recognizable parallels with modern politics.

The Great Compression: The middle-class society I grew up in didn’t evolve gradually or automatically. It was created, in a remarkably short period of time, by FDR and the New Deal. As the chart shows, income inequality declined drastically from the late 1930s to the mid 1940s, with the rich losing ground while working Americans saw unprecedented gains. Economic historians call what happened the Great Compression, and it’s a seminal episode in American history.

Middle class America: That’s the country I grew up in. It was a society without extremes of wealth or poverty, a society of broadly shared prosperity, partly because strong unions, a high minimum wage, and a progressive tax system helped limit inequality. It was also a society in which political bipartisanship meant something: in spite of all the turmoil of Vietnam and the civil rights movement, in spite of the sinister machinations of Nixon and his henchmen, it was an era in which Democrats and Republicans agreed on basic values and could cooperate across party lines.

The great divergence: Since the late 1970s the America I knew has unraveled. We’re no longer a middle-class society, in which the benefits of economic growth are widely shared: between 1979 and 2005 the real income of the median household rose only 13 percent, but the income of the richest 0.1% of Americans rose 296 percent.

Penultimately and for fun here, Rich doesn't miss the opportunity to pile on to the emperor clothes of CNBC and the righteous skewering by Jon Stewart shown earlier on this site. What's troubling is that the clips Stewart assembled were presented in full context and told a broader tale of CNBC and Wall Street insiderism that has become all-too-apparent now, and which CNBC is terrified to have revealed broadly.

Last week Jon Stewart whipped up a well-earned frenzy with an eight-minute “Daily Show” takedown of the stars of CNBC, the business network that venerated our financial gods, plugged their stocks and hyped the bubble’s reckless delusions. (Just as it had in the dot-com bubble.) Stewart’s horrifying clip reel featured Jim Cramer reassuring viewers that Bear Stearns was “not in trouble” just six days before its March 2008 collapse; Charlie Gasparino lip-syncing A.I.G.’s claim that its subprime losses were “very manageable” in December 2007; and Larry Kudlow declaring last April that “the worst of this subprime business is over.” The coup de grâce was a CNBC interviewer fawning over the lordly Robert Allen Stanford. Stewart spoke for many when he concluded, “Between the two of them I can’t decide which one of those guys I’d rather see in jail.”

Led by Cramer and Kudlow, the CNBC carnival barkers are now, without any irony whatsoever, assailing the president as a radical saboteur of capitalism. It’s particularly rich to hear Cramer tar Obama (or anyone else) for “wealth destruction” when he followed up his bum steer to viewers on Bear Stearns with oleaginous on-camera salesmanship for Wachovia and its brilliant chief executive, a Cramer friend and former boss, just two weeks before it, too, collapsed. What should really terrify the White House is that Cramer last month gave a big thumbs-up to Timothy Geithner’s bank-rescue plan.

Finally, Rich brings it brilliantly together so as not to ruin our Sunday morning coffee:

In one way, though, the remaining vestiges of the past decade’s excesses, whether they live on in the shouted sophistry of CNBC or in the ashes of Stanford’s castle, are useful. Seen in the cold light of our long hangover, they remind us that it was the America of the bubble that was aberrant and perverse, creating a new normal that wasn’t normal at all.

The true American faith endures in “Our Town.” The key word in its title is the collective “our,” just as “united” is the resonant note hit by the new president when saying the full name of the country. The notion that Americans must all rise and fall together is the ideal we still yearn to reclaim, and that a majority voted for in November. But how we get there from this economic graveyard is a challenge rapidly rivaling the one that faced Wilder’s audience in that dark late winter of 1938.

Buy American

I do not understand the "free traders." They are legion and on all sides of the ideological spectrum. They say that protectionism is entirely bad, and that so-called "free" trade is the economic panacea for all nations.

It's pure bunk.

If you did not catch last night's 60 Minutes with Nucor Steel, a steel recycler in America whose workers' salaries are tied to production, then I will try to find You-Tube footage for you tomorrow.

Any American with any heart or sense of patriotism at all could not watch this segment and come away feeling like a "free trader." As the CEO says basically, "Free trade is not free. It's an academic luxury. If you want to study it at Harvard, go ahead. But it has no practical application in the real world."

I agree. I don't understand how a system that causes our nation to have unending trade deficits year after year after year after year can be such a fantastic phenomenon. I'm so glad that the "Buy American" provisions in the stimulus bill the president will sign in Denver on Tuesday contains this provision for bill-authorized acquisitions of steel.

You see I have studied free trade at Harvard. And I agree with steel-workers that it has no practical application in the real world as currently practiced. We have a right, more a patriotic duty, to advance our nation's economic interests where possible. To say otherwise is simply un-American.

The Surging Populist Rage

In this morning's New York Times, the invaluable social critic Frank Rich writes about a familiar theme on this blog, namely the catastrophic policies set forth by both parties in the 1999 repeal of the depression era reform bill "The Glass Steagall Act" and the even more disastrous foundation for our current crisis, "The Commodities Futures and Modernization Act of 2000." From Rich:

Key players in the Obama economic team beyond Geithner are also tied to Rubin or Citigroup or both, from Larry Summers, the administration’s top economic adviser, to Gary Gensler, the newly named nominee to run the Commodity Futures Trading Commission and a Treasury undersecretary in the Clinton administration. Back then, Summers and Gensler joined hands with Phil Gramm to ward off regulation of the derivative markets that have since brought the banking system to ruin. We must take it on faith that they have subsequently had judgment transplants.

Truly any American should be concerned that the usual suspects of the 1990's whose policies caused so much international turmoil at the time, and whose policies (along with Chairman Alan Greenspan) set the stage for the gathering storm of the past eight years that culminated in this crisis of our own making we face today. Chillingly, Rich suggests that these players may not be fully rehabilitated.

A welcome outlier to this club is Paul Volcker, the former Federal Reserve chairman chosen to direct Obama’s Economic Recovery Advisory Board. But Bloomberg reported last week that Summers is already freezing Volcker out of many of his deliberations on economic policy. This sounds like the arrogant Summers who was fired as president of Harvard, not the chastened new Summers advertised at the time of his appointment. A team of rivals is not his thing.

Americans have had enough of such arrogance, whether in the public or private sectors, whether Democrat or Republican.

My greatest concern is about "the arrogant" Larry Summers. And while I have to honor a confidentiality oath, I can say that Summers is one of the creepiest people I have ever met and listened to in person, when he was President of Harvard University. One gets the sense that this man's sense of self-supremacy is unlimited and untempered even by recent years' evidence of his past failures. He is brilliant, the youngest professor ever to be tenured at Harvard University, practically at the moment he received his PhD. But academic brilliance does not translate into policy brilliance, which is fraught with unintended consequences if implemented poorly. This man rose too far too fast and was handed policy reigns when he should have been relegated to an advisory position and nothing more.

In 1999, he succeeded Rubin as Secretary of the Treasury. A year later, he was, with Alan Greenspan and Rubin, a leading advocate of the derivatives deregulation. Also during his stint in the Clinton administration, Summers was successful in pushing for capital gains tax cuts.

Larry Summers also deserves credit for advocating Washington Consensus policies during the Asian Financial Crisis. He eschewed Keynesian policies in favor of fiscal austerity, forcing the Korean government to raise its interest rates and balance its budget in the midst of a recession, policies criticized by liberal economists such as Paul Krugman and Joseph Stiglitz.[2] According to the book The Chastening, by Paul Blustein, during this crisis, Summers, along with Paul Wolfowitz, pushed for regime change in Indonesia. On May 4, 1998, when the Indonesian government began to raise fuel prices as part of an IMF program in exchange for hard currency, students started to protest, and in the ensuing riots, hundreds burned to death as blazes swept shopping centers in Jakarta.[2]

During the California energy crisis of 2000, then-Treasury Secretary Summers teamed with Alan Greenspan and Enron executive Kenneth Lay to lecture California Governor Gray Davis on the causes of the crisis, explaining that the problem was excessive government regulation.[4] Under the advice of Kenneth Lay, Summers urged Davis to relax California's environmental standards in order to reassure the markets. [5] It was later conclusively revealed that Enron traders were the cause of the California electricity crisis.

Here's a taste of the 1990's shenanigans by Summers and his ilk, and now ask yourself whether you want these "thinkers" in charge of turning around the American economic crisis we face.

Many critics of trade liberalization... see the Washington Consensus as a way to open the labor market of underdeveloped economies to exploitation by companies from more developed economies. The prescribed reductions in tariffs and other trade barriers allow the free movement of goods across borders according to market forces, but labor is not permitted to move freely due to the requirements of a visa or a work permit. This creates an economic climate where goods are manufactured using cheap labor in underdeveloped economies and then exported to rich First World economies for sale at what the critics argue are huge markups, with the balance of the markup said to accrue to large Multinational corporations. The criticism is that workers in the Third World economy nevertheless remain poor, as any pay raises they may have received over what they made before trade liberalization are said to be offset by inflation, whereas workers in the First World country become unemployed, while the wealthy owners of the multinational grow even more wealthy.

[C]ritics further claim that First World countries impose what the critics describe as the consensus's neoliberal policies on economically vulnerable countries through organizations such as the World Bank and the International Monetary Fund and by political pressure and bribery. They argue that the Washington Consensus has not, in fact, led to any great economic boom in Latin America, but rather to severe economic crises and the accumulation of crippling external debts that render the target country beholden to the First World.

Bear in mind that all the globalization of that decade still led to unending massive trade deficits that helped mushroom the national debt more in the last eight years than in all prior American history combined. Now our foreign debt is held by Japan and China, and our economy is subject to enormous economic and political threats by our adversaries. To me, that is not good policy, Professor Summers.

I had the good fortune to hear a small-room lecture by a past-president of a small Latin American nation, a man who experienced the ravages of the IMF first-hand and was ousted from his position because of his own country's crisis. This stuff is not theory.

Further alarming is Rich's claim that Paul Volcker, Alan Greenspan's predecessor whose leadership of the Fed laid the policy groundwork to save America from its last economic crisis in the late 70's to early 80's, is being "shut out" by Larry Summers today. Here's Volcker's previous work:

Paul Volcker, a Democrat[4], was appointed Chairman of the Federal Reserve in August 1979 by President Jimmy Carter and reappointed in 1983 by President Ronald Reagan.[5]

Volcker's Fed is widely credited with ending the United States' stagflation crisis of the 1970s. Inflation, which peaked at 13.5% in 1981, was successfully lowered to 3.2% by 1983.

While our current crisis is different in nature to be sure, it is no less urgent and its eventual solutions will be no less controversial than the policies Volcker implemented in the early 80's to arrest the inflationary spiral of that time.

The New "1/20" Rule
Here's where the new "populist rage" enters, as millions of Americans find themselves very recently out of work in the last three months alone. Again from Rich:

But we do know that the system has been fixed for too long. The gaping income inequality of the past decade — the top 1 percent of America’s earners received more than 20 percent of the total national income — has not been seen since the run-up to the Great Depression.

Yes, it's hard to believe, harder to fathom, that only 1% of the American population received more than 20% of the entire national income. When candidate Barack Obama said inartfully that he wanted to "spread the wealth," he wasn't talking about socialism. He was talking about this issue, about the need to rebuild the middle class, which brought this country to the peak of its economic and global power in the 20th century, so that more people can earn a better share of the nation's "pie," and so we can make it as big as we possibly can, together. That's not welfare. It's not socialism. It's how to build a healthy, diversified, and strong national democratic capitalist economy.

The strongest punch and thematic statement from Mr. Rich comes in his opening paragraphs this morning. And if the president, the senate, and the congress do not come to terms with this warning soon, it won't just be "the president's best-laid plans" that get "maimed."

SOMEDAY historians may look back at Tom Daschle’s flameout as a minor one-car (and chauffeur) accident. But that will depend on whether or not it’s followed by a multi-vehicle pileup that still could come. Even as President Obama refreshingly took responsibility for having “screwed up,” it’s not clear that he fully understands the huge forces that hit his young administration last week.

The tsunami of populist rage coursing through America is bigger than Daschle’s overdue tax bill, bigger than John Thain’s trash can, bigger than any bailed-out C.E.O.’s bonus. It’s even bigger than the Obama phenomenon itself. It could maim the president’s best-laid plans and what remains of our economy if he doesn’t get in front of the mounting public anger.

Entire Major Cities & States Unemployed

It's hard to get our minds around certain statistics like today's announcement that 598,000 (let's just say 600,000 can we?) jobs were lost just last month. This shows definitively that the horrific job loss trend is indeed accelerating. (Every American should be pressuring their congress-critters to pass a stimulus bill asap - it's already past due.)

To put this in perspective, it is as if the following entire major cities were put out of work just last month:

U.S. Cities with Populations around 600,000:

• Boston
• El Paso
• Milwaukee
• Seattle
• Nashville
• Denver
• Washington, D.C.

The following cities have far fewer than 600,000 people. Last month's job losses alone would have eliminated more than one job for every person in the following cities:

• Las Vegas
• Louisville
• Portland, OR
• Atlanta
• Sacramento
• Kansas City
• Cleveland
• Miami
• Omaha
• Oakland
• Minneapolis
• Raleigh
• Arlington, TX
• St. Louis
• Tampa
• Cincinnati
• Pittsburgh
• Newark
• Plano, TX
• New Orleans
• Orlando

Obviously this is not an exhaustive list, and remember that city populations include children, the retired, and others not in the workforce.

There have been over 2 million jobs lost in the last three months.

There are only four U.S. cities with populations greater than 2 million:

• Houston (2.2 M)
• Chicago (2.8 M)
• Los Angeles (3.8 M)
• New York (8.2 M)

There are only fifteen U.S. states with populations over 2 million.

And there are 26 -- yes, twenty six -- U.S. states with populations less than 600,000 - the number of jobs lost in the U.S. just last month.

We are not having an academic or ideological discussion in this country about the imminent need for stimulus.

Storm Infrastructure in America

Rachel Maddow, the radio and evening television pundit, is a rare breed. A self-avowed liberal, graduate of Stanford, Rhodes Scholar, and PhD, Dr. Maddow is a 35-year-old model of a, if not "the", future of liberal politics. I guess.

Aside from that however, Maddow proves on her new hit show (which often beats Larry King in the time slot) that political orientation does not need to immunize anyone or any issue. (Her smackdown interview of Rod Blagojevich will go down in history. Anyone looking for some Blogojevich schadenfreude will enjoy her multi-part interview in which he seems to admit to his crimes in several trip-ups.)

More importantly however, were Maddow's opening remarks about the sad statement of the condition of American infrastructure revealed -- yet again -- by a normal winter storm putting over 1 million Americans in the dark, in the dead of winter, with no power.

Her most powerful remark is how we are accustomed to hearing about the unimaginable terrorist "force multiplier" threats that could target our nation's energy grid, and yet time and again, including what we experienced ourselves right here in Houston, the nation's energy grid shows just how frail a condition it is in and how it cannot stand up to even run-of-the-mill seasonal storms.

This commentary leads into a revealing and frustrating discussion with US Oregon Representative Pete DeFazio about his efforts to get the new stimulus bill to include more job-providing, long-term infrastructure projects that Americans overwhelmingly support.

On this issue there can be no legitimate debate about the broad outlines:

1. Economic stimulation policy depends on increasing demand. Any attempt to stimulate supply by providing tax breaks for producers and investors inevitably fails because if the demand doesn't exist, you can, as we have with banks, provide all the money you want, but that money will just sit on the sidelines until there are buyers to produce for. Scared money doesn't spend.

2. Economic stimulus to increase demand must increase both spending power and actual spending in the private markets. It's no use to give money to those who in fear will put the money under a mattress. Therefore targeting money toward those who need it most, who have no choice but to spend it, is most effective. Therefore stimulative policy must focus on low-income workers and families who will spend. In addition, without jobs, those who must spend cannot. Therefore the other prong of stimulative spending must focus on jobs: preventing job loss and creating new jobs, preferably private-sector jobs that can be sustained in a recovery.

3. Simple tax rebates to those who will not spend and tax cuts to those with incomes who pay the most taxes (and by definition do not need to spend immediately) are not stimulative in this kind of environment. Most economists suggest long-term policy should include a fixed tax policy and stimulative/arresting policies from the Fed. Tax policy, except adjusting to route money immediately into the economy to those who will immediately spend that money (such as through payroll tax credits, which take effect immediately), is not effective for immediate stimulus.

4. The best investments of government spending must provide for future returns on that investment enough to cover future debt repayments and instill confidence in global investors of American national debt. The entire stimulus bill will be borrowed money. In order to accomplish that confidence, foreign investors need to see the US increasing its production capacity. Tax cuts do not do that; that approach is what ballooned - along with unrestrained spending - the national debt in the past 8 years past $11 trillion in an economy that has been producing $13 trillion annually. However, infrastructure investments do work.

The most famous infrastructure success story came from the Eisenhower administration in the $500 billion National Highway bill that established the Interstate highway system in every state. The modern parallel, aside from repair and maintenance of our roads, would be creating new high speed rails ("bullet trains" that don't exist yet in this country) but will reduce demand of foreign fossil fuels and provide new much more reliable and convenient regional travel (think uber-convenient substitute to Southwest Airlines).

Nonetheless, the idea that Houston's evacuation efforts involve many many hours of gridlock on highways, and the midwest to northeast loses power in the middle of a standard winter storm for over a million people, and Houston and other gulf coast cities can lose power for weeks and even months in the wake of a mid-tier hurricane -- it's just unacceptable in America. It's incompatible with the American way of life, and it presents an enormous security risk.

Enjoy Maddow's opening segment (and then watch the Blagojevich segments in the link above for a good laugh as he crashes and burns under Maddow's withering, crouching interview worthy of any world-class legal team).

Suburban Blight

This article is terribly, horribly interesting. It is about certain community leaders' efforts to revitalize a corridor of north Houston that used to be the de facto suburbs just 30 years ago. The area is the FM 1960 highway corridor (really it's a 5-lane cement thoroughfare) from I-45 westward to about Steubner Airline. It used to feature a primary medical district for the north Houston region, family-oriented retail strips, major retail outlets, entertainment, restaurants, and mid-rise office buildings.

But in the past 30 years as the northern boundary of the city of Houston reached FM 1960, and as the suburbs sprawled ever northward into the next county and past one of the nation's earliest and most successful master-planned communities, The Woodlands, the FM 1960 corridor - along its many large adjacent subdivisions, many once affluent - fell into total disrepair.

Now, driving from I-45 westward on FM 1960 to Spring Steubner at night reminds me of driving through Times Square in its worst years. The once neighborly strip centers have bars on the windows, the nice restaurants now long gone, obscenely bright flashing LED lights untolerated in any dignified residential area, pawn shops every other block along with other "low rent" small businesses, and the office buildings that once spared nearby residents from long commutes have fallen into office-slum status.

So now a group wants to create a special taxing entity to tax commercial businesses in the corridor to make "improvements." And here is where suburban politics intersects with traditionally "urban" concerns: the Republican state representatives are sitting on their hands, reluctant to create "additional layers of government", "new taxes", or to do anything local businesses -- even low rent ones -- might find objectionable.

Call it suburban blight. And we'll be seeing a whole lot more of this.

From the article:

That management district would provide a method to raise money, through an assessment on commercial property, to carry out improvement projects in the 1960 area. The annual assessment charged to commercial property owners would range between 9-15-cents-per-$100-property valuation.

In the past two years, Renaissance 1960 has been working on projects aimed at spurring revitalization, including the creation of an Urban Design plan for the community, group “bandit sign” removal efforts and community clean-up days, but work on larger projects would require a larger, steady source of income, management district supporters say. ...Many see signs of deterioration in vacant and abandoned buildings, graffiti, signage, heavy traffic and the perception that crime is on the increase.

Well this is certainly new territory for suburban Republican representatives, such as state Reps. Patricia Harless and Debbie Riddle.

Harless said Renaissance 1960 and Houston Northwest Chamber of Commerce members worked the past two years to communicate the management district’s mission to property and business owners, and they sought letters of support from those constituents.

In the end, 39 businesses representing about 10 percent of the property value in the proposed district’s boundaries wrote letters of support. That is a substantial number, Harless said, but the questions remain about the overall level of support, and the district’s ability to raise enough money to make an impact on the area even if the bill is passed.

“So that leaves us at how do you create a new tax and new layer of government when several major property owners do not support it?” Harless said.

Personally, I think all the smart "major property owners" bailed on this area years ago. Can anything be done now to lure those quality owners and developers back?

Hmmm... this is sounding more and more like a particularly well-known phenomenon... called urban blight.

Riddle said the management district option is not generating a positive response among commercial property owners who would pay the annual assessment. She said there is a misconception in the community that a management district would have the powers granted to a homeowners’ association, but that is not the case.

Because of those limited powers, she said the vast majority of problems on FM 1960 could not be addressed by management district, and there are other ways the community could address those issues with that without creating a “taxing authority.”

“We are all in agreement that doing nothing is not an option,” Riddle said.

Well now that's an understatement, Debbie. Welcome to urban, or post-suburban, politics.

And the Losers Are.....

This morning brings the frightening news that the U.S. Senate defeated the auto "rescue" bill passed handily by the House and negotiated with the White House. Make no mistake, this was pure political posturing on multiple levels.

And let's be clear also that Washington's politicians are gambling with the jobs of an estimated three million American middle class JOBS. And we've already discussed that there will be no economic turn-around without a turn-around in J-O-B-S. So what gives?

First, the pure politicking. Senate Republicans are taking credit for defeating the bill, and Minority Leader Mitch McConnell was quoted this morning on The Today Show blaming the unions' refusal to lower their wages by about $4/hr (from $27 to $23) immediately as a condition for the loan. Let's take a moment to appreciate how hypocritical and destructive this posturing really is.

American auto unions, despite their politics, are all about American working middle-class jobs. Period. And that is all you need to know in this current economic crisis. That means those jobs must be protected. Period. Period. And that doesn't include the other 2.5 million American jobs threatened by Congress's abject failure to lead.

Seriously, is congress going to destroy, or even threaten right now, 3 million jobs over $4/hour after the obsceneties of greed being subsidized by congress already? (Think AIG.) Really?

Furthermore, surely I'm not the only one who sees the hypocrisy of "small government" Republicans in the Senate trying to micro-manage private enterprises whose biggest political sin was to get "too big to fail," but who have been aided and abetted by congress for decades. This is crass partisan opportunism, and I don't care who does it, it is unAmerican and it is wrong, and it is a threat to us all.

Now is not the time to put the American auto manufacturers under a political microscope to try and diagnose and force change that has not occurred in the last 30 years. Now we are in an overall economic crisis, and we need every job we can keep. It is far more efficient to keep jobs than to create new ones. We are shooting ourselves in the thigh if we let any industry in America fail right now. Once the crisis is under control, then I have no problems with Congress revisiting its regulatory posture in any industry it chooses.

Should unions be scrutinized? Yes. Are American unions part of the car companies' problems? Probably. But they're not all of it. And to think that forcing a drastic wage cut -- in this economic crisis -- is somehow smart politics or smart business, without forcing a comprehensive change plan that is impossible to create in any reasonable amount of time in this crisis (GM says it may be out of cash by the end of the month), it is just the height of political stupidity or opportunism or both. And it disgusts me, not as a partisan, but as an American.

Without a turnaround in jobs, there will be no turnaround in the economy, and that includes housing.

The ironic part of this is that the failure of the bill may put political pressure for the president to use TARP funds (the $750 billion authorized in October with oversight required but still not yet enacted) for the auto companies. With AIG executives fighting for multi-million dollar "retention" incentives (aka "bonuses") all with taxpayer money, I don't see the problem giving the car companies $15 billion of the $750 billion for a bridge loan to keep them in business and 3 million Americans at work. And ironically, a Republican president may use those funds to cover the failure of congress to respond, over the objections of Republican senators, which will result in virtually no restrictions at all on the auto-makers in exchange for the government funds.

And frankly, that's the correct way to go..... if Wall St needed $750 billion with no questions asked and no restrictions, as the Treasury argued in September, then why in the world does it not make sense for the auto-makers to need $15 billion to maintain America's manufacturing base that underpins 3 million American jobs? Bottom line: the government can and should put the auto-makers under a microscope when the economy has stabilized again. It is the failure of congress that they haven't cared about American manufacturing for 30 years now. And now is not the time to put 3 million American jobs in that political crucible.

To even posture that it is that time is obscene, unAmerican, crass, opportunistic, partisan, and downright spiteful toward the dwindling and suffering American middle class.

If the auto-makers fail from political malpractice and economic treason, nobody should be surprised when Wall Street is flooded with 3 million unemployed Americans bearing pitchforks and torches.

What I Want to Know Is...

Here's what I want to know: Why in the world is congress giving American car makers such a hard time over a $35 billion loan, when the government has already allocated about $1 trillion for financial companies including American banks?

For instance, about $20 billion last week was allocated to Citigroup to prevent the failure of that massive bank. There was no public debate, no congressional approval... just an announcement. And make no mistake, Wall Street rallied, and it was the right thing for the government to do for the sake of America, and not for Citigroup's executives (jail them for all I care).

So why are the American car companies being publicly flogged for requesting a combined $35 billion -- less than 5% of the federal bailout law -- to get through this historical economic crisis?

Well, here's part of the answer, I think. Why does America only have 3 car companies to begin with, and all of them headquartered in the same failed midwestern city of Detroit? Isn't that odd for these modern times? There are no auto headquarters in California, or Texas, or Ohio, or Missouri? I could make a strong case for each.

If the Japanese and Koreans are going to force our industry out of business, and if we're going to let them do so, and largely with manufacturing plants even on our own soil, then why in the world can't America produce American competitors to beat the Japanese and Koreans? Maybe there's not enough competition within America and between American firms. Why would that be?

The thrust of the problem, I think, is that America has become hostile, even prejudiced, against American manufacturing. That's why it's held on in the city of Detroit, no innovation, no expansion, just old... thinking... and old... organizations.

Our primary concern as Americans right now needs to be American jobs. Without confidence in our jobs, America can never recover from this economic morass. Frankly, I don't know anyone right now who does not fear their job security at some level or another.

A rule of thumb is that a tenth of a percent of the unemployment rate equals about 100,000 jobs. Analysts suggest that a failure of "Detroit" could lead to a total loss of 2 million American jobs. That means unemployment would skyrocket by 2 entire points -- to maybe 8% (bear in mind that new calculation methods of unemployment make 8% equal to maybe twice that several decades ago).

So why is there a debate? I think Americans are tired of being ashamed of their auto industry. The truth is that Detroit has been making good cars in recent years, actually. Most people blame the unions. However if the unions did not exist at all, then Detroit would have to face the fact that their "failures" are really due to executive failures and a collective lack of imagination in design and understanding of market demand more than anything. To wit: GM and Ford decided just a couple of years ago that their best strategy was to create the big gas guzzling line of bland SUV's that had been so profitable for them. (There's not much room for a profit margin in a small, entry-level car.) Well, that was just the wrong decision and terribly short-sighted.

Global players such as Japanese and Korean firms have long marketed to European and Asian markets, of course, where highly dense metro areas require small, small cars. Even Mercedes produces the "Smart" car that is exotic in these parts but common on the streets of any major European city.

Maybe we need more than just 3 American auto companies. Maybe we need more competition. Maybe a California start-up will take a chunk of the market with advanced hybrid and electric technologies. Whatever happens, now is a time not for destroying our auto industry, but for paving the way for serious American innovation. History shows that when America innovates, the world has no choice but to follow.

I think it's time that America realizes that it's just as serious and worthy to have leading manufacturing sectors as it is to have leading technology and professional service sectors.

And congress should stop playing games with millions of jobs that underpin America's challenged middle class.

The Moderate Fringe

Thanks to Brad DeLong for leading me to this eloquent piece from Paul Musgrave about the progressive agenda and the plight of the rural U.S.

The tragedy of rural American life has gone mainly unmentioned, even as some of us have waxed rhapsodic over, say, the exportation of McDonald's to Asia. Why are we more concerned with the loss of "authentic" cultures in Thailand or Indonesia than with those of rural America?

Having interned in a declining rural area of western Massachusetts in grad school, I've become keenly attuned to the haunting silence of drowning rural cities. Paul hits the nail on the head.