Other people’s mistakes

It has been said that fools never learn and wise men learn from their mistakes. But geniuses should learn from other people’s mistakes.

The great state of California seems on the verge of becoming the late great state of California as it struggles to survive the current recession. Because of a few quirks in their state laws, combined with the fact that the legislature is required to produce a balanced state budget, the financial condition of the state is dire.

Some folks living outside of California who find it amusing, even righteous, to look
down upon the state and all its components (especially Hollywood and its Democrats) may be tempted to express a certain amount of glee at how the mighty seems to have fallen, apparently forgetting that it was California and specifically Hollywood that gave us the late, great Ronald Reagan.

But “left-coast” critics around the country, as they decide how to address their own fiscal crises, would do well to try to understand how that state got into this particular fix, for there is much to be learned from it by others.

Back in the day, as we love to say, California was thriving. But in 1978, “thriving” wasn’t enough for some — nor, for that matter, was their system of representative government, apparently, for beginning with the now infamous Proposition 13, they began to opt for anarchy.

California is one of the states that allows for new laws and even constitutional amendments to be accomplished through referendum — that is, a popular vote that effectively bypasses the legislature. Inquiring minds might want to know why anyone should bother with electing a government at all.

So the citizens passed a constitutional amendment, wildly promoted by anti-tax folks, limiting property taxes to 1% of the assessed value of a home and limiting assessment increases to 2% per year until the property changes hands.

By contrast, here in Waxahachie the property tax (including all local taxes) is about 2.35%. Given that just about everything is more expensive in California, the difference is striking.

Of course, here in Texas we have the homestead exemption, which includes a 10% cap on the amount an appraisal can be increased from year to year, a bit more than 2%.

Not satisfied with reducing future property tax revenues, the greedy folks who brought this about made it retroactive, sending out millions of dollars in refund checks the first year; all the homeowner had to do was ask.

Howard Jarvis, half of the Jarvis-Gann team who led the effort to put Prop 13 on the ballot, is quoted as having characterized all taxes as “felony grand theft.” Texas TEA-party folks would be proud.

Added to the existing law requiring a two-thirds vote for any tax increase anywhere in the state, and another prohibiting local agencies from setting any new tax, the collateral damage was huge.

Very soon after the amendment went into effect, the quality of life in California began to change dramatically. Public libraries began closing down to half-days, “non-essential” school personnel (like counselors) were laid off, and according to Wikipedia, citing a report from the Public Policy Institute of California, “Fire departments were gutted because of a drastic loss of funds. … Cities also cut water, gas and electricity expenses.”

According to a 2003 report in the Rand Review, “Widely regarded as one of the best systems of education in the country as recently as 30 years ago, the California public school system has since become, according to most measures, one of the worst.”

Does this sound like something we want in Texas?

One more thought:

The current web site of the Howard Jarvis Taxpayers Association boasts that Proposition 13 has "saved California taxpayers" over $528 billion. As of June 2009, Reuters reported, California’s present struggle is to overcome a $24 billion budget deficit.

You do the math.

One lump, or two?

There’s no accounting for people’s taste in matters of tea, or parties, or especially “tea parties.”

Last week saw the astounding uprising of dozens of people all across our country in a movement that could only be called, truthfully, “astroturf.” That is the term generally applied to activities pretending to be grass-roots movements that are not, really.

In this case, the leadership of passionate folks like Dick Armey, Newt Gingrich and the talking heads on Fox News was hard to ignore. Towards the end, Governor Perry and even ol’ Joe Barton inserted themselves into the act.

In search of a hook upon which to hang their objections to all things Obama, and apparently lacking the imagination to come up with something new, those good folks had decided on tea-and-taxes.

Back in 1773 tea-drinkers in the colonies, specifically in Boston, were really upset to learn that the British Parliament had decided to levy an import tax on tea shipped to the colonies. They were outraged, in fact, and told the captains of the three ships that were waiting in Boston Harbor to take their doggone cargo back to England. Wasn’t fair, they said, to have to pay taxes they had no hand in levying.

It was taxation without representation, they said. And that was wrong.

The ships didn’t budge, and things heated up to the point where angry colonists stormed the docks and dumped all that tea into the harbor.

Reports have it that Samuel Adams was a leader of the movement.

According to the account in Wikipedia,

The Boston Tea Party was a key event in the growth of the American Revolution. Parliament responded in 1774 with the Coercive Acts, which, among other provisions, closed Boston's commerce until the British East India Company had been repaid for the destroyed tea. Colonists in turn responded to the Coercive Acts with additional acts of protest, and by convening the First Continental Congress, which petitioned for repeal of the acts and coordinated colonial resistance to them. The crisis escalated, and the American Revolutionary War began near Boston in 1775.

Inquiring minds want to know: What’s the connection?

Last week’s events had nothing to do with tea, Americans are no longer subject to taxes levied by King George, and Samuel Adams is now associated with a more interesting beverage; Congressional representatives were everywhere to be seen at the “tea parties,” so you could hardly claim lack of representation was the issue.

The organizers managed to turn out clumps of participants all around the country, some wearing teabags, some tossing them into waterways (littering!), many carrying or wearing signs objecting to high taxes, more taxes, and taxes in general.

Given that it was April 15th, the subject had to be pretty fresh on their minds, though it looked like they were having a pretty good time anyway.

Yet the reality is that most of the folks who were demonstrating, from the looks of it, are actually getting a tax cut because of Obama; of course, some of the loudest, like Armey, Perry, Barton, and the stars of Fox News, are probably in that select group of people with income over $250,000 who will see their taxes go up (would that be why they are so passionately involved?).

Lost in the noise, interestingly, is that in the latter case, the projected increase will still keep their rates below what they paid under Clinton. In some cases tax rates will be lower than they were under Reagan. Were they complaining then? Remind me.

A reporter went to one of the rallies and asked around to see how they felt about the fact that their taxes were going to be reduced. Some demonstrators said that didn’t count, because they were sure their taxes were going to go up later.

Well, yes, some people always complain about taxes. They just don’t like them. For that matter, neither do I, but I am very fond of having a government, a military, first responders, national parks and public schools. Just for starters.

Anyway, I don’t think it was really about taxes. I suspect it was more about the economy, and we Americans can be an impatient lot, as is often noted.

Even so, is it reasonable to expect that Obama, after three whole months in office, should have fixed it by now?

Originally published in the Waxahachie Daily Light, April 20, 2009.

What's wrong with earmarks?

According to the politicians, the American kitchen table is the center of all family decision making, the place where matters of the economy – mortgage payments, medical bills, college tuition, the price of gasoline, and of course grocery and utility bills – are laid out to be dealt with by families feeling the stress.

It’s always stress, of course; have you ever heard about a family sitting around the kitchen table discussing how to spend an inheritance or lotto winnings?

No, it’s always something worrisome. And right now just about everything is worrisome.

While Mom and Dad and the kids are gathered ‘round the kitchen table, lingering over a delicious beef stew to put off as long as possible the after-supper discussion about household bills and how to pay them, we have banks failing, homes going into foreclosure, small businesses closing, the auto industry in a shambles, and folks losing their jobs; there’s also the matter of a couple of unfinished wars, a militant Iran, a pugnacious Russia, and near anarchy south of our border.

So what are the Republicans worried about most? Earmarks. “Pork.”

Terrible, wicked, close to sinful and very, very wrong. At least that’s what they seem to have become over the years; they’ve become almost as bad as taxes, if you listen to Republican rhetoric.

It’s time the American people sit up and think about this.

Earmarks are said to amount to less than two percent of the present budget being considered in Washington, but some members of Congress want to do away with them altogether. Most of those worthies have earmarks of their own in the bill, but those should be kept, of course.

What, exactly, is an earmark? According to the OMB,

At the broadest level, [it] is any additional funding provided by the Congress … for activities/projects/programs not requested by the Administration.

In other words, it gives any member of Congress the opportunity to amend the Administration’s budget to add funding for a specific purpose in his own district; after all, we elect our representatives to work for our State or congressional district, and that’s what he’s doing. Bringing home the bacon. “Pork.”

It’s called democracy, if you ask me. Or do you prefer that the budget submitted by the Administration and all its departments be the be-all and end-all, stop right there?

Earmarks got a bad rap in the past because of outrageous stuff like the “bridge to nowhere,” and earmarks slipped in at the last minute to escape review. And there’s some silly stuff in the current budget. But those things are fixable; getting rid of all of them is like throwing out the baby with the bathwater. Just doesn’t make sense.

If our government is going to assist with, say, the cost of rebuilding a falling-down school in South Carolina or repairing a bridge in Minnesota or rebuilding a portion of I-35, adding it to the current budget will make it happen a lot faster than the two years or so it could take for a bill to work its way through Congress all by itself.

Let’s go back to that kitchen table.

After the dishes are cleared the bills are laid out, and with the help of a small calculator it’s determined that they are going to have to prioritize. There’s not as much to work with since the economy started tanking. So they add up the necessities – mortgage, light bill, gasoline, health insurance, dog food, food.

They can save a little if Dad brown-bags his lunch most days, and new sneakers for the kids can wait another month (if they would just stop growing!). Mom will give up her gym membership for now.

But the car repair can’t wait, so it’s added in. (Earmark!) So are the textbook and school supply costs that are due. (Earmark!) It’s time for the dog’s trip to the vet for annual shots. (Earmark!)

The evening goes on, and money is earmarked for Buddy’s dental work, for Mom’s mammogram, for Sissy’s Girl Scout uniform. Non-essentials, you might think, but they are determined to find the money because these are important to the family. So they earmark part of the family budget for each of these expenses.

They will end up dipping into their savings to get by for now, but they are betting on the economy turning around eventually so they’ll be able to catch up. Meantime, they will get by, with the help of a little earmarking.

When terror strikes at home

It’s all over the news, of course. Every day more and more folks are affected by it, and when that happens even folks who may not be threatened by it begin to be fearful, wondering if it could happen to them and how they can fight back if it does.

I’m talking about the sorry state of the economy, and specifically about what is happening to home mortgages all around the country.

While the good news is that here in Texas things are a bit more stable, that doesn’t mean that foreclosures aren’t happening, and right in our own Ellis county communities.

It occurred to me that there may be people living in a high state of anxiety who can use some information that might turn out to be useful, and I want to share it.

Now, I’m not a lawyer and I don’t play one on TV, and I’m not a mortgage lender, ditto, but as a real estate broker I can offer some anecdotal evidence, gained through fairly recent experience, that there are things a homeowner can do to make it a little easier to get through these hard times and maybe even protect from foreclosure if it comes to that.

Beginning with the best-case scenario, let’s talk about the fact that mortgage interest rates are really low right now.

If everything is just fine with your credit record and your income, there is this thing called re-financing. If you can lower your mortgage interest rate by 2% or so, it may be well worth your effort to re-finance to a lower fixed rate; this could save you a few hundred dollars a month right there. Depending, of course, on the amount you still owe on your home.

Re-financing has costs — these vary wildly with the lender, but generally include some fees to the lender, the cost of an appraisal, etc. But since most of those costs are just rolled into the new mortgage you won’t feel a thing — after all, if you add a couple thousand dollars to your 30-year loan, that’s really small change over 30 years.

And consider changing a 15-year note to 30 years – if you are just dying to pay off your loan sooner than that, well, you can always pay extra along the way, but your monthly obligation will be less when spread over 30 years. That’s a little more protection against what may be ahead during these hard times.

Talk to the lender of your choice and get a good faith estimate to learn exactly how much you can benefit, then decide your best course of action.

A scarier scenario: You’ve been working hard, playing by the rules, and suddenly hit a bump in the road — been laid off, suffered a costly medical or other family emergency, for example — and just can’t make the mortgage one month but see your way clear to recovery. If that happens to you, then don’t just panic, take action. Contact your lender and see if you can defer that month’s payment, for example. Most lenders will try to work something out, if not from kindness of heart but because they really, really don’t want to foreclose.

Foreclosure is very costly to lenders. They have to hire lawyers and appraisers and pay staff to do paperwork, then try to find a buyer for the property and maintain it in the meantime; they know that in the long run they will lose money, one way or the other. That’s why your lender is as anxious to keep you in your home as you are.

In the third-case scenario — when the job is gone forever and there’s no way of continuing your monthly mortgage payment but still have some income, you should explore with your lender the possibility of a work-out to lengthen the term of your loan and reduce your monthly payment. The Obama administration’s finance team is working on finding a way to require lenders to engage on this idea. But until that’s set up, you are well advised to try to make it happen on your own. You may have to hire a lawyer, but the cost of legal help may be worth it.

My point is, don’t give up until you’ve tried everything.

Finally, when it’s clear you will not be able to keep your home, there is one more thing you can do. It’s called a “short sale,” or selling the house for less than you need to pay off the mortgage.

Why should you care? After all, if you are going to lose your home, why not just let the bank have it?

The reason is that a foreclosure on your credit record is worse, believe it or not, than a bankruptcy.

Sure, declaring bankruptcy would stop the foreclosure, but unless you can make the payments when all is said and done, what have you gained?

A “short sale,” where the lender agrees to accept less than is owed and — this is important — then call it paid in full, is a last resort, but a resort worth trying.

If you’ve done all you can (see above) and it’s clear you are going to have to give up your home, for heaven’s sake start the process as soon as possible.

Hire yourself a real estate agent who knows about short sale marketing, who will aggressively market your home and will go all-out to get a contract in place within the limited time available. You should determine even before you get a foreclosure notice that this will be your course of action, to give yourself as much time as possible.

Three years ago I wouldn’t have known all this stuff, but the sorry news is that this is where we are at the moment and I've racked up personal experience. Too many of our friends are finding themselves overwhelmed by today’s economy.

People facing any of the circumstances I’ve described are likely to become depressed and angry, and justifiably so. But you need all the energy you can muster to be proactive, for you might just find a way forward.

If you or a friend is going through this terror, remember that you are not alone. And though it’s little consolation when you’re hurting, realize that lots of other folks are in the same boat. For what it’s worth, I believe that better days are ahead.

Years ago a friend told me, “The man who falls down gets up faster than the man who lies down.”

So, if any of this resonates with you, don’t take it lying down — DO something!

Priorities

President-elect Barack Obama spoke to the American people last week about the urgency of passing an economic recovery plan. He explained in some detail what can be done and should be done and what will likely be the outcome if it’s not done.

Not surprisingly, there were objections by one or another member of Congress to this or that particular of his plan – too much, too little, too late, too soon -- because that’s how politics works. Still, I have a hard time understanding why, when Barack Obama won the election so handily, when the populace clearly wants dramatic measures taken in order to right the ship of state, we have members of Congress fussing about this tax cut or that bailout instead of getting down to business.

The feeling I had after listening to Obama’s speech about his plan was that if ever there was a time for Americans to write their congressmen it is now. I sent off a letter to Barton, Cornyn and Hutchison as follows:

I urge you to pass President-Elect Barack Obama's American Recovery and Reinvestment Plan immediately. Do not allow the bill to be weakened by delaying tactics on either side of the aisle. We need a big and bold plan of strategic, substantial and sustained public investment to create jobs now, generate clean energy, modernize our infrastructure and expand access to health care and education. Our economy is hemorrhaging and urgent action is needed. Thank you.

And, you know what? It’s not just about our economy. It’s about world peace and about our national security.

The world outside our borders is blowing up, and we need to get this matter of our economy under control so that soon-to-be President Obama can re-direct his attention to places like Israel and Gaza, Pakistan, India, Iraq and Iran, because he is our best hope, if there is hope, and we need him now.

* * *

Over the course of the last several years, some 8,000 rockets have been fired into Israel from Gaza, destroying homes, injuring and killing innocent people and driving families to bomb-shelter living. The world has taken little notice. A “cease fire” between Israel and Hamas, the Islamic militants who took over Gaza by force in a bloody coup against the Palestinian Authority a while back, ended just before Christmas. Hamas fired some 80 rockets into Israel that day and continued the bombardment daily thereafter -- and Israeli parents and children returned to the bomb-shelters.

When Israel finally said “Enough!” and fought back, Hamas deliberately drew deadly fire on its fellow citizens, with predictable results. Now there was outrage in the international community.

There’s a problem here, I think. And someone needs to deal with it. The United States is the one force that has any hope of mediating a solution in this dreadfully complex situation, but we can’t do it while we’re fighting our own economic demons.

***

We are in a situation the likes of which none of us has ever experienced. We don’t have a model for resolving the mixture of economic and international crises in which we find ourselves in this year 2009, so the best option is to trust those whom, after all, we have elected.

And tell those members of Congress to get on board.

What kind of man would break his word?

Just imagine yourself back a few years, back when a job wasn’t that hard to find and you could usually have a choice of job offers. Imagine that you chose to work for a local company that offered good benefits — health coverage, sick pay, paid holidaysand vacation time, plus a retirement plan.

Way back in the day, of course, most employers offered these things. But let’s say you chose a job that appealed to you because of the benefits.

So you started work, settled in, got married, bought a house, started raising kids, became a contributing member of your community.

In that way-back day, a job usually lasted until retirement age if you wanted it to, and so you worked hard, saved a little money, and when the time came you retired, ready to do a little traveling, visit the grandkids, all that good stuff.

But what if you then discovered that your old company now has financial troubles and needs a loan to make it through the next few months, but the bank won’t do it unless you give back a big chunk of your hard-earned benefits?

The way I see it, those benefits were promised as part of your compensation; you accepted that job based in part on those promises and your wages and benefits were earned over many years of hard work. To demand years later that you give any of them back makes a mockery of those promises.

There is a small group of Republican senators in Washington who would seem to have no respect for promises or the contracts that contain them. Despite pleas from their own President, despite widely acknowledged dire consequences if the American auto manufacturers fail for want of a $15 billion loan agreed to by the House of Representatives and the President of the United States, those senators have blocked passage of the enabling legislation in the Senate.

Why would they put their own party — and President — in position to be blamed for an economic catastrophe that would make previous bailouts look like small potatoes?

Here’s the deal they offer: If the auto companies will break their promises to their workers, who happen to be members of the United Auto Workers union, these honorable men will agree to allow the companies to borrow money to get through the next three or four months.

Generous to a fault, you say?

Notwithstanding that the union has, over the past four difficult years, made significant wage and benefit concessions to help the auto manufacturers stay profitable, the senators want more this time around.

They already got the unions to accept workers’ wages being reduced to that paid workers in foreign-owned non-union plants (located, interestingly, in the states represented by said senators); the unions already agreed to accept reductions in pension benefits. But the senators now want those reductions put in place this coming year (drill here! drill now!).

According to a report in The New York Times,

In a statement Thursday night, the union said it was "prepared to agree that any restructuring plan should ensure that the wages and benefits of workers at the domestic automakers should be competitive with those paid by the foreign transplants. But we also recognized that this would take time to work out and implement" using programs like buyouts and early retirement offers to bring in new workers at lower rates.

Of course the whole gambit is dishonest.

First of all, while the senators have every right to try to impose conditions on the auto manufacturers who need the loan, they have absolutely no business, so far as I can see, inserting themselves into a company-union relationship. Labor negotiations should involve management and labor, period.

Second, let’s face it: In the end, it’s all about breaking up the union. As even the famously understated pundit David Gergen said recently, there has always been “a tension” between unions and the Republican party, but this is going way too far.

Why, I wanted to know, do Republicans hate unions? I thought it was as simple as wanting cheaper labor. The anti-UAW folks are fond of insisting that auto workers are paid over $70 an hour. That would be, well, a lie.

Here’s how they figure it: Take all the wages paid and add the cost to the company of all the benefits, and then add the cost of all the pensions and benefits being paid to retirees and divide by the number of active workers. Presto.

So it can’t be about making current labor cheaper, though a case could certainly be made that they want to get rid of workers’ pensions and benefits.

U.S. Senators are paid a decent salary — over $188,000 plus benefits that include state of the art health care — and are entitled to full retirement at age 62 after five years of service. Nice.

Of course, they are much more important than factory workers.

No, I really do think it’s all about getting rid of those pesky unions.

Now, you could argue that union power has been on the wane for several years, but I’d point out that American wages have been on the wane for the same period; make of that what you like.

A very knowledgeable political historian friend insists it’s more complex, as follows: Unions are a significant force in the Democratic party, notably providing fundraising and manpower during elections, and thus help the Democrats win; ergo, if unions can be eliminated the Republicans have a better chance.

I wonder.

Whatever may be motivating those who would get rid of unions, we now know this: Promises don’t mean a thing to them.

The Big Three Million

The hot topic over the last week or two has been the proposal to offer some kind of bailout to the “Big Three” American auto manufacturers — Ford, General Motors and Chrysler — all of whom, most immediately General Motors, are struggling to survive the current economic crisis.

Now, I don’t know about you, but the American automobile, whatever its breed, has been near and dear to my heart since I ran with the ‘rodders back in high school — back in the day when I could tell you the make and model of everything coming down the pike.

There were certain rules that I still take as sacrosanct, too: You might drive a Ford family car, but your old pickup was always a Chevy and the van conversion had to be a Dodge.

Suffice to say those days are past; I began to lose track somewhere between the MG-TD and the Lamborghini, and finally gave up trying when the Japanese started building pickup trucks.

Thirty years ago it made good sense to want an American vehicle; no matter the buzz that Mercedes might be better engineered or that a Volkswagen or Renault got better mileage, it just seemed practical to avoid the possibility of being stranded for days in some remote village without ready access to foreign parts.

Then the economy got all global and now foreign cars are made right here in America, but old habits die hard and I confess to a visceral loyalty to the American originals. So it matters to me, for that reason if no other, what happens to our automobile industry.

The possibilities being debated among members of Congress and opined upon by an array of media pundits range from government loans to bankruptcy, with a few hard-hearted suggestions that nothing at all be done because “they brought it upon themselves.”

Maybe so. But who deserves punishment? Certainly not the almost three million Americans whose jobs will likely be lost if just General Motors is allowed to die!

It’s said that one in every five American jobs would be affected: after all, it’s not just the assembly-line workers in Detroit, but also the companies that make the components, the truck drivers who transport the new cars all around the country, and the salespeople and mechanics in the dealerships; consider, too, the graphic designers and video producers who create the new car advertisements, the Madison avenue types who sell them and the media that publish them . . . you get the picture. And it’s not pretty.

So it may be tempting to say “It’s their problem,” but it’s much bigger than that.

If your neighbor lights his roof on fire by burning leaves on a windy day, you could say it’s his problem, too. But that doesn’t mean you refuse to call the fire department just because it would cost taxpayer money to run that red truck over and put out the fire.

You call the fire department because, among other really good reasons, that fire just might spread to your house and then it is definitely your problem.

Interestingly, folks who favor bankruptcy as a solution almost always seem to get around to the appeal of “tearing up union contracts,” which makes me wonder whether they are more interested in helping to rescue the industry or in getting rid of unions. These same folks also complain about the pensions retired workers are receiving.

What is it with these people? Pension envy?

If someone is to be punished it could be management, it could be labor, it could even be the public that demanded what Detroit was selling. For years – well, just about forever, the big three resisted safety changes that cost money, increasing gas mileage – which would cost money, building smaller cars, and so on, and yes, they did bring it on themselves.

But that just makes a case for spreading the punishment around, to borrow a phrase, rather than socking it to workers and the economy that workers support.

We can provide bridge loans to the auto industry but with serious conditions: we can require that they retool ASAP to build fuel-efficient cars and hybrids; we can demand that the unions concede some of their hard-won benefits and that managers and stockholders take serious cuts in pay.

I heard one of the opponents of a bailout cry, “But it will cost money! Where are we supposed to get the money?” Maybe from the same place that’s providing the money for the war in Iraq? Where did we get the money for the AIG bailout?

In fact, the main bailout proposal being talked about would get the money from the $700 billion already on hand for economic relief, and would amount to only 4% of those funds.

But it won’t be enough just to help the industry get past the present crisis; we can do more to help rebuild and stabilize this hub of American manufacturing, at the same time working to reduce our dependence on oil. Robert Goodman, a professor of environmental design writing for the New York Times, suggests that

As part of its loan package, the government should insist on the development of "transportmaker business plans" from the car companies, with specific timelines for developing more fuel-efficient cars. The companies should also provide detailed plans to transform some of their factories into research and manufacturing centers for the development of light-rail cars and high-speed trains and buses. (In some cases, these could run on existing tracks and on the median strips of Interstate highways; in others, entirely new lanes and tracks would be built.) . . .

During World War II, the auto companies converted their factories to build not only military trucks and jeeps, but also airplanes, weapons, tanks and other vehicles. Ford’s Willow Run plant built thousands of B-24 bombers, becoming the world’s biggest bomber plant.

The research and production capacity that the car companies built during the 20th century could be adapted for the needs of the 21st.

Sounds like a plan to me!

The past is prologue?

If some of our more partisan conservative commentators are to be believed, Bill Clinton and his administration are to blame for anything and everything that’s gone wrong in this country since 1992, including bin Laden, Katrina, the subprime mess, and of course the present worldwide economic crisis.

In the latter cases, the line of thought seems to be that the present crisis can be traced back to the Community Reinvestment Act, originally passed in 1977 and furthered during the Clinton administration. Here’s how it’s described on the Federal Reserve’s own web site:

The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations. … The regulation was … most recently amended in August 2005.

The gist always seems to be that lending to minorities is what got us here, and that it is all the fault of the Clinton administration.

Just a couple of observations: First, you’ll note that the Community Reinvestment Act required banks to operate in a way “consistent with safe and sound operations.” And, second (and perhaps most significant), the Act was “most recently amended in August 2005.”

Daniel Gross, writing in the October 7, 2008 issue of Newsweek, summed it up best:

The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren't regulated banks. They were outfits such as Argent and American Home Mortgage, which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA. These institutions worked hand in glove with Bear Stearns and Lehman Brothers, entities to which the CRA likewise didn't apply. … Nor did the CRA force the credit-rating agencies to slap high-grade ratings on subprime debt.

Though I believed from experience that there have been many, many foreclosures that weren’t necessarily related to subprime lending, the Gross article offered some detail, pointing out that, for example, a builder of high-end condominiums in Florida filed for bankruptcy just a couple of months ago:

Very few of the tens of thousands of now-surplus condominiums in Miami were conceived to be marketed to subprime borrowers, or minorities—unless you count rich Venezuelans and Colombians as minorities.

And it’s a myth that lending to poor folks or minorities is in itself risky. Gross cites a recent New York Times report that

... a long-running initiative to build homes and sell them to the working poor in subprime areas of New York's outer boroughs, has a repayment rate that lenders in Greenwich, Conn., would envy. In 27 years, there have been fewer than 10 defaults on the project's 3,900 homes. That's a rate of 0.25 percent.

The villains in the subprime lending debacle were in it for the money. The loan fees for such loans are higher than those for conventional loans, and I’ve seen for myself cases where the buyer who would have qualified for a conventional or FHA loan was pushed into a subprime loan because the loan officer was greedy. And, of course, there were loans made that should never have passed underwriting because the loan officer was simply dishonest.

Even so, if you want to blame it all on Clinton, what do you do about the fact that, when the Act was amended in 2005, the Presidency and both houses of Congress were under the complete control of Mr. Bush and the Republicans?

Hm.

I leave the reader to think about it while I point the finger in another, more sinister, direction.

Back in 1996, in what may have been a prescient letter to the New York Times, I wrote:

I believe now that Newt Gingrich, with the perhaps unwitting support of the famous “freshmen” he so carefully recruited, programmed and brought to Washington, does have it in his mind to dismantle if not destroy our federal government. I think it’s time for someone to openly question whether his intentions are honorable.

His unrelenting “Newtspeak” attacks on existing government programs, his vilification of anyone opposing him, his brazen moves to destabilize Wall Street, his cultivation of discord and fostering of anarchy, and finally his dismissal of public disagreement with comments that amount to ‘progress is painful, but I know what’s good for America,’ suggest that Americans had better pay attention when he calls it ‘revolution.’ Those who call him brilliant would do well to recall Hitler, for one, among those revolutionaries of history who used similar tactics to take control of the existing government. It is increasingly apparent that Gingrich’s agenda includes a revised constitution that he intends to write and a ‘revolutionary’ government that he intends to control.

Judging by the ineffectiveness of our scattered protests, he seems to have convinced the American people that we cannot stop the inevitable.

Every politician in Washington claims to care most about “middle class Americans.” Well, the working people of America — the true middle class — had better stand up for themselves, or suffer the consequences.

During the recent turmoil in Washington while Congress tried to decide what to do, it was reported on good authority (Andrea Mitchell) that ol’ Newt had been working furiously behind the scenes in opposition to the “bailout” legislation – before he came out in support of it. There was also mention of the possibility that he is preparing a run for President in 2012.

Another something to think about.

But no guarantees, of course.

Saturday morning on NPR a focus group of undecided voters, gathered by the network to watch the Presidential debates, now were asked to give their reactions. Most of them said the debate had helped them get closer to deciding which candidate they prefer. But one rather grumpy-sounding fellow disagreed, complaining that he didn’t hear either of the candidates put forth a proposal for resolving the finance-industry crisis now being debated in Washington.

Well, mister, if all the king’s horses and all the king’s men haven’t been able to figure out how to put the economy together again, let alone whether to take any action at all, how can you demand that any one person, even a candidate for President of the United States, know what to do?

Frankly, I’d rather have a President who doesn’t claim to know it all, who is willing to hold off making a decision until all the information is in — and who understands the potential harm that might result from acting recklessly or in haste — than one who doesn’t think he needs more information, nor to listen to more opinions, who trusts his “gut” feeling.

We’ve been there, had that, and it didn’t work out too well, did it?

Late Sunday the Congressional leaders of both parties, after working through the weekend, announced that they had agreed on a plan to “unclog the arteries” of lending and investment institutions so that money for home and business loans would begin to flow again.

And why the rush? Here’s where it gets dicey.

The reader may recall that the subprime crisis wreaked a bit of havoc recently, with one effect being that the most egregious lending practices were ended and lenders started insisting that their borrowers be qualified and capable of paying off the loan.

Over the last few weeks now, as banks and investment companies began to fail and others go all wobbly, stock market values began to bounce up and down, and loans became harder to get.

Then, abruptly, just over a week ago President Bush and his Secretary of the Treasury came out and proclaimed a dire situation, asking Congress to immediately authorize them to take $700 billion of taxpayer-backed money and use it to buy unknown quantities of unmarketable mortgage-backed securities of undefined value held by banks and investment companies; no less was at stake than our homes, jobs and pensions, not to mention our ability to buy a new car.

In this case, it seemed, the smoking gun would be the mushroom cloud kicked up by imminent economic collapse across the country and indeed around the world.

Just like the WMD’s of yore, no one can prove or disprove any of this. Although there is plenty of agreement among respected economists that something must be done quickly to add fresh money to the system and remove moribund securities from their inventories, there are almost as many equally respected economists who disagree; some disagree about the need for speed, others about the whole idea.

No one knows exactly what the problems are, or how to fix them. Most in Congress feel obliged to take the President and Paulson seriously, without evidence to the contrary.
A few in Congress and in the press have dared to ask how the situation got so dire without anyone noticing, given that this came up so suddenly. As economist Paul Krugman suggested, you have to wonder where the grownups have been all this time.

But now the President and Paulson definitely had everyone’s attention; howls of protest arose from Democrats and Republicans in Congress, and from citizens all over the country at the mere idea that taxpayers should bail out the fat cats of Wall Street.

The candidates for President reacted in respectively characteristic ways. Obama stayed in communication with Paulson and Congressional leaders by phone and offered his conditions for support; John McCain did a bungee jump from his campaign into Washington but we still don’t know exactly what he thinks of it.

Yesterday’s announcement laid out the changes to the Paulson plan that would be acceptable to both Republicans and Democrats in the House and Senate, giving it a fair (though not certain) chance to pass.

The improved plan includes slowing the distribution of the funds by providing them incrementally; establishing a Congressional oversight board as well as a special inspector general to protect against fraud or abuse; protecting what will be considered an investment by taxpayers that must be paid back, and requiring that taxpayers benefit from any future growth in the assets that are purchased through this program; providing for renegotiation of mortgages wherever possible, to keep families in their homes; and banning golden parachutes and unearned bonuses for executives of the participating companies.

Since economists don’t all agree, and since the folks in Congress don’t all agree, and since everything the Administration is about to undertake (if the legislation passes both houses of Congress) is based on assumptions, estimates, best guesses, computer projections, and just plain opinion, I guess I’m equally entitled to offer my opinion. After all, with all the disagreement out there I’m sure someone higher up will share it.

My sense, from a local real estate broker’s experience and point of view, is that this is not so dire a situation as we are told. The real estate market is very slow, to be sure, but houses are still selling to qualified buyers.

Yes, it would be nice to have business pick up and yes, it’s harder to get loans if you are only marginally qualified, but isn’t that the way it’s supposed to be?

If I’m wrong and the legislation passes, after which miraculously everything gets (and stays) better, pass the Tabasco and I’ll eat my words.

With all of this, the point that advocates for the plan keep making is that this promise of a bailout is needed to reassure “the market,” to help the economy stabilize.

That begs the questions: What if the market, like some child who is terrified of the unknown, decides not to be reassured? Or what if we did nothing, but let nature take its course?

I’m going to slip into a somewhat partisan outlook, and wonder if the emergency is a product of the Administration’s desire to help out Wall Street. But of course that couldn’t be true, could it?

One thing I do know is that I don’t know the answers, and it looks like we won’t get to find out.


Originally published September 29, 2008

How did we get here and where do we go?

During my real estate career I’ve come across more than a few predatory lenders — lenders who do not, as a rule, serve the buyer’s best interests. Unlike reputable mortgage brokers and banks, they are willing to subordinate the buyer’s interests to their own, and that almost inevitably causes trouble.

A subset of the predatory lender is the inexperienced loan officer who, due to lack of experience, education, or oversight, hasn’t a clue that what he’s doing is not quite right.

I’ve had cases where the loan officer continued to assure everyone involved — the buyer, the agent for the buyer, and the agent for the seller — that “this is definitely going to close,” even up to the morning of closing, only to have it turn out that his underwriting department didn’t share his opinion.

I don’t know if you ever saw “Glengarry Glen Ross,” but its grim lesson is the state of denial that a desperate salesman may get himself into, even without malicious motives. And the one who pays will be the buyer.

And eventually, as we learned over the past couple of weeks, the American taxpayer.

“I can get you into a house with absolutely no money down!” cannot ever be true, yet how many hopeful buyers have succumbed to the lure? The fact is that every buyer will need to have at least $500 – 1,000 cash on hand to cover the costs of earnest money to be deposited, a home inspection, and an appraisal — all of these amounts are generally “pay-as-you-go.”

The risk of purchasing with "no money down" is that you’ll end up owing more on the house at closing than you could sell it for. Particularly if all your closing costs are rolled into the mortgage, it would be virtually impossible to turn around the day after closing and recover your investment; the costs of sale will come back to bite you.

Then there are lenders who make it possible for you to afford the monthly payments on the dream house you didn’t think you could afford by offering you an adjustable rate mortgage. They don’t make a big deal out of the fact that “adjustable” almost always means “upwards,” of course, but if you do ask about that they are likely to reassure you that “the way houses are appreciating, you’ll be able to refinance before your interest rate goes up.”

And here lately we’ve learned what happened to THAT option.

There have even been loan officers who falsified income information (without the buyer’s knowledge) in order to get the loan approved by higher-ups. But it gets worse:

In one case, the lender manipulated the transaction to the point where the poor buyer ended up with a mortgage on the property that well exceeded its value. The usual checks and balances didn’t exist because the buyer’s agent, the lender and the appraiser all worked for the same company; in addition, that company styled itself a “charitable” organization that collected a “non-taxable donation” of several thousand dollars from the seller and transferred a portion of it as a “gift” from seller to buyer. And added it to the mortgage, of course, while giving the seller a charitable donation receipt for funds he never paid.

As it turned out, just over a year later that buyer lost the home to foreclosure.

But before that happened there’s no doubt that, quick as a wink, that lender sold the note. A mortgage note has value, after all, as an income producer. And whoever bought it — a bank or investment company — almost certainly sold it to someone else. By the time the buyer defaulted, who knows where it had landed? But one thing for sure, it could no longer be sold. And that made one less pool of money available for the investor to use to buy more mortgages.

As more and more “subprime” mortgages went into foreclosure, the inventories of more and more investors became unmarketable, and the investors had less and less money to invest. The amount of money available for loans of any kind dwindled and the economy slowed to a crawl.

At the same time, more and more foreclosures began to force down the market values of homes around them as well as increasing the time it took to sell any home.

So now we end up with Wall Street investment companies being sold, going bankrupt or having to be bailed out, and with our nation in a precarious situation not unlike that which brought on the Great Depression. Last week, the Bush Administration proposed to buy up those bad mortgage notes in order that the investors can get a fresh start and maybe perk up the economy as a result.

The Administration, fearing considerable worsening of the situation, has urged Congress to take immediate action and vote this week to provide the $700 billion that it believes will be needed just to begin the bailout. It is proposed that Henry Paulson, the Secretary of the Treasury, be given absolute discretion in using the funds — what to buy, how much to pay, and so forth. And doesn’t want legislation held up by too much debate.

Gives me a queasy, been-there, feeling.

I believe that there are just a few tweaks needed in the proposed legislation.
As it stands, the investors would get rid of their losers, while the American taxpayer would acquire them. I say there should be something there for the taxpayers, who being asked to take on the risk.

Some decent additions to the legislation that have been proposed include forbidding the beneficiaries of bailout to give multimillion-dollar “golden parachutes” to the CEO’s that are responsible, a restriction that was imposed in the case of Fannie Mae and Freddie Mac.

There is legislation that was proposed back in the spring, that would empower bankruptcy judges to rewrite the terms of a mortgage with the goal of keeping the homeowner in the home. This should be included because it makes sense and because foreclosures have a negative effect on the community. And to the extent that the lender took advantage of a buyer, or should have known better than to lend to someone who was obviously not qualified, it’s justice.

I wrote to Elizabeth Warren, a nationally recognized authority in bankruptcy at Harvard Law, because I wanted to be sure I have this right. Here’s what she replied:

Congress should amend the ill-advised bankruptcy statute enacted just a few years ago to permit neutral bankruptcy judges to adjust mortgages, principal and interest to keep people in their homes and to keep payments flowing on mortgages.

If a homeowner can afford a long-term, fixed rate mortgage that will pay off 100% of the current market value of the home, then everyone is better off … and the family stays in the home. If the family can't afford that, then it is time to give up the house and move on.

Either way, we can reach a bottom on the housing market, force the investors to take their losses, and move forward.

This plan won't cost the taxpayers a single dollar. And it will force the lenders to come to the table to negotiate over the value of these mortgages instead of waiting for another government bailout.

It has also been proposed that a new stimulus tax credit be given the vast majority of Americans, the poor and the middle-class, to help them get over the hump that has resulted from all this.

And finally, for now, it is imperative that regulations be put in place over the lending industry to make sure this never happens again.

Put all this together, which can be done immediately, and it just makes sense.


Originally published September 22, 2008

Politics 2008

If it weren’t so infuriating I’d just shrug it off and call it silliness. But believe you me, this is deadly serious stuff and can make or break the success of Barack Obama’s quest for the Presidency. It all depends, frankly, on how much attention American voters are willing to commit to the selection process, and their capacity for critical thinking.

Come to think of it, this kind of stuff probably goes back to, oh, 1789 or so (yes, there were candidates other than George Washington for the signal honor of being Father of our Country), but my own experience is necessarily limited to the last 50-plus years.

You could liken it to the snake oil salesmen of the old West, or the fellow who offers a deed to the Brooklyn Bridge or perhaps some oceanfront property in Arizona, to Professor Harold Hill and his promise to build a boys’ band in River City, or the recent scammers right here in Waxahachie: What all these have in common is the ability to slick-talk folks into believing in something that is a lie.

Every one of their victims chose to buy into something they would never have believed if they had just been a little more skeptical, asked a few more questions, done a little fact-checking for themselves.

I like to think that you can attribute the willingness of some voters to believe the unbelievable to what I think is an American tendency to see the good in people, to give the benefit of the doubt, sort of the way we pride ourselves on the concept of “innocent until proven guilty.” But some outcomes suggest that at least a touch of cynicism is in order, at least when it comes to our money and our country.

Back in 1952, Richard Nixon lobbed non-fact grenades against his opponents, as in accusing Adlai Stevenson of being a “Commie-sympathizer” for suggesting that we talk to Red China. That would be the same Richard Nixon who famously opened the gate to Red China after he got elected some years later.

Leaping forward to our current situation, George W. Bush promised us that he was a “compassionate conservative,” and turned out to be neither.

A very clever fellow named Frank Luntz thought of a way to help the Republicans get rid of nettlesome taxes like the estate tax, which taxes the transfer of great wealth — defined nowadays as exceeding $2 million and excluding family farms — to other than a surviving spouse or a charity. I don’t know if anyone you know will have that much to leave to the kids, but now that it’s called the “death tax,” you’d be dumfounded to learn how many ordinary folks are dead-set opposed to it. Even though experts calculate that doing away with the estate tax would deprive the country of “tens of millions” of dollars every year.

You see, Luntz wanted plain folks to believe that just dying would bring a tax upon you. As Molly used to tell Fibber, “Tain’t so, McGee!” Check it out.

Speaking of taxes, John McCain is quite emphatic when he claims that “Barack Obama wants to raise your taxes!” What he fails to mention is that “your” in this case refers to people with incomes greater than $250,000, twice that for a married couple.
And of course it wouldn’t be helpful to him to add that Obama also wants to lower taxes for everyone earning less than that, and eliminate them altogether for folks earning under $50,000.

Nope. “Barack Obama wants to raise your taxes” is out there, low-hanging fruit dangling from the tree for people too hungry to question it.

And then there’s the not-exactly-a-lie: Speaking to the Congressional Democratic Caucus last week, Obama said, according to people who were there, as reported in The Atlantic:

“It has become increasingly clear in my travel, the campaign, that the crowds, the enthusiasm, 200,000 people in Berlin, is not about me at all. It's about America. I have just become a symbol of the possibility of America returning to our best traditions.”

So what does John McCain’s latest ad tell us about that? That Obama said, in a fit of vanity, that, “I have become a symbol of America returning to our best traditions.” Tain’t so, McCain.

Finally, the straight-out lie of the McCain campaign to bring down Barack Obama is manifested in his recent pop-culture ad costarring celebrity airheads Spears and Hilton, which claims that Obama is all speech and no substance, and in support of that claim McCain’s minions love to say that “we don’t know what he stands for.”

Well. Now, you can go to the library or to Google and find position speeches dating back through the entire campaign and read until your head spins, or you can go to his website and find them there, all neatly categorized.

When you think of it, it’s odd that McCain can attack Obama for what he stands for if we don’t know what that is, isn’t it?

My idealistic, optimistic hope is that THIS time, with what has been called the worst economy since the Great Depression, with America’s reputation in tatters around the world, with our troops committed to an occupation in Iraq while getting blown up in Afghanistan and Iran is making us nervous (but we don’t have any troops to spare right now), our infrastructure showing signs of distress, health care costs and the mortgage crisis driving more seniors into bankruptcy than ever before, that THIS time every single voter will pay attention like never before.

Else, it’s “fool me twice” for America.

Originally published August 3, 2008

Don't be fooled

Depending on how things work out over the next couple of months, Americans could find themselves faced with a daunting choice: To vote for someone with a record of pandering and not always being honest but you hope she’s telling the truth this time, or to vote for someone with a record of pandering and a reputation for straight talk and telling the truth but you hope to goodness this time he isn’t.

The recent hullabaloo over gas prices has been enough to set a political junkie’s teeth on edge, not to mention make grown economists weep and newspaper editorial writers run out of words.

Consider this: You might have to choose between John McCain, a Republican, who says he’d like to give America a “gas tax holiday” and Hillary Clinton, a Democrat who wishes to run against him, says that’s a swell idea, and proposes that it can be paid for by sticking it to the oil companies with a “windfall profits” tax — a tricky prospect, considering it would require both houses of Congress acting to pass that legislation between now and when school lets out. Congress. The House and the Senate. One month.

If you don’t see a problem there, then ask yourself: Will George W. Bush ever sign a bill imposing a new tax on anyone, let alone the oil companies?

Barack Obama, who opposes the idea, is catching all kinds of flak from the Clintons, who claim that he is “out of touch” because he thinks saving a family $0.30 a day, or $25-30 for the whole summer, is not worth the 300,000 jobs it would cost, let alone removing $9 billion from the highway funds that are used to fix everything from potholes on I-35 to bridges over rivers and canyons.

Well, Hillary did respond to that last week. She decided to say, instead, that it would “save the American people $8 billion.” Sounds more impressive, that’s for sure. Who among us wouldn’t love to have a share of $8 billion dollars?

But, you know what? Your share of that, given the millions of Americans who pump gas and drive, would be — ta-da! About $0.30 a day.

Not so fast, some would argue: What about truck drivers, taxi drivers, long-distance commuters, and farmers? They need a lot more gasoline and thus are hurt more by skyrocketing prices. True, but the reasonable point has been made by reasonable experts that we should and could help those folks with tax credits, something that would come directly from federal funds without abandoning needed highway repairs. And wouldn’t have to be accomplished in just a month.

Those weeping economists, by the way, are almost unanimous in saying that it’s most likely any tax reduction would just be consumed by the oil companies anyway, keeping prices just where they are. Because they can.

So, under the McCain/Clinton plan, instead of taking from the oil companies to give a break to the consumer, we’d be taking from the consumer to give to the oil companies. Great plan.

I’ll tell you what’s going wrong in America. It is not that we have a “red state, blue state” divide. No, the division in this country, when it comes right down to it, is between those who are content to believe anything they are told, without regard to source, and those who just don’t understand how they can fall for it.

I’m going to join that happy crowd that blames “the media” for a lot of what’s going on in this election season. In this case, I blame the TV media for hyping, ad nauseam, whatever story gets the most viewers even when it offers no enlightenment; the blogging media that perpetuates outrageous rumors without one scintilla of documentation, whether out of carelessness or out of bigotry or just hate for the “other”; and those of the print media that don’t find important issues important enough to spend the space.

The Founders felt so strongly about having a free press that they amended the Constitution to provide protection for it. After all, without a free press (think Thomas Paine), America might never have come into being.

Americans have always understood the role of the free press to be to watch and report on what their government is doing, and that the free press is essential to the survival of our democracy. When that freedom is abused by the media, in whatever form, we are being disserved and we should object.

Service is honesty; disservice is perpetuation of rumor or retelling of unexamined events.

And yet too much of our information is just that.

If the reporting we read and hear includes all the information that is relevant, and not just sound bites and what the reporters think people may think about them, then we will be better able to decide on an issue, or a President.

The great journalist Ambrose Bierce once declared that the vote, our most sacred right, is “The instrument and symbol of a free man's power to make a fool of himself and a wreck of his country."

Let us not be fools.

Upside-Downside

If you think I’m spending too much time thinking about the upcoming presidential election, I might agree. Or I might say there’s no such thing as too much thinking when it comes to changing presidents, something our current Commander in Chief might choose to call “a defining moment.”

Defining decade might be more like it; that’s how long it seems to have taken to turn this battleship around. Perhaps defining generation, as in “We are so out of here!”

Amazingly, there are still three candidates in the race, with no end in sight, apparently -- though it is devoutly to be wished by most Democrats that we were already down to only two. A few brouhahas have erupted, some silly, some troubling, not least the penchant on the part of Hillary Clinton to gussy up her resume a bit.

As the candidates head for the finish line next fall it behooves the voter to do more than just listen to words or watch the ever-changing polls. It is time to think.

As recently as a couple of weeks ago I agreed with those Obama supporters and not a few pundits who thought Clinton should pull out of the race because it is statistically well nigh impossible for her to win the nomination without very sharp and unacceptable tactics. But then I changed my mind.

Why shouldn’t she continue? There is a rationale that can’t be disputed: Lightning might strike, Obama might stumble, votes in the remaining state primaries might break 90-10 in her favor. But it could happen.

The upside is that Obama gets a lot more experience surviving nastiness, while all the remaining states get to vote; the downside is that every one of her attacks on Obama is recorded by the Republicans for playback in the fall – and don’t think Obama is the only one who would be hurt.

Yes, she has every right to continue in the campaign, so long as she runs an honorable race. Dishonorable might make me think again.

As for McCain and his laser-like focus on all things military – there are a few problems he’ll have to deal with, not least his age, which may account for his Lieberman-guided understanding of who we’re fighting in Iraq; his desire to keep our over-extended soldiers in Iraq for years while keeping the Bush tax cuts (something we used to call having our cake and eating it too); and his dismissive approach to our current economic crisis.

The Chicken Littles in the punditocracy opine often and loudly that the continuing Democratic contest is giving McCain an advantage that might be insurmountable, but they totally forget two truths: First, the guy who is not getting attacked always rises, like cream in unstirred milk; doesn’t mean a thing. And, most important, McCain can’t win because he is a terrible campaigner, a weak candidate who doesn’t seem all that charged up by comparison, and whose entire basis for running is his military background.

Don’t get me wrong. I kinda like the guy; I sent him money once. But if you don’t buy my reasoning, then think about the fact that just recently the word “recession” finally passed the lips of significant folks – like Ben Bernanke, head of the Federal Reserve System where, you should excuse the expression, the buck stops in these matters.

John McCain? Bush policies to be continued? In the middle of a recession? I don’t think so.

Which brings me to Barack Obama.

I thought I would explode at one point early this month: it was after a couple of days of drumbeat around the Clinton campaign’s assertion -- but not in public and not in speeches -- that Barack Obama “can’t win.” I didn’t see it coming, I have to admit, though I should have. It just hit me all of a sudden: The Clintons have come to the point where they are running a purely racist campaign.

All of this talk, the Clintons' claims that states with more electoral votes, or states that voted solidly Democratic time after time in the past, or states that chose their delegates – or some of them, like Texas – by caucus, or states with more voters, period, being likely to refuse to vote for anyone but Hillary Clinton, is just so much malarkey. This gambit is all they have left.

Now, I don’t believe for a minute that either of them is a racist; I just think that they want the superdelegates to believe that the American voter is, and that they have nothing to lose by playing the only card they have left to play: “Obama can’t win. You know Obama can’t win.”

That’s code, folks. You’re supposed to understand from this that a black man cannot be elected president of the United States.

Well, let me tell you the upside in nominating Barack Obama.

All over America governors and members of Congress representing not-so-blue states are supporting Obama in droves, in many cases because they know that if Hillary Clinton is at the head of the ticket her negatives and the resulting higher Republican turnout will hurt them down-ballot, whereas an Obama-led ticket will bring so many new and enthusiastic voters and independents out to vote it is bound to help them.

The way I see it, this could mean so many Democratic victories that even if McCain ends up winning, the Democrats will have such majorities in Congress that he wouldn't be able to do a doggone thing they don't like.

The downside? The risk that the Clintons are proven right and in the midst of a recession, with homes foreclosing all around us, joblessness on the rise and a bloody war without end in sight; despite a Republican candidate who offers more of the same, racism will prevail.

If that happens, America will be the worse for it, and God help us.

I believe in America, though, and my faith is strong that we are all we say we are and all that we wish for the rest of the world.

So I’m rolling the dice. America, call it!

IT’S THE STUPID ECONOMY

Setting aside for the moment the dreadful situation for many American families created by the subprime lending meltdown, let’s look at the problems in the broader economy.

Sad, isn’t it, that the people and institutions with the power to do something remedial about it don’t seem to notice or care about problems until the stock market twitches?

The whole notion that a surging stock market and related “good economic news” mean the economy is in great shape is delusional, almost a shell game.

The ultra-wealthy one or two percent of the population took their five- and six-figure tax cuts and invested in the stock market, which naturally caused various indicators to surge with glee. And in a kind of parallel universe to ours, those with lots of money to spend have been investing like crazy, buying and selling and raking in profits, making it look like the economy is strong and growing, while the rest of us are borrowing money to pay for car repairs so we can get to the second (or third) job that we’ve had to take just to get by.

Is there anyone who works for someone else for a living who hasn’t noticed for quite some time that things are not as hunky-dory as Mr. Bush and his minions keep assuring us? After all, claiming that when the stock market is doing well we are all doing well totally ignores the fact that stocks and bonds are the source of income for investors, not for working stiffs.

There have been some unpleasant truths lurking beneath apparently never-ending home appreciation and our ability to buy more and more new clothes, running shoes, toys, kitchenware and flat-screen TVs—an ability that, on the face of it, has helped us live the American dream and then some.

First, there are the ritual assurances that unemployment is low: The government’s report on unemployment bases its assessment on the number of active claims for unemployment. But no one tracks the folks who gave up replacing a manufacturing or computer software job that was outsourced and went into floor sales for Home Depot or Wal-Mart, or the folks who have been unemployed so long their benefits have run out.

Ironically, the at-home mom who took a job to help make up the income loss is counted as a new hire, resolving that particular family struggle in a way that only contributes to the lie.

But the economy must be doing well, you may think—just look at how consumer spending is still up and the way we continue to party on!

What’s not talked about much is how many folks went for the terrific deals offered by MasterCard and Visa, seducing new “pre-qualified” borrowers with “introductory” low interest rates, knowing full well that the cards, used to pay for everything from groceries to weddings, would accrue balances well into higher interest rates. Or how many of those folks have paid down credit card debt with home equity loans, sold with such fervor on the TV ads, only to run them back up again to maintain a standard of living.

And what’s not talked about, too, is how many folks have been surviving for a while on the equity in their homes that, because of the remarkable increases in housing values over the past decade, has allowed them to borrow money and keep on keepin’ on.

We are beginning to understand the hidden cost of those clothes, shoes, toys, kitchenware and TVs in lost jobs and lower wages, but I suspect there are not many folks who have read the occasional buried news story telling how the typical American family income went flat several years ago.

Back in the 1990’s things were booming and America seemed to love the way folks were getting rich from the new information technology. But it wasn’t until recently that I learned how displaced that affection may have been.

According to an August 21, 2007 report in the New York Times, in every year from 2000 to 2005 the average income earned by Americans went down; in 2005, it was nearly 1% less than in the year 2000.

Now get this: “The White House said the fact that average incomes were smaller five years after the Internet bubble burst ‘should not surprise anyone.’”

In addition, the Times article went on to explain that growth in total incomes, the number from which the average is derived, “was concentrated among those making more than $1 million. . . . These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.”

This week in Congress the debate will continue as to whether private equity fund and hedge fund managers, whose earnings include a percentage of the profits, called “performance pay,” from sale of the capital assets they manage, should pay taxes like the rest of us. Currently the tax law allows those earnings to be taxed at the capital gains rate of 15% rather than at the 25% to 35% they would pay if their earnings were called earnings.

Lobbyists for the status quo argue that such earnings are essentially a payout for taking entrepreneurial risk, and thus properly taxed as a capital gain.”

(Y’know, if this is true, then I think we’ll see a whole new world open up for real estate firms hit by the subprime implosion!)

Supporters of the legislation point out, however, that capital gains income is not subject to the 2.9% Medicare tax paid by the rest of us, and that if fund managers were taxed the same way as the rest of us are, it would raise as much as $1 billion annually and cover the cost of insuring about 98,000 people!

Now I didn’t write all this just to get you depressed. And I don’t want you to think the situation is something we are stuck with, that it’s beyond our control, that there’s nothing we can do about it.

I just want you to know what’s going on, what’s lurking beneath the headlines, what’s causing the pinch for the American family.

Paraphrasing Molly Ivins, I just think it helps if the people know what is going on. What they do about it is up to them.

Play It Again, Joe Hill!

Labor Day is here, and with it another wonderful three-day holiday. It’s time for family get-togethers, backyard cookouts and, for the politically addicted, speeches and rallies. But somewhere between parades and picnics I hope folks will give a moment’s thought to what Labor Day means.

It’s more than a day off for workers. It is a day to celebrate unions, and especially the American worker for whom they have toiled for over a century.

Not surprisingly, employers have tried to get rid of unions ever since they became a force to be reckoned with. With the help of Congress, they finally dealt organized labor a massive blow in the mid-20th century, selling us the idea that a “right to work” was antithetical to collective bargaining. Sort of like the Healthy Skies Initiative actually relaxed controls on polluters. It was pretty much downhill from there.

From time to time over the last couple of decades, as unions have struggled to remain a force in our economic dialogue, there have been speculations about their possible resurgence. Unfortunately for folks at levels lower than management, in most cases that is still a dream.

In fact, sad to say, some people question whether unions are any longer relevant.

No doubt it has something to do with the globalization of the economy, which at the end of the last century and since has really affected what Americans buy and sell, the way we manufacture and distribute goods, the ways we are employed—or not, and of course our quality of life.

Labor unions came into being in the 1880’s because workers were being exploited by their employers, more so in some industries than in others—the Pullman Railroad Company and the coal mines come to mind as among the worst. Then someone figured out that there was strength in unity, and as collective bargaining for wage increases and benefits went forward, working conditions gradually improved.

After laws were passed to protect workers from abuse, to abolish sweatshops and in particular to eliminate the use of children as laborers, matters such as wages, benefits and job security were addressed.

There is no doubt that all working Americans have benefited from union accomplishments, whether or not they belong to a union themselves. Although many trades, such as secretaries and bookkeepers, were never able to organize themselves effectively in the private sector, the laws that were passed because of union effort were to their advantage as well: more and more frequently, employers began to offer sick leave, periodic pay raises, paid holidays and annual vacations, and other benefits that have trickled into the mainstream.

Unions became a powerful force in America, and often set the pace for improved working conditions in other parts of the world. But after awhile, when it seemed to some that certain unions were asking too much, demanding raises when people in non-union jobs were barely holding their own, it didn’t go down well. And it didn’t help matters whenever a union flexed its muscle in defiance—as in the case of the Teamsters’ threat to bring the whole country to a standstill unless they got what they wanted. And here and there corruption surfaced, giving the whole movement a bad name.

All along, of course, those who resisted unions from the beginning fought to keep them out of their particular shops were working tirelessly to get rid of them; they would not have succeeded without the unions’ own successes that made them less urgent, and without the self-destructive behavior that power seems to invite.

It seems to me not surprising, given all these circumstances, that unions faded from prominence back then; neither is it surprising, given today’s circumstances, that they have a legitimate function again.

With the globalization of the economy, American workers are confronted once again with low wages, sweatshop conditions and the exploitation of children as laborers. But this time the problems are too far away to be resolved by American workers demanding improved working conditions—it is the worker in a distant land who is being exploited, whose low pay leads to downsizing in an American industry trying to compete. What good is it to complain, or to demand, when the situation is so far out of our control?

The functions of the labor unions, this time around, are vigilance and education, since there is little hope they can get over there and organize the garment workers in China and Thailand, or the rug makers in Pakistan (where UNICEF estimates children aged 4 to 14 make up 90 percent of the carpet workforce). Vigilance can lead to education of the consumer and resulting public pressure on the American importers, which has already shown to be effective in closing down or at least reducing these practices.

Most of us consumers lament the effect of the new economy on America, even as we buy shoes made in Korea, electronics made in China, hats from El Salvador, toys from Romania, and designer garments handcrafted in Thailand. The least we can do for ourselves—and ultimately for the American worker—is to insist on knowing that we are not furthering the exploitation of children and the dehumanization of adults in order to save money. If enough Americans refuse to buy goods made with what amounts to slave labor, we will help to end it.

In the meantime, our labor unions can keep up the pressure on Congress to make trade laws that address these issues, and to change laws that subsidize American companies’ exportation of jobs to other countries into laws that reward companies who choose to keep jobs here.

Back in the day, as they say, we were told that if you want to criticize the farmer, don’t do it with your mouth full.

On this Labor Day I suggest that if you want to complain about labor unions, don’t do it while you’re on your paid holiday!