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Mitch McConnell's Plan to Worsen the Economy

Paul Krugman wrote a compelling column in December called 50 Herbert Hoovers, about how state governments are cutting back on spending even though they're making the economy worse by doing so.  He wrote,

No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to balance its budget in the face of a severe recession. The Obama administration will put deficit concerns on hold while it fights the economic crisis. But even as Washington tries to rescue the economy, the nation will be reeling from the actions of 50 Herbert Hoovers — state governors who are slashing spending in a time of recession, often at the expense both of their most vulnerable constituents and of the nation’s economic future.

 Why are they doing this?

State and local government revenues are plunging along with the economy — and unlike the federal government, lower-level governments can’t borrow their way through the crisis. Partly that’s because these governments, unlike the feds, are subject to balanced-budget rules. But even if they weren’t, running temporary deficits would be difficult. Investors, driven by fear, are refusing to buy anything except federal debt, and those states that can borrow at all are being forced to pay punitive interest rates.

We have evidence right here in Washington State, where the government is being forced to cut education, public safety, health care, and other critical services. And there are cuts at the local level too. The Seattle school board is closing schools, and King County has eliminated prosecutors, police, and workers in the courts system and elsewhere. Even those cuts were alleviated by raiding funds set aside to maintain infrastructure and by requiring County employees to take a two week furlough. The Seattle Times quoted Superior Court Presiding Judge Bruce Hilyer, who said "if the courts take further cuts, 'The criminal-justice system is going to look like a train wreck.'"

These state and local cuts are exactly what the US economy doesn't need right now.  And only the Federal government can help.

But here comes Republican Senate Minority Leader Mitch McConnell, who wants to take grants to states out of any economic stimulus package.  In an interview with NPR's Renee Montagne,

McConnell said the government should consider offering financial help to states in the form of loans, instead of grants. That approach could have an added benefit, he said: "I think they'd be more careful in how they spent it."

McConnell is completely out of touch if he thinks states are going to spend this aid profligately.  They just want to keep schools open, to keep professors employed, to maintain infrastructure, and to protect public safety.  Any fat was cut out in much earlier rounds of budget planning.

But McConnell's not alone—the Republican party position is to oppose direct aid to states. Just this past Sunday, House Minority Leader Boehner cited this aid as a key reason he plans to vote against the stimulus plan in its current form.

So what's McConnell's big idea?  What's Boehner's solution?

You guessed it.  Obama's $300 million middle class tax cut is not enough for McConnell and Boehner. They want more tax cuts for the rich, and less stimulus.  Hasn't anybody told these guys that we already tried that for eight years?  Have they seen the results?  I thought the Republican leadership had realized they need some new ideas if they want to stay relevant.  You would not know it to listen to McConnell and Boehner.

So You Think The Auto Industry Should Be Allowed To Fail

Later this week, the CEOs of GM, Ford and Chrysler will return to Washington to make what will hopefully be a much better case for why the government should give their companies $25 billion in support. Leading up to that appearance, technology commentators in Silicon Valley (like this one and this one) have ventured far outside their area of expertise to call for the government to let the auto companies fail. They're being echoed by their Seattle counterparts as well.

Having just returned from the Detroit area where I spent Thanksgiving with my family, I believe wholeheartedly that this is a horrible idea.

Lord knows, much of the criticism of the auto industry is justified. It's true that the CEOs' first D.C. appearance was lamentable, deserving of the lampooning they received on Saturday Night Live and elsewhere.  These guys need to put forward a concrete plan, and it's crazy they didn't present one the first time, especially after Obama had basically given them the answer they should have provided: seriously reforming their business practices while focusing on more fuel efficient vehicles.

And so far, the auto makers (and the Michigan congressional delegation led by Senator Carl Levin) have hidden behind the argument that people just don't appreciate the reforms Detroit has already made.  Levin said on a recent Meet the Press appearance:

GM now produces more models getting more than 30 miles per gallon, twice as many, as any of its competitors.  Ford, Chrysler are moving into the hybrids.  We're doing the plug-ins.  GM is going to lead the way in plug-in hybrids if people will recognize that this isn't the '70s when the, when the Big Three were producing inferior products. 

While there may be some truth to this, it's far from good enough.  The 30 MPG that Levin cites is based on the faulty Corporate Average Fuel Economy (CAFE) measurement, which EPA has shown are 5-20% overstated, or worse. And a March '08 report by the National Highway Traffic Safety Administration showed that even going by the CAFE measurements for domestic automobiles, Honda and Toyota (at 35.2 and 34.7 respectively) outperformed the big three (at 29.5 for Ford, 29.4 for GM, and  29.3 for Chrysler), who barely exceed the minimum requirements. 

So these CEOs need to come back with a plan that goes well beyond just saying that what they're already doing is good enough.  And they need to do it in a big way.  For example, I'd love to see the automakers make a gesture like pledging to stop making new SUVs.  Just leave that part of the market to someone foolhardy enough to stay in it. Or pledge, as Toyota already has, to provide a hybrid option on every vehicle they sell. They've got to show that they understand that any financial support will be contingent on improving fuel economy and helping to reduce our dependence on foreign oil. And the CEOs have got to cut their own salaries, ideally to $0, while this bailout is going on.

They're probably not going to be big enough or bold enough.  If not, Congress needs to spell it out for them even more clearly than Obama already has, and to demand new CEOs. But they cannot allow the auto industry to collapse. Because Michigan is in big trouble already, even with the auto industry more or less intact.

Michigan's unemployment rate has already worsened over the past year so that now it is worse (at 9.3%) than France's (under 8%). Housing prices are through the floor.  If you are a tech commentator living in Seattle or SF and you think the housing market is weakening, just imagine what it would be like to try to sell a home in Detroit right now, where the average price of a home is $73,000, and the average price per square foot has already fallen to $34.  (Average home price in Seattle: $663,000, avg/sq ft: $354.  Average home price in SF: $1,227,450, avg/sq ft: $648.)  And the low price of gas in the Detroit area (at $1.68 late last week) is not enough to help; it's probably only making things worse.

On a national level, for all the comparisons of the current economic situation to the 1930's, things haven't gotten nearly as bad.  But if the auto industry crashes, things are going to get much worse than they are now, starting in Michigan. Congress needs to push the auto industry in the right direction, but it cannot allow it to fail.

Vote Obama and Volunteer

[For those of you who don't know me, I work with Will. I sent this out as email to many of my friends last night and Will invited me to cross-post it here. A slightly earlier version can be found at my own blog.]

I'm voting for Obama, which is no secret to anyone who knows me. I agree with his policies and I'm impressed by the man. Over the last two years, he's run an excellent campaign, going from underdog to all-but certain victory. Clearly, he has executive ability.

Moreover, McCain is the wrong man for the job. I strongly disagree with his policies (essentially Bush's), his campaign is thrashing spastically, and he disqualified himself by picking that blithering idiot Palin as his VP.

I'm more worried about Christine Gregoire, who is running for re-election as Governor of Washington. She's uncomfortably close in the polls to Dino Rossi. The Building Industry Association of Washington and the Republican Governers' Association have dumped $7.5 million into Rossi's campaign in the last few weeks. You are known by your enemies, so she must be doing something right. Gregoire, alas, is a competent governor, but an indifferent campaigner.

Darcy Burner is running for Dave Reichert's Congress seat over on the Eastside. She too is polling uncomfortably close to her opponent. Burner is a strong candidate, a former Microsoft manager, and someone who's already made her mark. Her Responsible Plan to end the war in Iraq has been signed on to by dozens of Congressional candidates. Reichert has been a mediocre representative, ranking around 400th of the 435 Congress members in influence.

On Saturday and Sunday afternoon, I walked my precinct, talking to voters who've been identified as Leans Democratic. I'll try to get to some neighboring precincts over the next eight days.

What can you do?

First of all, vote! If you have an absentee ballot, turn it in as soon as possible. King County can only count so many votes per day; the sooner the absentee ballots are mailed in, the sooner the final tally. BTW, the first all-mail election in King County will be February 2009.

Second, spread the word. Talk to all your friends who are persuadable and get them to vote for Obama, Gregoire, and other good Democratic candidates.

Third, volunteer for the next eight days. The campaign will be glad to have you. Most of all, they want people to go door to door. They also need people to call voters. (I believe you can do this from your own home.) If you're not comfortable doing this—though, really, it's not that bad—they also need people to do data entry and other tasks.

Fourth, volunteer on Election Day. They need people to be poll watchers, to go door to door to get people out, and people to drive incapacitated voters to the polls.

Fifth, send money, if you can. Campaigning is hideously expensive. I'd love to see full public funding of elections, but that's not what we have to work with this year.

(If you're not a US citizen, don't despair. You can do #2, #3, and #4. Permanent residents can do #5 too.)

Go to the Washington State Democrats to sign up.

Palin and Independents

OK, I'll admit it. I used to be such a fan of John McCain that I voted for him in the 2000 primary election. I registered as a Republican to do it, and I was sincere in my support.

No shit.

I was drawn to his campaign finance reform message. Unless you dealt with that, I believed, you weren't going to get anything else done.  And I'll admit this too: McCain's position was unpopular in his own party. Though the 2002 McCain-Feingold law ended up being completely ineffective (c.f. Swift Boaters), it was indeed fought by leading Republicans.

I saw a little bit of the old McCain in his acceptance speech tonight. So even though I've had that picture of McCain hugging Bush on this blog since June 2005, it's still hard for me to reconcile the reasonable things he sometimes professes to believe with the policies he's implicitly endorsing by choosing Sarah Palin as his running mate.

While McCain has always been anti-reproductive rights, it never seemed to be a priority for him. But then he went and picked Palin, who believes that women should be forced by the government to keep their babies, even if they are the result of rape or incest.

McCain claims to be concerned about climate change, but Palin is still unsure whether it's a real man-made problem—and even Bush has finally figured that one out.

McCain is supposedly against drilling in the National Wildlife Reserve in Alaska, but Palin is the nation's most prominent supporter of it.

McCain's flip-flops are numerous: first he was against the Bush tax cuts for the wealthy, now he is for them; first he was against off-shore drilling, now he is for it; first he condemned waterboarding, then he refused to vote for a law that would have banned its use by the CIA.

But with his choice of Palin, he's lost all remaining credibility as a centrist who could cross the aisle and pick up independent voters like the one I used to be.

John McCain is Andy Rooney

Have you ever noticed the resemblance between John McCain and Andy Rooney?

You remember Andy Rooney—he's the "60 Minutes" fixture who for 30 years has complained about annoyances like his office filing system, the seats he gets at ballgames, and objects that viewers send him in the mail.  He starts many of his segments with that slight whine, "Why is it that..."

Here's a typical segment:

Now compare that to John McCain's speech from June 3rd; the widely panned one with the sickly-green background.  Jump ahead to the 8 minute mark, and you'll see what I mean, especially at 8:42:

Uncanny.

Thank You Senator Clinton

As everyone who reads this blog knows, I've been a fierce supporter of Barack Obama for a long time.  But I want to dedicate this post to Senator Clinton, especially after her gracious speech yesterday.

Hillary's always been a leading advocate for universal health care. Having lived in France, where the health care was superb, I can testify that by contrast the American system is shamefully inadequate and bureaucratic.  Hillary has been right to continue to fight for improvements, and I'm confident she will play an important role in getting the United States where it needs to be.

Hillary is also a powerful speaker.  Her speech on Saturday demonstrated once again that she knows her audience and knows how to connect with the people in it. She is a much stronger speaker than John McCain, for example, despite his many years in public service, and her ability to fire up a crowd is real.  It's part of the reason she is truly a talented politician.

And while it's hard for me to admit it, her relentless persistence is admirable as well.  This primary season has gone on for a long time, but it has allowed both Democratic candidates to build infrastructure in all 50 states, and on balance that may prove a boon to the Democrats. Regardless, there's no doubt that no matter what happens now, Hillary has served as a role model for millions of American women, and demonstrated that they should never give up or let anyone tell them they can't do something.

So here's to you Hillary Clinton.  Congratulations on an historic, ceiling-breaking campaign.

Congratulations, Barack Obama!

Congratulations on your historic nomination!

A Lesson on Appeasement

Stranger Than Fiction...

Sounds like a disturbing number of people thought my April Fools' Day post was serious. 

This campaign season has gotten so weird, it's hard to tell truth from fiction...

The Other 3 AM Call

Ouch.