Parts to Wholes: the Socionomic Systems Nexus

Video Clips

The Punditry Opines: Rose Interviews

• A conversation with David Brooks
• President Obama’s week in review

The Politicians Pontificate and Posture

• Netcast As the economic crisis worsens, can Democrats and Republicans in Washington find common ground on the stimulus package and a bank rescue plan? Our panel of key lawmakers weighs in: Sen. John Ensign (R-NV), Rep. Barney Frank (D-MA), Sen. Claire McCaskill (D-MO), and Rep. Mike Pence (R-IN).
• FTN: McCain: Stimulus Bill "Generational Theft" Senator John McCain said he could not support the stimulus package heading towards a Senate vote this week because of the debt it would create for America

The President On the High Ground

• Pres. Obama Holds First Press Conference Out of the 13 questions reporters asked Pres. Obama tonight during his first Presidential Press Conference, 7 of them dealt with the economy and his stimulus package. Earlier in the day, the President spoke about his plan at a Town Hall meeting in Elkhart, IN.
• Town Hall in Elkhart, IN (2/9) 
• Live coverage of President Obama's address Live coverage of President Obama's address with Jackie Calmes, Floyd Norris, David Leonhardt, Andrew Ross Sorkin, Joe Nocera and Peter Baker

Politics

Obama on Defense as Daschle Withdraws Former Sen. Tom Daschle withdrew his nomination as secretary of Health and Human Services after a mounting debate over his back taxes and a lucrative stint in the private sector -- dealing a political setback to the fledgling Obama administration. One of President Barack Obama's closest political confidants and early mentors, Mr. Daschle had been tapped to spearhead the effort to overhaul the nation's health-care system. But concerns arising from Mr. Daschle's failure to pay more than $100,000 in taxes on time, coupled with tax problems involving two other cabinet nominees, threatened both the administration's health-care agenda and the credibility of Mr. Obama's pledge to raise the ethical standards of Washington. Mr. Daschle's sudden withdrawal came two weeks to the day after Mr. Obama took office, and 24 hours after the president told reporters that he "absolutely" stood by his nominee. The abrupt move stands to potentially dent the reputation for steadiness and managerial prowess that the 47-year-old president had cultivated over a smoothly run campaign and a transition to power that boasted of a swift vetting and nomination of top aides. In a broadcast interview Tuesday night, Mr. Obama admitted to mistakes in handling the Daschle matter. "I'm here on television saying I screwed up and that's part of the era of responsibility," he told NBC News. "Ultimately it's important for this administration to send a message that there aren't two sets of rules. You know, one for prominent people and one for ordinary folks who have to pay their taxes." The president added that he is "frustrated with myself, with our team," but said, "ultimately my job is to get this thing back on track." Mr. Daschle said he made his decision after concluding that he couldn't be effective in the post. "This work will require a leader who can operate with the full faith of Congress and the American people, and without distraction. Right now, I am not that leader," he said in a statement. The impact of his decision could be felt for some time, as the White House presses for an ambitious health-care overhaul without Mr. Daschle, who was widely seen as ideally suited to lead the effort.

• Exits Let Obama Cut His Losses Before Storm Worsens
• Obama Interview Excerpts, Chuck Todd on Daschle’s Distraction,

The Note, 2/3/09: Soft Middle -- Obama seeks to reset debate, but centrists control stimulus’ fate

Maybe this is post-partisanship at work -- but somehow we feel like we’ve seen this play out before: Sixty is the new 80.The stimulus package -- combined with Cabinet woes, and a few flexible pledges -- have brought a presidency that seeks to soar down to solid ground. As Obama fans out to the networks -- including a sit-down with ABC’s Charles Gibson, to air on “World News” Tuesday -- he needs to re-set the terms of the stimulus debate. Team Obama lost the early battle to define the bill -- which has become a pork-stuffed monstrosity, instead of economic salvation wrapped in legislation. That’s where Senate centrists come in. The loose coalition of lawmakers that are scrubbing the measure with an eye on offering joint amendments -- being led by Sen. Ben Nelson, D-Neb., and Sen. Susan Collins, R-Maine -- are quickly becoming the group to watch. They have the votes to exert their will, and that means sorting out spin from reality (or at least their take on it) on a measure that’s easy to hate for its scope, and maybe easier to mock for its specifics. ABC’s George Stephanopoulos: “President Obama isn't going to get the 80 votes in the Senate that he originally wanted on the stimulus bill. The president is starting to agree to changes in the bill, taking out some of the more unpopular spending and increasing some tax credits.”  “There's a group of centrist Democrats and Republicans in the Senate who are working now on amendments that might increase infrastructure spending, do more for housing, and, perhaps, bring down the overall cost to the bill,” he adds.  “The fix is in,” write Roll Call’s Emily Pierce and Keith Koffler. “Stung by GOP -- and even some Democratic -- criticism of their so-called economic recovery behemoth, Senate Democrats and the White House are scrambling to repair the package so that it might appeal to Republicans and actually stimulate the economy before October 2010. But before it gets better, it’s likely to look a whole lot worse, as the Senate appears set to add tens of billions of dollars more to the already $888 billion measure this week.” Out of necessity, taking on his own party: “Two Democratic sources with knowledge of the meeting [at the White House] said the president took a blunt tone with the lawmakers, urging them to drop whatever needs to be cut from the bill to gain bipartisan support and to pass Congress soon,” Michael D. Shear and Shailagh Murray report in The Washington Post. “One source said Obama appeared to be frustrated by the public perception that the recovery bill was becoming laden with partisan pet projects.”

The Gang System Barack Obama is a potentially transformational figure. In political style and intellectual outlook, he is unlike anything that has come before. On matters of policy substance, however, he’s been pretty conventional. The policies he offered during the campaign matched those of just about every other Democrat. So an important question for the Obama presidency is this: Will his transformational style eventually lead to transformational policies, or will his conventional policies eventually force him to shelve his transformational style? In the first major episode of his administration, the stimulus package, the conventional policies so far have won. The Obama administration sent a series of stimulus principles to Capitol Hill and allowed the Old Bulls in the House and Senate to write legislation. They produced sprawling bills that gathered dozens of traditional liberal ideas. The resulting bills would have been no different if Nancy Pelosi had been elected president, or Harry Reid, or any other conventional Democrat. The substance of the legislation set up the polarized debate that followed. On Thursday, moderate unease translated into political action. Forty-nine moderate Democrats in the House belatedly signed a letter calling for cuts in the package, and protested the way they had been trampled by the Democratic leadership. Over in the Senate, a gang of roughly 20 moderates, led by Republican Susan Collins and Democrat Ben Nelson, huddled in the Dirksen Building to cut and focus the stimulus bill. They talked of trimming $90 billion or more. The big news here is that there are many Democrats who don’t want to move in a conventional liberal direction and there some Republicans willing to work with them to create a functioning center. These moderates — who are not a party, but a gang — seemed willing to seize control of legislation from the party leaders. They separated themselves from both the left and right. What we’re seeing may be the formation of a regular gang system. In the past, moderate gangs — like the judicial Gang of 14 — have appeared or disappeared depending on the issue. But exploding federal deficits are a galvanizing issue for those in the center. Concern over these deficits will influence every piece of domestic legislation. In the coming weeks and months, there will be housing legislation, another round of TARP bailouts, the budget debate, the health care and entitlement debates. In each case, the Moderate Gangs will occupy the crucial ground, even if the Democrats do wind up with 60 Senate votes.

• The Note, 2/6/09: Buying Partisanship -- Will Obama continue partisan push -- or embrace the center?

Finding His Inner Eastwood The Marine Corps’ 1st Division has a macho motto: “No Better Friend. No Worse Enemy.” President Barack Obama could use a little of that Clint Eastwood-style bravura now as he bargains with Republicans over the stimulus package and tries to establish momentum and credibility for his new administration. Obama needs to make Washington politicians fear that if they cross him, they’ll pay a penalty. That’s the essence of political power -- the ability to help your friends and punish your enemies (or, to put it politely, those who obstruct your efforts to do the public’s business). All successful presidents have had this ability to inspire respect; most unsuccessful presidents have lacked it. I have been a fan of Obama’s efforts to create a post-partisan politics that ends Washington’s business-as-usual. But I noted in a column last month: “It's an admirable strategy but also a high-risk one, since the ‘center,’ however attractive it may be in principle, is often a nebulous political never-never land…. it remains an open question whether the Republicans will do more than applaud politely when Obama asks for help.” As it turns out, the GOP isn’t even bothering to clap. You’d have to say that these first weeks of Obama Nation haven’t gone too well. The stimulus package provided an early test of Obama’s ability to work across partisan lines and do the people’s business. But Republicans challenged the president’s economic policies and seized the initiative from him. Then there was the series of messy tax problems for Obama nominees -- Tim Geithner, Tom Daschle, Nancy Killefer and Hilda Solis. It looked like business as usual. And it undermined the core of the message that got Obama elected. As the president thinks about how to regain momentum, he should study the example of Bob Gates. Gates established himself as a forceful secretary of defense by, to put it simply, scaring people. He fired the secretaries of the Army and Air Force for ignoring the seriousness of problems in their domains. And from that moment on he had the power to make changes that were needed.

The Action Americans Need By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression. Millions of jobs that Americans relied on just a year ago are gone; millions more of the nest eggs families worked so hard to build have vanished. People everywhere are worried about what tomorrow will bring. What Americans expect from Washington is action that matches the urgency they feel in their daily lives -- action that's swift, bold and wise enough for us to climb out of this crisis. Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.That's why I feel such a sense of urgency about the recovery plan before Congress. In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive. I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We've seen the tragic consequences when our bridges crumble and our levees fail. Every day, our economy gets sicker -- and the time for a remedy that puts Americans back to work, jump-starts our economy and invests in lasting growth is now. Now is the time to protect health insurance for the more than 8 million Americans at risk of losing their coverage and to computerize the health-care records of every American within five years, saving billions of dollars and countless lives in the process.

• The Republicans' Opportunity

The Chess Master It was just a week ago that the bad-mouthing of Barack Obama seemed to be reaching a fever pitch. The president was taking heat for the tax problems of Tom Daschle, Timothy Geithner and other appointees and nominees. Liberal supporters of the president were upset that he was making such a high-profile effort to get Republicans to climb aboard his stimulus package bandwagon. Self-styled middle-of-the-roaders were snarling that Mr. Obama was not doing enough bipartisan outreach, even as Republicans on Capitol Hill were attacking his economic package with the kind of venom usually reserved for the handiwork of Satan. Mr. Obama was called a hypocrite, dismissed as both craven and politically naïve and taken to task for being too much in the public eye. After making every effort — and failing — to generate significant G.O.P. support for the stimulus package, the president ratcheted up his rhetoric, pointing to the stunning job losses in January and sharply criticizing the Republicans’ obstructionist tactics. There is always a tendency to underestimate Barack Obama. We are inclined in the news media to hyperventilate over every political or policy setback, no matter how silly or insignificant, while Mr. Obama has shown again and again that he takes a longer view. There was no way, for example, that the Daschle flap was going to derail the forward march of a man who had survived the Rev. Jeremiah Wright fiasco. It’s early, but there are signs that Mr. Obama may be the kind of president who is incomprehensible to the cynics among us — one who is responsible and mature, who is concerned not just with the short-term political realities but also the long-term policy implications. The simple truth is that most Republican politicians would like Mr. Obama to fail because that is their ticket to a quick return to power. I think the president is a more formidable opponent than they realize. Mr. Obama is like a championship chess player, always several moves ahead of friend and foe alike. He’s smart, deft, elegant and subtle. While Lindsey Graham was behaving like a 6-year-old on the Senate floor and Pete Sessions was studying passages in his Taliban handbook, Mr. Obama and his aides were assessing what’s achievable in terms of stimulus legislation and how best to get there.

Emanuel: Team Lost Message on Stimulus  White House Chief of Staff Rahm Emanuel conceded President Barack Obama and his team lost control of the message for selling their massive stimulus bill last week, fixating on bipartisanship while Republicans were savaging the legislation. But in a wide ranging interview with reporters, Mr. Emanuel said the president's travels across the country this week have shored up support for the $789 billion measure. He strongly defended the young Obama administration against charges that its opening weeks have been amateurish and mistake-prone. In three weeks, the president has secured what Mr. Emanuel called the most sweeping single piece of economic legislation ever, extended health insurance to 11 million children, righted a clear wrong by making it easier for women to sue for wage discrimination, and reoriented U.S. foreign and environmental policy with his orders to close the prison at Guantanamo Bay, Cuba, end torture, and allow states to pursue higher fuel economy standards to combat climate change.There will be days that will have setbacks. There will be days that will have disappointments, he said. But as long as were moving forward, the White House is moving in the right direction. Speaking volubly about the stimulus package, Mr. Emanuel offered new details about the White House's involvement in bringing the legislation to the brink of passage. The framework for the bill was set at a Dec. 12 meeting during the transition, he said, but White House aides decided against drafting a detailed proposal. That decision has elicited criticism from Republicans and some Democrats who said it allowed members of Congress to bulk up the measure with extraneous provisions of questionable economic value.

Jeb Bush: Republicans Must Be a National Party So are Republicans, Mr. Bush believes. But with a few adjustments, the GOP can become a modern reform party. "I don't think there's anything that holds us back," he says. "I think we're actually well positioned to do exactly that." Mr. Bush would stand the party on its head by de-emphasizing Washington and mounting "a real effort to play offense outside of Washington in advancing a reform agenda. I think a respectful, policy-oriented opposition in Washington will be quite effective." But the states are where "being able to change things is easier to do." This approach "worked in the early 90s," Mr. Bush says. "We had some fantastic governors who were my role models." He mentions his brother when he led Texas, John Engler of Michigan and Tommy Thompson of Wisconsin. "We had an all-star team." He likes the current crop of Republican governors, including Mark Sanford of South Carolina and Haley Barbour of Mississippi. "Beyond the ideas and all of that," Mr. Bush says the GOP must be a national party. That means "we need to be competitive in California," where the "burden of big-government policies" has produced a $42 billion deficit. "I don't care how big the state is, that's mind-boggling. It's not a tax problem. Don't they have the 'excuse me for living' tax out there? The growth of government spending has been enormous. And a creative, reform-minded candidate on the Republican side" could be elected governor.

Rebranding Government: It's Time Politicians Stopped Running For or Against Government and Started Running it Well For thirty years, Americans have absorbed the well-branded mantra of Ronald Reagan: Government is the problem, not the solution. They have absorbed it so well that it has literally become part of the fabric of their--and our--brains. "Government" is unconsciously associated with bureaucracy, failed programs, inefficiency, waste, socialism, and all kinds of words, concepts, and images that are in turn associated with negative emotions for the average American. Neuroscientists have demonstrated that repeatedly pairing one word or idea with another leads to changes in both the connections among neurons in the brain that represent those ideas and the readiness of those neurons to fire together, so that even those of us on the left do not realize that concepts like "bureaucracy" and "waste" are triggered unconsciously in our brains when someone mentions government. The effectiveness of the conservative branding campaign on "government" is in fact a central reason we are in the economic mess we are in today. The notion that government is an evil--among some voters a necessary one, but among most voters an evil nonetheless--is what led Democrats to remain silent for much of the last eight years as George W. Bush turned record surpluses into record deficits in the name of scaling back government intrusion; weakened or eliminated regulations that had been in place for decades to protect American consumers, homeowners, retirees, and people saving for their retirement or their kids' college education; and failed to regulate new threats that were as preventable as they were foreseeable, such as unregulated commerce in "commodities" most people don't understand (e.g., derivatives) or putting too much money into risky investments without enough capital to back it up if good-times loans were to go bad. And the effective branding of government as the problem is part of what has led, over three decades, to Democrats remaining relatively silent as our infrastructure crumbled because of their (well founded) fear that their conservative opponents in the next election would attack them for their "tax-and-spend" profligacy. The result has been that we cut taxes to the wealthy and failed to invest in our future in times of relative prosperity, while creating the conditions that will require nothing short of massive government deficit spending, extraordinary governance, and a lot of luck to get us out of an economy that is still in free-fall.

• Change vs. Bipartisanship: What Happens When You Throw a Bipartisan Party and Half the Guest List Stays Home?
• Why Judd Gregg's Change of Heart Was a Birthday Present to Lincoln's Protégé

Economy and Economic Policy

US Economic & Interest Rate Outlook (NT) As we mentioned, the current economic environment is bleak. As shown in the attached Table 1, we are forecasting that real GDP will contract at an annual rate of nearly 5% in both last year’s fourth quarter and this year’s first quarter. Private domestic demand has collapsed – spending for personal consumption, residential investment and business equipment. With the U.S. recession having spread to the rest of the world, even demand for U.S. exports is now contracting. Businesses are desperate to reduce their inventories. With Detroit, for all intents and purposes, shut down for the month of January, business inventories will crater even more in the first quarter. With office, retail mall and hotel vacancies rising and with credit to finance commercial building all but dried up, the last domino to fall will be nonresidential construction expenditures. Chart 1 shows the history of annual average percent changes in real GDP and real personal consumption expenditures (PCE) from 1947 through 2007 along with our forecasts for 2008 and 2009. As you can see, we are forecasting for 2009 the largest percentage contractions in these two measures, minus 2.5% for real GDP and minus 2.0% for real PCE, during this time span. So, no sugar coating – this recession is likely to be the most severe in the post-WWII era. slowdown/downturn? Massive federal spending funded by the Federal Reserve and the banking system. The Obama administration and Congress are in the process of developing a two-year fiscal stimulus package that at last, but likely not the final, count totals $825 billion. This fiscal stimulus program will include all things to all people – traditional and non-traditional infrastructure spending, aid to state and local governments, expansion of food stamp and unemployment insurance programs, and tax cuts for households and businesses. This massive federal spending and tax cut program will be financed by issuing additional federal debt. Who is likely to purchase this debt? The Federal Reserve and the banking system.

• Is The Bailout Working?

A Stimulus Plan With Dual Goals: Reform and Recovery As President Obama and Congress barrel toward the latest emergency program to resuscitate the American economy, one question is looming over their search for a cure: Can the government fashion a fast and efficient economic stimulus while also seizing the moment to remake America? For now, Mr. Obama and his aides are insisting they can accomplish both goals, following their mantra of using the urgency of the economic crisis to accomplish larger — and long-delayed — reforms that never garnered sufficient votes in ordinary times. In fact, at various times in American history, moments like this one have been used for big programs, from integrating the armed forces to creating Social Security and, later, Medicare. So it is little wonder that everyone with a big, stalled, transformative project — green energy programs, broadband networks that reach into rural America, health insurance for the newly unemployed or uninsured — is citing the precedent of Franklin D. Roosevelt, and declaring that a new New Deal is overdue. But the question that the Senate will begin debating Monday is whether grand ambitions are getting in the way of pulling the country out of a nose dive. And so for every comparison of this moment to F.D.R.’s first hundred days, there are warnings that much of his social experimentation did not have a big impact on America’s economic recovery, which took years.

• Time to Steer 'Forceful Course' for Stimulus
• Do Tax Rebates Work? - Economix Blog
• The Big Fix - Can Barack Obama Really Transform the U.S. Economy ...

On the Edge A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts. It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated. Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again.It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.

• Getting Tough in Washington

Recession Can Change a Way of Life AS job losses mount and bailout costs run into the trillions, the social costs of the economic downturn become clearer. The primary question, to be sure, is what can be done to shorten or alleviate these bad times. But there is also a broader set of questions about how this downturn is changing our lives, in ways beyond strict economics. All recessions have cultural and social effects, but in major downturns the changes can be profound. The Great Depression, for example, may be regarded as a social and cultural era as well as an economic one. And the current crisis is also likely to enact changes in various areas, from our entertainment habits to our health. First, consider entertainment. Many studies have shown that when a job is harder to find or less lucrative, people spend more time on self-improvement and relatively inexpensive amusements. During the Depression of the 1930s, that meant listening to the radio and playing parlor and board games, sometimes in lieu of a glamorous night on the town. These stay-at-home tendencies persisted through at least the 1950s. In today’s recession, we can also expect to turn to less expensive activities — and maybe to keep those habits for years. They may take the form of greater interest in free content on the Internet and the simple pleasures of a daily walk, instead of expensive vacations and N.B.A. box seats. In any recession, the poor suffer the most pain. But in cultural influence, it may well be the rich who lose the most in the current crisis. This downturn is bringing a larger-than-usual decline in consumption by the wealthy. Popular culture’s catering to the wealthy may also decline in this downturn. We can expect a shift away from the lionizing of fancy restaurants, for example, and toward more use of public libraries. Such changes tend to occur in downturns, but this time they may be especially pronounced. Recessions and depressions, of course, are not good for mental health. But it is less widely known that in the United States and other affluent countries, physical health seems to improve, on average, during a downturn. When all is said and done, something terrible has happened in the United States economy, and no one should wish for such an event. But a deeper look at the downturn, and the social changes it is bringing, shows a more complex picture. In addition to trying to get out of the recession — our first priority — many of us will be making do with less and relying more on ourselves and our families. The social changes may well be the next big story of this recession.

• The Recession. Isn’t It Romantic?

Futures and Adaptations

Is 'Octomom' America's Future? A moment last Monday, just after noon, in Manhattan. It's slightly overcast, not cold, a good day for walking. I'm in the 90s on Fifth heading south, enjoying the broad avenue, the trees, the wide cobblestone walkway that rings Central Park. Suddenly I realize: Something's odd here. Something's strange. It's quiet. I can hear each car go by. The traffic's not an indistinct roar. The sidewalks aren't full, as they normally are. It's like a holiday, but it's not, it's the middle of a business day in February. I thought back to two weeks before when a friend and I zoomed down Park Avenue at evening rush hour in what should have been bumper-to-bumper traffic. This is New York five months into hard times. One senses it, for the first time: a shift in energy. Something new has taken hold, a new air of peace, perhaps, or tentativeness. The old hustle and bustle, the wild and daily assertion of dynamism, is calmed. A major reason people are blue about the future is not the stores, not the Treasury secretary, not everyone digging in. It is those things, but it's more than that, and deeper. It's Sully and Suleman, the pilot and "Octomom," the two great stories that are twinned with the era. Sully, the airline captain who saved 155 lives by landing that plane just right—level wings, nose up, tail down, plant that baby, get everyone out, get them counted, and then, at night, wonder what you could have done better. You know the reaction of the people of our country to Chesley B. Sullenberger III: They shake their heads, and tears come to their eyes. He is cool, modest, competent, tough in the good way. He's the only one who doesn't applaud Sully. He was just doing his job. This is why people are so moved: We're still making Sullys. We're still making those mythic Americans, those steely-eyed rocket men. Like Alan Shepard in the Mercury rocket: "Come on and light this candle." But Sully, 58, Air Force Academy '73, was shaped and formed by the old America, and educated in an ethos in which a certain style of manhood—of personhood—was held high. What we fear we're making more of these days is Nadya Suleman. The dizzy, selfish, self-dramatizing 33-year-old mother who had six small children and then a week ago eight more because, well, she always wanted a big family. "Suley" doubletalks with the best of them, she doubletalks with profound ease. She is like Blago without the charm. She had needs and took proactive steps to meet them, and those who don't approve are limited, which must be sad for them. She leaves anchorwomen slack-jawed: How do you rough up a woman who's still lactating? She seems aware of their predicament.

• After Curbing Enthusiasm, Obama Now Must Ease Anxiety

Obamanomics The fact that the economy grows — that it produces more goods and services one year than it did in the previous one — no longer ensures that most families will benefit from its growth. For the first time on record, an economic expansion seems to have ended without family income having risen substantially. Most families are still making less, after accounting for inflation, than they were in 2000. For these workers, roughly the bottom 60 percent of the income ladder, economic growth has become a theoretical concept rather than the wellspring of better medical care, a new car, a nicer house — a better life than their parents had. Americans have still been buying such things, but they have been doing so with debt. A big chunk of that debt will never be repaid, which is the most basic explanation for the financial crisis. Even after the crisis has passed, the larger problem of income stagnation will remain. It’s hardly the economy’s only serious problem either. There is also the slow unraveling of the employer-based health-insurance system and the fact that, come 2011, the baby boomers will start to turn 65, setting off an enormous rise in the government’s Medicare and Social Security obligations. Most of these problems aren’t immediate, which helps explain why they have gone unaddressed for so long. And the United States remains a fabulously prosperous country, relative to almost any other country, at any point in history. Yet Americans seem to realize that something has gone wrong. In recent polls, about 80 percent of respondents say the economy is in bad shape, and almost 70 percent say it’s going to get worse. Together, these answers make for the most downbeat assessment since at least the early 1980s, and underscore that the next president will be inheriting a set of domestic problems as serious as any the country has faced in a long time. To understand where Obama stands, you first have to know that, for 15 years, Democratic Party economics have been defined by a struggle that took place during the start of the Clinton administration. It was the battle of the Bobs. On one side was Clinton’s labor secretary and longtime friend, Bob Reich, who argued that the government should invest in roads, bridges, worker training and the like to stimulate the economy and help the middle class. On the other side was Bob Rubin, a former Goldman Sachs executive turned White House aide, who favored reducing the deficit to soothe the bond market, bring down interest rates and get the economy moving again. Clinton cast his lot with Rubin, and to this day the first question about any Democrat’s economic outlook is often where his heart lies, with Reich or Rubin, the left or the center, the government or the market. There is plenty of evidence that this synthesis isn’t merely a part of a candidate’s inevitable tack to the center for a general election. In Obama’s memoir, “Dreams From My Father,” he sympathetically recounts a conversation he had with a Kenyan farmer, in which the man complains both about rich people who won’t pay their fair share of taxes and about burdensome government regulations on coffee growing. In Obama’s second book, “The Audacity of Hope,” he goes further: “Reagan’s central insight — that the liberal welfare state had grown complacent and overly bureaucratic, with Democratic policy makers more obsessed with slicing the economic pie than with growing that pie — contained a good deal of truth.”

The Destructive Center Even if the original Obama plan — around $800 billion in stimulus, with a substantial fraction of that total given over to ineffective tax cuts — had been enacted, it wouldn’t have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years. Yet the centrists did their best to make the plan weaker and worse. One of the best features of the original plan was aid to cash-strapped state governments, which would have provided a quick boost to the economy while preserving essential services. But the centrists insisted on a $40 billion cut in that spending. The original plan also included badly needed spending on school construction; $16 billion of that spending was cut. It included aid to the unemployed, especially help in maintaining health care — cut. Food stamps — cut. All in all, more than $80 billion was cut from the plan, with the great bulk of those cuts falling on precisely the measures that would do the most to reduce the depth and pain of this slump. On the other hand, the centrists were apparently just fine with one of the worst provisions in the Senate bill, a tax credit for home buyers. Dean Baker of the Center for Economic Policy Research calls this the “flip your house to your brother” provision: it will cost a lot of money while doing nothing to help the economy. All in all, the centrists’ insistence on comforting the comfortable while afflicting the afflicted will, if reflected in the final bill, lead to substantially lower employment and substantially more suffering. But how did this happen? I blame President Obama’s belief that he can transcend the partisan divide — a belief that warped his economic strategy. After all, many people expected Mr. Obama to come out with a really strong stimulus plan, reflecting both the economy’s dire straits and his own electoral mandate. Instead, however, he offered a plan that was clearly both too small and too heavily reliant on tax cuts. Why? Because he wanted the plan to have broad bipartisan support, and believed that it would. Not long ago administration strategists were talking about getting 80 or more votes in the Senate.

Next Steps: Make it So, No. 1

Spending More Than $800 Billion Is the Easy Part The easy part is coming to an end. Ask just about anyone in Washington involved in the $800-billion-plus economic stimulus legislation churning its way through Congress and they will tell you it is a milestone — but without question the less expensive, and politically and technically less chancy, part of the Great National Bailout of 2009. This week, President Obama and his Treasury secretary, Timothy F. Geithner, will prepare the country for the next, and far more difficult, step: another attempt to fill the huge hole blown in the center of the nation’s financial system. No one has yet put a price tag on that effort. But the administration’s diagnosis of what went wrong with the first attempt to right the financial system — that it was too small, and that the problem has ballooned in recent months — suggests that the next effort will almost certainly entail a far bigger commitment of taxpayer dollars than the $350 billion left from last year’s $700 billion effort to right the system, and probably far more than the stimulus package.At his first news conference, scheduled Monday evening, Mr. Obama is expected to argue that the nation’s recovery depends on simultaneously firing on three cylinders. The stimulus that the House and Senate are now hashing out is one, intended to help create or protect jobs by funneling money to individuals, companies and state and local governments. Unplugging the stoppage in the credit system that has kept consumers and businesses from borrowing the money they need, by shoring up shaky or failing banks, is the second part, and a vital one: offering a $15,000 tax credit to home buyers, administration officials argue, will not do much good if the buyers simply cannot get a mortgage. And the final part, which Mr. Obama is not expected to announce for days, involves spending billions of dollars more to prevent home foreclosures, for fear that the displacement and anger created by throwing people out of their homes, and putting more properties onto a glutted market, will create a psychological and financial death spiral. But while the president and his economic team had a playbook of sorts to follow when it came to the stimulus plan — since the Great Depression the federal government has been using big increases in spending and reductions in taxes to jolt the economy with varying degrees of effectiveness — the problems facing the financial system have no real parallels in scale or complexity.

Wanted: Personal Economic Trainers. Apply at Capitol. Let's review some of the more silly arguments about the stimulus bill, starting with the notion that "only" 75 percent of the money can be spent in the next two years, and the rest is therefore "wasted." As any economist will tell you, the economy tends to be forward-looking and emotional. So if businesses and households can see immediate benefits from a program while knowing that a bit more stimulus is on the way, they are likely to feel more confident that the recovery will be sustained. That confidence, in turn, will make them more likely to take the risk of buying big-ticket items now and investing in stocks or future ventures. Moreover, much of the money that can't be spent right away is for capital improvements such as building and maintaining schools, roads, bridges and sewer systems, or replacing equipment -- stuff we'd have to do eventually. So another way to think of this kind of spending is that we've simply moved it up to a time, to a point when doing it has important economic benefits and when the price will be less. Equally specious is the oft-heard complaint that even some of the immediate spending is not stimulative. What really irks so many Republicans, of course, is that all the stimulus money isn't being used to cut individual and business taxes, their cure-all for economic ailments, even though all the credible evidence is that tax cuts are only about half as stimulative as direct government spending. Many, including John McCain, lined up this week to support a proposal to make the sales tax and interest payments on any new car purchased over the next two years tax-deductible, along with a $15,000 tax credit on a home purchase. These tax credits make for great sound-bites and are music to the ears of politically active car salesmen and real estate brokers. Most economists, however, have warned that such credits will have limited impact at a time when house prices are still falling sharply and consumers are worried about their jobs and their shrinking retirement accounts. Even worse, they wind up wasting a lot of money because they give windfalls to millions of people who would have bought cars and houses anyway. What adds insults to injury, however, is that many of the senators who supported these tax breaks then turned around and opposed as "boondoggles" much more cost-effective proposals to stimulate auto and housing sales, such as having the government replace its current fleet of cars with hybrids or giving money to local housing authorities to buy up foreclosed properties for use as low-income rental housing.

Showing Some Discipline Geithner’s plan is huge but also disciplined. It’s designed by someone aware of government’s limitations. Geithner has been working the financial meltdown for a while. The basic lesson he has drawn is that the federal government has been too constrained. Occasionally, policy makers would step on the accelerator and bail out a bank, but then they’d step on the brake, worrying about moral hazard or inflation. It’s time to be heavier on the accelerator, he says: “It goes against the basic instincts of anybody who is understandably worried about using taxpayer money carefully, about moral hazard, about long-term credibility issues. But if you don’t do it now, the market will know you’re going to have to do it later.” Some economists leave the impression that the banking sector is a rotting corpse, hopelessly polluted by valueless toxic assets. Geithner takes a different view. He agrees that many bankers did things that are “reprehensible and deeply troubling.” But the big uncertainty is not inside the banks; it’s in the broader economic climate.“People are enormously uncertain about the depth of the recession,” Geithner says. “They’re enormously uncertain” about how their assets will perform in this environment. But this is not like the savings-and-loan crisis of the ’80s and ’90s, or like Sweden, where banks themselves were dead, he said, adding that we’re trying to repair “a system that is largely alive and will largely survive but is still burdened by systemic market failure, systemic uncertainty.” Therefore, Geithner argues, the government doesn’t need to go in and nationalize the banks. “It’s very important that we don’t look like there’s any intent of taking over or managing banks. Governments are terrible managers of bad assets. There’s no good history of governments doing that well.”

• Citing ‘Lost Faith’ in Banks Geithner to Push Bailout Geithner Outlines Overhaul of Bailout
• Big Lessons in Finance From a Little Bank You've Never Heard Of

The News Hour Economists panel - Krugman, Rogoff, Marron, Rivlin Part 1

The News Hour Economists panel - Krugman, Rogoff, Marron, Rivlin Part 2

Next Challenge on Stimulus: Spending All That Money Minnesota's Sage Electrochromics Inc. has been ready for months to move on just the sort of project the Obama administration hopes will bolster the U.S. economy: a $65 million factory that would make energy-saving windows and generate 250 new jobs. So what's holding it up? The Energy Department, whose fledgling loan-guarantee office has yet to approve a single project, including the proposed Sage glass factory, since the loan program launched in early 2007. President Barack Obama plans to rely heavily on agencies like the Energy Department to approve contracts and issue loan guarantees and grants at a record clip in the $789 billion stimulus plan. But there are signs that parts of the federal bureaucracy will need an overhaul to handle the huge workload heading their way. Such worries are apparent at the Energy Department, which will play a key role in Mr. Obama's bid to revive the economy and wean the country off oil. The stimulus bill nearing a final vote in Congress could pump as much as $170 billion into projects such as highways, Internet broadband and public-housing repairs. Of that, about a quarter -- or some $40 billion -- could go to the Energy Department. The agency would be under the gun to swiftly hand out money to projects that would modernize the electric grid, build electric cars and make homes and buildings more energy efficient. The new energy secretary, Steven Chu, has barely moved into his office overlooking the Smithsonian Castle. He says he'll have to transform how parts of his agency work if the president's stimulus plan is to succeed. "We've got to do it," Mr. Chu said in an interview. "Otherwise it's just going to be a bust." Other agencies face steep challenges, too. An obscure Commerce Department office with a $19 million budget and fewer than 20 grant officers could end up in charge of $7 billion in grants to expand Internet access in rural areas. A Congressional Budget Office report said it could take eight years for those grants to be issued because the amount of money would "far exceed" the agency's traditional budget and require the deployment of technology that is "not widely available today." The spending demands could prove particularly taxing at the DOE. The Energy Department has had limited experience pulling off big, transformative energy projects. Most of the department's $25 billion budget goes toward maintaining the nation's nuclear stockpile, cleaning up former weapons plants, and doing basic scientific research. Where the Money Goes

• Whatever You Think of It, the Package is Historic
• Amid Complaints, Stimulus May Benefit From Speed

Go Ahead and Save. Let the Government Spend. Government is in a far better position to provide immediate economic stimulus. It is in fact the only player that can significantly alter the economy’s short-run trajectory. In a recession, as in ordinary times, a family’s first economic priority should be to spend its income prudently. But even by mortgaging itself to the hilt (as many families have indeed already done during the recent national spending spree), no family could spend enough to affect the current downturn.  Nor is it reasonable to demand that individual businesses pick up the slack, since most of them already have more capacity than they currently need. At moments like these, government is the only actor with both the motivation and the ability to jump-start the economy. Passage of a robust stimulus bill has rightly been the Obama administration’s highest priority since taking office last month. As Keynes explained during the Great Depression, increased public spending would help end the downturn even if it were for useless activities like digging holes and filling them back up. It would obviously be better if the extra spending went for something useful. And as it happens, decades of infrastructure neglect, combined with huge state and local government budget shortfalls, provide more than enough valuable projects to put everyone back to work.  Bizarrely, however, some Congressional critics have denounced the administration’s stimulus proposals as “mere spending programs.” Of course they’re spending programs! More spending is exactly what we need. The imperative is to get this legislation passed and get the spending started right away.

Decade at Bernie’s Last week the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001. At one level this should come as no surprise. For most of the last decade America was a nation of borrowers and spenders, not savers. The personal savings rate dropped from 9 percent in the 1980s to 5 percent in the 1990s, to just 0.6 percent from 2005 to 2007, and household debt grew much faster than personal income. Why should we have expected our net worth to go up? Yet until very recently Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing. And if the belief of many Americans that they could count on capital gains forever sounds naïve, it’s worth remembering just how many influential voices — notably in right-leaning publications like The Wall Street Journal, Forbes and National Review — promoted that belief, and ridiculed those who worried about low savings and high levels of debt. If you want to see what it really takes to boot the economy out of a debt trap, look at the large public works program, otherwise known as World War II, that ended the Great Depression. The war didn’t just lead to full employment. It also led to rapidly rising incomes and substantial inflation, all with virtually no borrowing by the private sector. By 1945 the government’s debt had soared, but the ratio of private-sector debt to G.D.P. was only half what it had been in 1940. And this low level of private debt helped set the stage for the great postwar boom. Since nothing like that is on the table, or seems likely to get on the table any time soon, it will take years for families and firms to work off the debt they ran up so blithely. The odds are that the legacy of our time of illusion — our decade at Bernie’s — will be a long, painful slump.