Robert B. Reich's Blog, page 140

The Untimely Death of Long-Term Health Insurance

The Administration's decision to pull the plug on long-term health insurance in the new healthcare law (so-called Community Living Assistance Services and Support or, as it was known by healthcare insiders, CLASS) offers an important lesson. 

As written, the law had three incompatible parts. 

First, it required beneficiaries to receive at least $50 a day if they had a long-term illness or disability (to pay a caregiver or provide other forms of maintenance). That $50 was an absolute minimum. No flexibility on the downside. 

Second, insurance premiums had to fully cover these costs. In budget-speak, the program was to be self-financing. Given the minimum benefit, that meant fairly hefty premiums. 

Third, unlike the rest of the healthcare law, enrollment was to be voluntary. But given the fairly hefty premiums, the only people likely to sign up would know they'd need the benefit because they had or were prone to certain long-term illnesses or disabilities. Healthier people probably wouldn't enroll. 

Yet if the healthier didn't enroll, the program would have to be financed entirely by the relatively unhealthy — which meant premiums would have to be even higher. So high, in fact, that even the relatively unhealthy wouldn't be able to afford it. 

End of story. End of program. 

The lesson: If a public insurance system has minimum benefits and must pay for itself, it can't be voluntary. Everyone has to sign up.

Or something else has to give — benefits have to be more flexible, or the program can't be expected to pay for itself. 

For example, Medicare and Social Security are mandatory. Everyone effectively signs up through their payrolls. Even so, questions arise about how flexible their benefits have to be if the programs must be self-financing. 

So what does this mean for the remainder of the new healthcare law? Its fate hinges on the so-called individual mandate — the requirement that everyone, including younger and healthier people, participate (or pay a fine if they don't).

Today's decision to jettison long-term care offers clear evidence why that individual mandate is so necessary. 

Unfortunately, the mandate isn't popular — because it wasn't modeled on Social Security or Medicare but based instead on private insurers who'll want to maximize revenues. It's also vulnerable to constitutional challenge, largely for the same reason. The Supreme Court will likely decide its fate this term. 

Why, oh why, didn't the Obama administration make life easy for itself and for Americans by choosing the simplest and most efficient system for both primary and long-term health insurance  — Medicare for all? 

It didn't because it wanted to get Republican votes. It got almost none. And now the Republicans are enjoying the prospect of the law being dismembered piece by piece, starting today.  

The Triumph of Dogma, and a Sad Goodbye to David Frum

Every other Wednesday evening for the past few years I've been offering commentary on a spritely show on public radio called "Marketplace." On alternative Wednesdays David Frum, a former speechwriter for George W. Bush, has been airing his views. 

This past Wednesday, Frum called it quits. He explained to the show's host, Kai Risdal, that he could no longer represent Republican views.  

I think that there's a kind of expectation that when you do it that you represent the broad point of view of your half of the political spectrum. And although I consider myself a conservative and a Republican, and I think that the right-hand side of the spectrum has the better answers for the long-term growth of economy — low taxes, restrained government, less regulation — it's pretty clear that facing the immediate crisis — very intense crisis — I'm just not representing the view of most people who call themselves Republicans and conservatives these days…. And it's a service to the radio audience if they want to hear people explaining effectively why one of the two great parties takes the view that it does — it needs to have somebody who agrees with that great party.

I respect David's decision but I disagree with his understanding of his job on "Marketplace." And I find his decision to leave a sad commentary (no pun intended) on what's happening to public discourse in America. 

Why exactly was it necessary for David Frum to "represent" the views of conservative Republicans?

I don't feel any obligation to represent liberal Democrats. Over the years I've argued, for example, in favor of getting rid of the corporate income tax, creating school vouchers inversely related to family incomes, and extending free-trade agreements — positions not exactly favored by liberal Democrats.

The American public doesn't want or need to hear "representatives" from the so-called right or left. It wants insight into what's best for America. 

Yet over and over again — on the radio, on TV, in print, in the blogosphere, and all over Washington — political ideology is substituting for thought. 

Politicians take oaths and sign pledges. Special-interest groups abide by litmus tests and ideological labels. The media is either assertively liberal or conservative. Pundits are either on the left or the right.   

Meanwhile, the Republican Party has become so extreme that it's more and more difficult for anyone to rationally "represent" its views. As Frum put in in a post on his website, FrumForum, "Under the pressure of the current crisis — intoxicated by anti-Obama feelings and incited by talk radio and Fox — Republicans have staked out an extreme position on the role of government." 

What if conservative Republicans believe the sun revolves around the earth? Would someone in David Frum's position who disagrees feel compelled to stop offering "conservative" commentaries about the celestial bodies? And would a major media outlet then be obliged to find a replacement who agrees with conservative dogma?  (This isn't such a far-fetched example when you consider what leading Republicans say about evolution or climate change.)

David's particular break with Republicans has come over what to do about the continuing awful economy. Here's what he told Kai Risdal:

This is not a moment for government to be cutting back. … Right now we're watching state governments try to balance all of their budgets at the same time in the middle of this crisis. We've seen half a million public sector jobs disappear. Now, if these were good times, I would applaud that. We need to see a thinner public sector — especially at the state and local level. But we're seeing what happens when you do that as an anti-recession measure and you make the recession worse. And even though we're in a technical recovery, incomes and employment — all of that remains lagging for people — I think that we've rediscovered in this crisis something that I think we all knew. Which is, there's a reason why the people of the 1930s built some kind of minimum guarantee — unemployment insurance, health care coverage and things like that. And it's not because they wanted to be nice. It's because in a crisis when people lose their jobs, if there is no social safety net they loose 100 percent of their purchasing power.

It so happens the vast majority of economists and economic policy experts agree with David on this — even though you wouldn't know it if you watched or listened to broadcast debates between a so-called "liberal" and "conservative" economists. 

No wonder Americans are so confused. 

David Frum's voice will be sorely missed. Yet I understand his dilemma. At the start of his interview on "Marketplace" explaining his decision to leave the program, he was introduced this way: 

David Frum has been a regular commentator for this program for years, offering the voice of the political right against Robert Reich and the views of the political left. 

That introduction illustrates the problem. 

THE SEVEN BIGGEST ECONOMIC LIES The President's Jobs Bill...

THE SEVEN BIGGEST ECONOMIC LIES

The President's Jobs Bill doesn't have a chance in Congress — and the Occupiers on Wall Street and elsewhere can't become a national movement for a more equitable society – unless more Americans know the truth about the economy.  

Here's a short (2 minute 30 second) effort to rebut the seven biggest whoppers now being told by those who want to take America backwards. The major points:

 

1. Tax cuts for the rich trickle down to everyone else. Baloney. Ronald Reagan and George W. Bush both sliced taxes on the rich and what happened? Most Americans' wages (measured by the real median wage) began flattening under Reagan and have dropped since George W. Bush. Trickle-down economics is a cruel joke. 

 2. Higher taxes on the rich would hurt the economy and slow job growth. False. From the end of World War II until 1981, the richest Americans faced a top marginal tax rate of 70 percent or above. Under Dwight Eisenhower it was 91 percent. Even after all deductions and credits, the top taxes on the very rich were far higher than they've been since. Yet the economy grew faster during those years than it has since. (Don't believe small businesses would be hurt by a higher marginal tax; fewer than 2 percent of small business owners are in the highest tax bracket.)  

 3. Shrinking government generates more jobs. Wrong again. It means fewer government workers – everyone from teachers, fire fighters, police officers, and social workers at the state and local levels to safety inspectors and military personnel at the federal. And fewer government contractors, who would employ fewer private-sector workers. According to Moody's economist Mark Zandi (a campaign advisor to John McCain), the $61 billion in spending cuts proposed by the House GOP will cost the economy 700,000 jobs this year and next.

 4. Cutting the budget deficit now is more important than boosting the economy. Untrue. With so many Americans out of work, budget cuts now will shrink the economy. They'll increase unemployment and reduce tax revenues. That will worsen the ratio of the debt to the total economy. The first priority must be getting jobs and growth back by boosting the economy. Only then, when jobs and growth are returning vigorously, should we turn to cutting the deficit.

 5. Medicare and Medicaid are the major drivers of budget deficits. Wrong. Medicare and Medicaid spending is rising quickly, to be sure. But that's because the nation's health-care costs are rising so fast. One of the best ways of slowing these costs is to use Medicare and Medicaid's bargaining power over drug companies and hospitals to reduce costs, and to move from a fee-for-service system to a fee-for-healthy outcomes system. And since Medicare has far lower administrative costs than private health insurers, we should make Medicare available to everyone.

 6. Social Security is a Ponzi scheme. Don't believe it. Social Security is solvent for the next 26 years. It could be solvent for the next century if we raised the ceiling on income subject to the Social Security payroll tax. That ceiling is now $106,800.  

 7. It's unfair that lower-income Americans don't pay income tax. Wrong. There's nothing unfair about it. Lower-income Americans pay out a larger share of their paychecks in payroll taxes, sales taxes, user fees, and tolls than everyone else.

Demagogues through history have known that big lies, repeated often enough,  start being believed — unless they're rebutted. These seven economic whoppers are just plain wrong. Make sure you know the truth – and spread it on.

 

The Wall Street Occupiers and the Democratic Party

Will the Wall Street Occupiers morph into a movement that has as much impact on the Democratic Party as the Tea Party has had on the GOP? Maybe. But there are reasons for doubting it.

Tea Partiers have been a mixed blessing for the GOP establishment – a source of new ground troops and energy but also a pain in the assets with regard to attracting independent voters. As Rick Perry and Mitt Romney square off, that pain will become more evident.

So far the Wall Street Occupiers have helped the Democratic Party. Their inchoate demand that the rich pay their fair share is tailor-made for the Democrats' new plan for a 5.6 percent tax on millionaires, as well as the President's push to end the Bush tax cut for people with incomes over $250,000 and to limit deductions at the top.

And the Occupiers give the President a potential campaign theme. "These days, a lot of folks who are doing the right thing aren't rewarded and a lot of folks who aren't doing the right thing are rewarded," he said at his news conference this week, predicting that the frustration fueling the Occupiers will "express itself politically in 2012 and beyond until people feel like once again we're getting back to some old-fashioned American values."

But if Occupy Wall Street coalesces into something like a real movement, the Democratic Party may have more difficulty digesting it than the GOP has had with the Tea Party.

After all, a big share of both parties' campaign funds comes from the Street and corporate board rooms. The Street and corporate America also have hordes of public-relations flacks and armies of lobbyists to do their bidding – not to mention the unfathomably deep pockets of the Koch Brothers and Dick Armey's and Karl Rove's SuperPACs. Even if the Occupiers have access to some union money, it's hardly a match.

Yet the real difficulty lies deeper. A little history is helpful here.

In the early decades of the twentieth century, the Democratic Party had no trouble embracing economic populism. It charged the large industrial concentrations of the era – the trusts – with stifling the economy and poisoning democracy. In the 1912 campaign Woodrow Wilson promised to wage "a crusade against powers that have governed us … that have limited our development … that have determined our lives … that have set us in a straightjacket to so as they please." The struggle to break up the trusts would be, in Wilson's words, nothing less than a "second struggle for emancipation."

Wilson lived up to his words – signing into law the Clayton Antitrust Act (which not only strengthened antitrust laws but also exempted unions from their reach), establishing the Federal Trade Commission (to root out "unfair acts and practices in commerce"), and creating the first national income tax.

Years later Franklin D. Roosevelt attacked corporate and financial power by giving workers the right to unionize, the 40-hour workweek, unemployment insurance, and Social Security. FDR also instituted a high marginal income tax on the wealthy.

Not surprisingly, Wall Street and big business went on the attack. In the 1936 campaign, Roosevelt warned against the "economic royalists" who had impressed the whole of society into service. "The hours men and women worked, the wages they received, the conditions of their labor … these had passed beyond the control of the people, and were imposed by this new industrial dictatorship," he warned. What was at stake, Roosevelt thundered, was nothing less that the "survival of democracy." He told the American people that big business and finance were determined to unseat him. "Never before, in all our history, have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me, and I welcome their hatred!"

By the 1960s, though, the Democratic Party had given up on populism. Gone from presidential campaigns were tales of greedy businessmen and unscrupulous financiers. This was partly because the economy had changed profoundly. Postwar prosperity grew the middle class and reduced the gap between rich and poor. By the mid-1950s, a third of all private-sector employees were unionized, and blue-collar workers got generous wage and benefit increases.

By then Keynesianism had become a widely-accepted antidote to economic downturns – substituting the management of aggregate demand for class antagonism. Even Richard Nixon purportedly claimed "we're all Keynesians now." Who needed economic populism when fiscal and monetary policy could even out the business cycle, and the rewards of growth were so widely distributed?

But there was another reason for the Democrats' increasing unease with populism. The Vietnam War spawned an anti-establishment and anti-authoritarian New Left that distrusted government as much if not more than it distrusted Wall Street and big business. Richard Nixon's electoral victory in 1968 was accompanied by a deep rift between liberal Democrats and the New Left, which continued for decades.

Enter Ronald Reagan, master storyteller, who jumped into the populist breach. If Reagan didn't invent right-wing populism in America he at least gave it full-throttled voice. "Government is the problem, not the solution," he intoned, over and over again. In Reagan's view, Washington insiders and arrogant bureaucrats stifled the economy and hobbled individual achievement.

The Democratic Party never regained its populist footing. To be sure, Bill Clinton won the presidency in 1992 promising to "fight for the forgotten middle class" against the forces of "greed," but Clinton inherited such a huge budget deficit from Reagan and George H.W. Bush that he couldn't put up much of a fight. And after losing his bid for universal health care, Clinton himself announced that the "era of big government" was over – and he proved it by ending welfare.

Democrats have not been the ones to engage in class warfare. That was the distinct product of right-wing Republican populism. Anybody recall the Republican ad in the 2004 presidential election describing Democrats as a "tax-hiking, government spending, latte-drinking, sushi-eating, Volvo-driving, New York Times-reading, body-piercing, Hollywood-loving, left-wing freak Show"?

Republicans repeatedly attacked John Kerry as a "Massachusetts liberal" who was part of the "Chardonnay-and-brie set." George W. Bush mocked Kerry for finding a "new nuance" each day on Iraq – drawing out the word "nuance" to emphasize Kerry's French cultural elitism. "In Texas, we don't do nuance," he said, to laughter and applause. House Republican leader Tom DeLay opened his campaign speeches by saying "Good morning or, as John Kerry would say, Bonjour."

The Tea Party has been quick to pick up the same class theme. At the Conservative Political Action Conference of 2010, Minnesota Governor Tom Pawlenty attacked "the elites" who believe Tea Partiers are "not as sophisticated because a lot of them didn't go to Ivy League Schools" and "don't hang out at … Chablis-drinking, Brie-eating parties in San Francisco." After his son Rand Paul was elected for Kentucky's Senate seat that May, Congressman Ron Paul explained that voters want to "get rid of the power people who run the show, the people who think they're above everyone else."

Which brings us to the present day. Barack Obama is many things but he is as far from left-wing populism as any Democratic president in modern history. True, he once had the temerity to berate "fat cats" on Wall Street, but that remark was the exception – and subsequently caused him endless problems on the Street.

To the contrary, Obama has been extraordinarily solicitous of Wall Street and big business – making Timothy Geithner Treasury Secretary and de facto ambassador from the Street; seeing to it that Bush's Fed appointee, Ben Bernanke, got another term; and appointing GE Chair Jeffrey Immelt to head his jobs council.

Most tellingly, it was President Obama's unwillingness to place conditions on the bailout of Wall Street – not demanding, for example, that the banks reorganize the mortgages of distressed homeowners, and that they accept the resurrection of the Glass-Steagall Act, as conditions for getting hundreds of billions of taxpayer dollars – that contributed to the new populist insurrection.

The Wall Street bailout fueled the Tea Party (at the Utah Republican convention that ousted incumbent Republican Senator Robert Bennett in 2010, the mob repeatedly shouted "TARP! TARP! TARP!"), and it surely fuels some of the current fulminations of Occupy Wall Street.

This is not to say that the Occupiers can have no impact on the Democrats. Nothing good happens in Washington – regardless of how good our president or representatives may be – unless good people join together outside Washington to make it happen. Pressure from the left is critically important.

But the modern Democratic Party is not likely to embrace left-wing populism the way the GOP has embraced – or, more accurately, been forced to embrace – right-wing populism. Just follow the money, and remember history.

The Truth About the Economy

The Truth About the Economy

Follow the Money: Behind Europe's Debt Crisis Lurks Another Giant Bailout of Wall Street

Today Ben Bernanke added his voice to those who are worried about Europe's debt crisis.

But why exactly should America be so concerned? Yes, we export to Europe – but those exports aren't going to dry up. And in any event, they're tiny compared to the size of the U.S. economy.

If you want the real reason, follow the money. A Greek (or Irish or Spanish or Italian or Portugese) default would have roughly the same effect on our financial system as the implosion of Lehman Brothers in 2008.

Financial chaos.

Investors are already getting the scent. Stocks slumped to 13-month low on Monday as investors dumped Wall Street bank shares.

The Street has lent only about $7 billion to Greece, as of the end of last year, according to the Bank for International Settlements. That's no big deal.

But a default by Greece or any other of Europe's debt-burdened nations could easily pummel German and French banks, which have lent Greece (and the other wobbly European countries) far more.

That's where Wall Street comes in. Big Wall Street banks have lent German and French banks a bundle.

The Street's total exposure to the euro zone totals about $2.7 trillion. Its exposure to to France and Germany accounts for nearly half the total.

And it's not just Wall Street's loans to German and French banks that are worrisome. Wall Street has also insured or bet on all sorts of derivatives emanating from Europe – on energy, currency, interest rates, and foreign exchange swaps. If a German or French bank goes down, the ripple effects are incalculable.

Get it? Follow the money: If Greece goes down, investors start fleeing Ireland, Spain, Italy, and Portugal as well. All of this sends big French and German banks reeling. If one of these banks collapses, or show signs of major strain, Wall Street is in big trouble. Possibly even bigger trouble than it was in after Lehman Brothers went down.

That's why shares of the biggest U.S. banks have been falling for the past month. Morgan Stanley closed Monday at its lowest since December 2008 – and the cost of insuring Morgan's debt has jumped to levels not seen since November 2008.

It's rumored that Morgan could lose as much as $30 billion if some French and German banks fail. (That's from Federal Financial Institutions Examination Council, which tracks all cross-border exposure of major banks.)

$30 billion is roughly $2 billion more than the assets Morgan owns (in terms of current market capitalization.)

But Morgan says its exposure to French banks is zero. Why the discrepancy? Morgan has probably taken out insurance against its loans to European banks, as well as collateral from them. So Morgan feels as if it's not exposed. 

But does anyone remember something spelled AIG? That was the giant insurance firm that went bust when Wall Street began going under. Wall Street thought it had insured its bets with AIG. Turned out, AIG couldn't pay up.

Haven't we been here before?

Republicans and Wall Street executives who continue to yell about Dodd-Frank overkill are dead wrong. The fact no one seems to know Morgan's exposure to European banks or derivatives – or that of most other giant Wall Street banks – shows Dodd-Frank didn't go nearly far enough.

Regulators still don't know what's happening on the Street. They have no clear picture of the derivatives exposure of giant U.S. financial institutions.

Which is why Washington officials are terrified – and why Treasury Secretary Tim Geithner keeps begging European officials to bail out Greece and the other deeply-indebted European nations.

Several months ago, when the European debt crisis first became apparent, Wall Street banks said not to worry. They had little or no exposure to Europe's problems. The Federal Reserve said the same. In July, Ben Bernanke reassured Congress the exposure of U.S. banks to European nations in trouble was "quite small."

Now we're hearing a different tune.

Make no mistake. The United States wants Europe to bail out its deeply indebted nations so they can repay what they owe big European banks. Otherwise, those banks could implode — taking Wall Street with them. 

One of the many ironies here is some badly-indebted European nations (Ireland is the best example) went deeply into debt in the first place bailing out their banks from the crisis that began on Wall Street. 

Full circle.

In other words, Greece isn't the real problem. Nor is Ireland, Italy, Portugal, or Spain. The real problem is the financial system — centered on Wall Street. And we still haven't solved it. 

The American Jobs Depression, and How to Get Out of It

The Reverend Al Sharpton and various labor unions have announced a March for Jobs. But I'm afraid we'll need more than marches to get jobs back.

Since the start of the Great Recession at the end of 2007, America's potential labor force – that is, working-age people who want jobs - has grown by over 7 million. But since then, the number of Americans who actually have jobs has shrunk by more than 300,000.

In other words, we're in a deep hole and the hole is deepening. In August, the United States created no jobs at all. Zero.

America's ongoing jobs depression - which is what it deserves to be called - is the worst economic calamity to hit this nation since the Great Depression. It's also terrible news for President Obama, whose chances for re-election now depend almost entirely on the Republican party putting up someone so vacuous and extremist that the nation rallies to Obama regardless.

The problem is on the demand side. Consumers (whose spending is 70% of the economy) can't boost the American economy on their own. They're still too burdened by debt, especially on homes that are worth less than their mortgages. In addition, their jobs are disappearing, their pay is dropping, their medical bills are soaring.

Consumer spending slowed again in August as incomes dropped.

Businesses, for their part, won't hire without more sales. So we're in a vicious cycle. The question is what to do about it.

When consumers and businesses can't boost the economy on their own, the responsibility must fall to the purchaser of last resort. As John Maynard Keynes informed us 75 years ago, that purchaser is the government.

Government can hire people directly to maintain the nation's parks and playgrounds and to help in schools and hospitals. It can funnel money to help cash-starved states and local government so they don't have to continue to slash payrolls and public services. And it can hire indirectly - contracting with companies to build schools, revamp public transportation and rebuild the nation's crumbling highways, bridges and ports.

Not only does this create jobs but also puts money in the hands of all the people who get the jobs, so they can turn around and buy the goods and services they need - generating more jobs. Not exactly rocket science.

But congressional Republicans are firmly opposed. Why don't Republicans get it? Either they're knaves - they want the economy to stay awful through next election day so Obama gets the boot. Or they're fools - they've bought the lie that reducing the deficit now creates more jobs.

Republicans claim businesses aren't hiring because they're uncertain about regulatory costs, or their taxes are too high, or they can't find the skilled workers they need. But if these were the reasons businesses weren't hiring - and consumer demand were growing - we'd expect companies to make more use of their current employees. The average number of hours worked per week by the typical employee would be increasing.

In fact, the length of the average workweek has been dropping. In August, it declined for the third month in a row, to 34.2 hours. That's back to where it was at the start of the year - barely longer than what it was at its shortest point two years ago (33.7 hours in June 2009).

Republicans say America can't afford to spend more. In truth, we'll be in worse shape if we don't. If the economy remains dead in the water, the ratio of public debt to the total economy balloons.

Besides, the United States can now borrow money from the rest of the world at fire-sale rates. Interest on the ten-year Treasury bill is now under 2%. That's an almost unprecedented deal. With so many Americans unemployed and so much of our infrastructure in disrepair, this is the ideal time to get on with the work of rebuilding the nation.

But it won't be enough for government to become the buyer of last resort – in Keynes's words, to prime the pump. If the economy is to continue to grow and create jobs after the government has stopped the priming, there must be enough water in the well. Yet, now and in the foreseeable future, America's vast middle class doesn't have the purchasing power to keep the mechanism going.

For more than 30 years, the median wage in America has barely increased, adjusted for inflation – even though the economy is twice as large as it was three decades ago. Almost all the gains have gone to the top - especially the top 1%, who now receive over 20% of total income (it was just 10% in 1980).

As long as America's vast middle class could continue to borrow on the rising value of their homes, they continued to spend - thereby keeping the economy going. But going deeper into debt is not a sustainable strategy. Now, after the bubble burst, America's middle class doesn't have enough money to maintain the economy at or near full employment.

Any long-term strategy for rescuing the American economy must therefore seek to reverse the widening gap in income and wealth. One place to start is tax reform. The earned income tax credit - a wage subsidy for lower-income workers - should be enlarged and expanded. Taxes on the middle class should be reduced - including social security payroll taxes (80% of Americans pay more in payroll taxes than they do in income taxes).

Taxes on the wealthy, on the other hand, should be increased. The president has proposed closing some tax loopholes that allow the super-rich to reduce their tax liability, and to end the tax cut on the rich put in place by George W Bush in 2001 (thereby increasing the top marginal tax rate to what it was under Bill Clinton - 39%).

But the nation should go much further, particularly in light of the large budget deficit projected several years from now. We need more tax brackets at the top, with higher marginal rates. The capital-gains tax (now at 15%) should be raised to match the income tax rate. And a wealth surtax of 2% should be applied to all wealth in excess of $7 million.

Needless to say, Republicans won't go along with anything like this. They balk even at the president's modest plan.

It would be better for President Obama to assume that he will get no Republican support this year and next, and build his 2012 election campaign around a bold plan to revive jobs and the American middle class — and end the American Jobs Depression.

The Moral Question

We dodged another shut-down bullet, but only until November 18. That's when the next temporary bill to keep the government going runs out. House Republicans want more budget cuts as their price for another stopgap spending bill.

Among other items, Republicans are demanding major cuts in a nutrition program for low-income women and children. The appropriation bill the House passed June 16 would deny benefits to more than 700,000 eligible low-income women and young children next year.

What kind of country are we living in?

More than one in three families with young children is now living in poverty (37 percent, to be exact) according to a recent analysis of Census data by Northeastern University's Center for Labor Market Studies. That's the highest percent on record. The Agriculture Department says nearly one in four young children (23.6) lives in a family that had difficulty affording sufficient food at some point last year.

We're in the worst economy since the Great Depression – with lower-income families and kids are bearing the worst of it – and what are Republicans doing? Cutting programs Americans desperately need to get through it.

Medicaid is also under assault. Congressional Republicans want to reduce the federal contribution to Medicaid by $771 billion over next decade and shift more costs to states and low-income Americans.

It gets worse. Most federal programs to help children and lower-income families are in the so-called "non-defense discretionary" category of the federal budget. The congressional super-committee charged with coming up with $1.5 trillion of cuts eight weeks from now will almost certainly take a big whack at this category because it's the easiest to cut. Unlike entitlements, these programs depend on yearly appropriations.

Even if the super-committee doesn't agree (or even if they do, and Congress doesn't approve of their proposal) an automatic trigger will make huge cuts in domestic discretionary spending.

It gets even worse. Drastic cuts are already underway at the state and local levels. Since the fiscal year began in July, states no longer receive about $150 billion in federal stimulus money — money that was used to fill gaps in state budgets over the last two years.

The result is a downward cascade of budget cuts – from the federal government to state governments and then to local governments – that are hurting most Americans but kids and lower-income families in particular.

So far this year, 23 states have reduced education spending. According to a survey of city finance officers released Tuesday by the National League of Cities, half of all American cities face cuts in state aid for education.

As housing values plummet, local property tax receipts are down. That means even less money for schools and local family services. So kids are getting larger class sizes, reduced school hours, shorter school weeks, cuts in pre-Kindergarten programs (Texas has eliminated pre-Kindergarten for 100,000 children), even charges for textbooks and extra-curricular activities.

Meanwhile the size of America's school-age population keeps growing notwithstanding. Between now and 2015, an additional 2 million kids are expected to show up in our schools.

Local family services are being cut or terminated. Tens of thousands of social workers have been laid off. Cities and counties are reducing or eliminating their contributions to Head Start, which provides early childhood education to the children of low-income parents.

All this would be bad enough if the economy were functioning normally. For these cuts to happen now is morally indefensible.

Yet Republicans won't consider increasing taxes on the rich to pay for what's needed – even though the wealthiest members of our society are richer than ever, taking home a bigger slice of total income and wealth than in seventy-five years, and paying the lowest tax rates in three decades.

The President's modest proposals to raise taxes on the rich – limiting their tax deductions, ending the Bush tax cut for incomes over $250,000, and making sure the rich pay at the same rate as average Americans – don't come close to paying for what American families need.

Marginal tax rates should be raised at the top, and more tax brackets should be added for incomes over $500,000, over $1,500,000, over $5 million. The capital gains tax should be as high as that on ordinary income.

Wealth over $7.2 million should be subject to a 2 percent surtax. After all, the top one half of 1 percent now owns over 28 percent of the nation's total wealth. Such a tax on them would yield $70 billion a year. According to an analysis by Yale's Bruce Ackerman and Anne Alstott, that would generate at least half of $1.5 trillion deficit-reduction target over ten years set for the supercommittee.

Another way to raise money would be through a tiny tax (one-half of one percent) tax on financial transactions. This would generate $200 billion a year, and hardly disturb Wall Street's casino at all. (The European Commission is about to unveil such a tax there.)

All this can be done, but only if Americans understand what's really at stake here.

When Republicans recently charged the President with promoting "class warfare," he answered it was "just math." But it's more than math. It's a matter of morality.

Republicans have posed the deepest moral question of any society: whether we're all in it together. Their answer is we're not.

President Obama should proclaim, loudly and clearly, we are.

Why This is Exactly the Time to Rebuild America's Infrastructure

Seems like only yesterday conservative nabobs of negativity predicted America's ballooning budget deficit would generate soaring inflation and crippling costs of additional federal borrowing. 

Remember Standard & Poor's downgrade of the United States? Recall the intense worry about investors' confidence in government bonds — America's IOUs? 

Hmmm.

Last week ten-year yields on U.S. Treasuries closed at 1.83 percent.

In other words, they were wrong.

In fact, it's cheaper than ever for the United States to borrow. That's because global investors desperately want the safety of dollars. Almost everywhere else on the globe is riskier. Europe is in a debt crisis, many developing nations are gripped by fears the contagion will spread to them, Japan remains in critical condition, China's growth is slowing. 

Put this together with two other facts:

Unemployment in America remains sky-high. 14 million Americans are out of work and 25 million are looking for full-time jobs.

The nation's infrastructure is crumbling. Our roads, bridges, water and sewer systems, subways, gas pipelines, ports, airports, and school buildings are desperately in need of repair. Deferred maintenance is taking a huge toll.

Now connect the dots. Anyone with half a brain will see this is the ideal time to borrow money from the rest of the world to put Americans to work rebuilding the nation's infrastructure. 

Problem is, too many in Washington have less than half a brain. 

When Will Wall Street Call for More Federal Spending?

The Dow Jones Industrial Average dropped another 3 percent today as Wall Street metabolized the truth most Americans already know: We're in a recession. The "double dip" has arrived.

Most Americans never really emerged from the Great Recession anyway. 

We can get out of this recession but not via the Fed's "quantitative easing" alone. When consumers can't spend and businesses won't spend without additional consumers, government must be the spender of last resort.

Juicing the economy back to health (notice I didn't use the "s" word Republicans have now vilified) will require at least $700 billion in additional federal spending this year and next. (This number takes account of state and local government cutbacks as well as well as the current shortfall between current economic activity and the economy's productive capacity at or near full employment.)

But this magnitude of additional spending isn't feasible in the face of Tea Party Republican intransigence. Hell, Republicans won't even spend additional money on flood and hurricane relief. The Tea Party obsession about the federal deficit and the size of the government is prevailing.

Not only is this obsession keeping millions of Americans out of work, it's also starting to bring down the Street.

If this keeps up, we'll have a showdown between establishment Republicans who understand what must be done — and who will support substantially more federal spending in the short term in order to goose the economy — and Tea Party zealots who refuse to face reality. 

The crack in the Republican Party between its establishment and Tea Party wings is viewed politically as a contest between Mitt Romney and Rick Perry. But in reality it's a brewing fight between economic pragmatists and right-wing ideologues. (Don't expect Romney to call for more government spending, at least before the Republican nomination.)

The titans of Wall Street may not want to Barack Obama reelected, but the Street has an even greater interest in saving its assets and its ass.