Word has just come down that U.S. Rep. Henry Waxman (CA-30) has defeated Rep. John Dingell (MI-15) in the race for chairman of the powerful House Energy and Commerce Committee. This will have a dramatic impact on the course of climate change and energy legislation in the 111th Congress.
New York City -- At NDN, we have been arguing for many months that a stimulus package is needed to jump start this difficult economy. We need a proposal that works for the long term as well as the short term. Absent real stimulus, there is a possibility, as Rob Shapiro argues, that the economy may lapse into a "sub-optimal equilibrium" in which people spend and produce far less than they can. However, we have also argued that the form the stimulus takes is as important as the amount. Invesments in clean infrastructure have the ability not only to get money onto the street quickly but also to address our long-term economic challenges such as stagnant wages, rising energy costs and the threat of climate change.
Yesterday, President-elect Obama and his Chief of Staff Rahm Emanuel said that a clean energy and infrastructure stimulus package literally will be the first order of business for the new Administration come January. What a difference a new President can make!
This is good news for the American economy and the American people. Clean infrastructure investments have the ability to create high-paying domestic jobs, lower energy costs and raise productivity all while stimulating the economy in the short term.
Here are some of the stimulus measures proposed yesterday by the President-elect's new chief of staff: mass transit, upgraded electricity transmission lines, "smart" electrical meters that allow consumers to save money by using electricity at off-peak hours, and universal broadband Internet access.
All not only make sense but are critical to our future.
As the new Administration takes shape and a new Congress prepares to take office, we look forward to working with stakeholders and policy makers to make these critical investments and get America moving again!
In a remarkable spectacle, an Administration with a sustained record of economic blunders and failures finds itself aghast at the mistakes and mismanagement of U.S. automobile companies. Imagine Confederate General John Pemberton, after leading his forces to an historic defeat at Vicksburg, dismissing his cook for squandering the rum rations.
Yes, America's big three automobile makers (with an assist from the auto workers' union) have been so consistently unimaginative, self-regarding and inept that they've brought themselves to the brink of bankruptcy. Now they find themselves pleading for a bailout which, under normal circumstances, most sane policy makers would dismiss out of hand. But circumstances today are as far from normal as most Americans have ever experienced, and the request requires a serious second look.
The automakers had been in deep trouble for some time; but until the economic crisis hit, their condition was far from terminal. The Bush Administration's inept strategies and incompetent management of the crisis then dealt a weak industry new, serious body blows. First, the sudden upheavals across the financial system, along with the Administration's inability to explain how it happened or how they intended to protect the rest of us from the fallout, bred such extreme caution and even panic among consumers, that most demand for Detroit's products dried up. Moreover, much of the shrinking cohort of Americans still prepared to purchase a new U.S.-made car can't find financing for it. That's because two decades of deep federal distrust of regulating most financial institutions allowed them to speculate so recklessly with borrowed funds, that now, even with the bailout, their balance sheets are so precarious that they won't provide a new loan to anybody who couldn't pay for a new car without one. Finally, the crisis turned off the lines of credit and other routine financing that auto manufacturers need to operate. All three blows are consequences of the remarkable failures by the White House, the Treasury and the Federal Reserve to comprehend the dangers of the sub-prime mortgage market as it began to unravel and address effectively those dangers as the crisis snowballed.
So, the American auto industry now faces a kind of life-or-near-death moment, and if the President and Congress turn their backs, the results could drive down the economy much further. That's the only reason to countenance a bailout for an old industry that doggedly resists modernizing itself -- but under the current circumstances, it's a compelling one.
American businesses and consumers remain dangerously vulnerable to yet another economically-bloody shock which could further shift expectations downward, which in turn could produce a Depression-like state of mind and what economists call a "sub-optimal equilibrium." That's a very unpleasant condition in which markets produce much less wealth, jobs and incomes than they could, because consumers, businesses and banks no longer believe that the conditions to support better times can be sustained.
Since the Bush Administration is at least partly responsible for what now faces the auto industry -- and now faces the rest of us, too - they should put their weight behind new help for automakers and auto workers. But the bailout shouldn't be a handout. The industry needs both a shake-up and a technological shift, and strings tied to the federal assistance can help make both happen. The first part of the shake-up is simple: the current executive teams are out, and everybody takes real pay cuts -- including some workers who at GM reportedly earn an average of $71 per hour (including benefits), compared to Toyota's U.S. workers at $49 per hour. The aid also should be tied to a greater commitment to develop and produce new engines and cars with extremely high mileage per gallon and a small carbon footprint, because that's the market being created by high energy prices and climate change. And to provide additional motivation, the government can conduct the kind of competition the Pentagon carries out routinely, in which the first automaker to produce a 75- or 100-mile-per-gallon, low-carbon automobile wins a 10-year contract to supply the federal government fleet. And the taxpayers providing the aid should not only get an equity share in return for their investments, but public-representative seats on their boards, to keep watch and keep tabs. Finally, the government should commit itself to cajoling or coercing the Big Three's lenders to enter into debt-equity swaps with the auto companies, and so improve their balance sheets enough to attract new private investors (and so avoid a second bailout).
Rescuing the auto companies is, of course, a slippery slope, but the alternative may be to skip past the slope and head directly for the cliff. As it is, it still may not be enough. Home foreclosures continue to rise, and the additional losses to mortgage-backed securities and their derivatives may soon absorb much of the current Wall Street bailout. Further, the global recession has pushed a number of emerging-market and transition economies perilously close to sovereign debt defaults, which would deal another serious blow to the financial institutions that today hold the debt of those countries. At a minimum, neither the economy nor the auto industry will tread water while Americans wait for the new President and new Congress to take office. That's why, this time, the extraordinary conditions to justify bailing out a failing industry are present. And if a Republican President and his party in Congress keep their ideological blinders on and ignore those conditions, Detroit's demise could take the GOP with it for a long time.
New York City -- On October 3, the day President Bush signed the $700 billion bailout package that Hank Paulson called vital to saving American capitalism, the Dow closed at 10,325. Yesterday it closed at 8,424. In the six unhappy weeks of the bailout fund's life, the Dow has shed close to 2,000 points or about 20% of its value. Almost as soon as the fund was authorized, the Treasury and the Fed shifted gears and followed Gordon Brown in using the first slice to invest in banks. Capitulating last week to the fund's dubious impact on markets, Secretary Paulson announced that the Troubled Assets fund would not be used, after all, to buy troubled assets. Yesterday, he announced he does not plan to use the unspent funds of about $410 billion at all but will instead leave it as dry powder for the Obama Administration. Some have unkindly called this fund a slush fund. However, launched by a former Goldman star, levered at close to 100% and with the goal of making opportunistic investments, it really resembles nothing so much as a Hedge Fund.
So what's wrong with a government hedge fund?
The advantage of a Hedge Fund over a more constrained capital allocation process is that the fund manager can make the decisions quickly. If the manager is a genius, the fund does well. However, a genius one year can turn out to be not so smart the next. And as the limited partners in this hedge fund, the public should have the right to withdraw its money if the fund manager does not have a strategy.
In a world of constrained debt, one cost of the public's commitment to this hedge fund is that it has used up a healthy amount of the public's credit -- something that has not gone unnoticed by markets. As an article in the current Barrons observes, the yield curve, or the premium for borrowing for a longer period, has stiffened, recalling the famous inflation premium on long-term debt that drove the Clinton Administration's fiscal restraint. That premium disappeared during the Bush years, thanks to supercharged global liquidity from the Asian savings glut and expansion that followed the Asian financial crisis. Its reappearance, however, bears noting. More ominously, perhaps, a little known derivative, the credit default swap for long-term U.S. government bonds -- a derivative that should not exist since it represents insurance against a Treasury default -- has risen in price. In other words, some are now betting against the full faith and credit of the U.S. government.
However, this hedge fund poses another problem for the economy and government policy that is impacting the proposed government stimulus, its opportunity cost. Any focused stimulus package now pales in comparison with the TARP hedge fund. Of what stimulative impact is $2 billion for weatherization or $10 billion to extend unemployment benefits when the Treasury is giving out chunks of $30 billion or $50 billion at a time to AIG?
The hedge fund -- while it may have served a purpose in helping the banks stay solvent --threatens to interfere with needed stimulus.
As we have argued at NDN, the unbridled use of monetary tools last year left the Fed empty handed as we enter a recession and a fiscal stimulus is now the primary tool left to policy makers with which to address the slowdown. But we have also argued this fiscal stimulus should work for the long term as well as the short term.
We suggested a substantial share go into clean infrastructure projects that get money out onto the street but also address our long-term energy, environmental and economic challenges. Clean infrastructure projects can not only can create jobs and exert a large multiplier effect, but also pave the way for future prosperity. As President-elect Obama said over the weekend and again yesterday, clean energy is his top priority next year because it has the ability to address so many of our challenges at once.
However, as long as the Hedge Fund overshadows any proposed stimulus, it will be difficult for Congress to make these needed investments. What, then, is the answer?
Now that the immediate challenge of stabilizing the banks has been met, Congress and the incoming Administration should reassert their authority over the second half of the hedge fund. A portion of this money might be better allocated to stimulus than loans to banks. In any case, it should not stand in the way of a meaningful stimulus package.
The hedge fund may have served a short term purpose, but it is no way over the long term to allocate public funds. The sooner we begin making real investments, not just backstopping financial institutions, the sooner we will get America's economy moving again.
As a new president prepares to take office amidst a receding economy, infrastructure investments are gaining attention as a way to create jobs and stimulate the economy in the short term while also creating the basis for future prosperity. However, U.S. infrastructure, already outdated, has come under new pressure from the combined challenges of climate change and volatile energy prices. As we face up to the competitive demands of the 21st century, it is clear that old, energy-inefficient infrastructure must be repaired, upgraded, or retired and replaced with a new, clean infrastructure to meet the needs of the coming low-carbon economy, the creation of which President-elect Obama has already made a top priority. NDN has long argued that any economic stimulus proposal must be heavily weighted toward clean infrastructure investment.
In that light, NDN is hosting the first in a series of events on clean infrastructure, beginning with a powerful discussion on modernizing the electrical grid tomorrow, Tuesday, November 18 on Capitol Hill.
A Vision for a Modernized Electric Grid: Clean Infrastructure for a 21st Century Economy
Rayburn House Office Building, Room 2322
Tuesday, November 18
12 p.m. – 1:30 p.m. Click here to RSVP
Featured Speakers include:
Congressman Jay Inslee, Member, House Committee on Energy and Commerce, the Committee on Natural Resources, and the Select Committee on Energy Independence and Global Warming and co-chair of the New Democrat Coalition’s Energy Task Force
Congressman Earl Blumenauer, Member, House Committee on the Budget, the Commitee on Ways and Means, and the Select Committee on Energy Independence and Global Warming
Commissioner Jon Wellinghoff, Federal Energy Regulatory Commission (FERC)
Kurt Yeager, Executive Director of the Galvin Electricity Initiative
Michael Moynihan, NDN Green Project Director
To attend or for further information about the event, please click here or contact Courtney Markey at email@example.com or (202) 384-1214.
NDN is pleased to announce that Federal Energy Regulatory Commission (FERC) Commissioner Jon Wellinghoff will join Congressman Jay Inslee, Google’s Dan Reicher, the Galvin Electricity Institute’s Kurt Yeager, and NDN Green Project Director Michael Moynihan on Tuesday, November 18 for:
Developing the 21st Century Economy: Investing in Clean Infrastructure:
Rayburn House Office Building, Room 2322
Tuesday, November 18
12 p.m. – 1:30 p.m. Click here to RSVP
This event should be an excellent and powerful conversation on clean infrastructure investment and grid modernization. For more information on the event or to RSVP, please click here or contact Courtney Markey.
On Wednesday, I posted some of the influential election stories that featured NDN - if you haven't seen these, be sure to check them out, there are some really exellent pieces by some of the best journalists in the country. Since Wednesday, in addition to Simon's winning The Hill's election prediction contest, NDN has appeared in another big round of press:
First, Simon was quoted in a must-read piece by Ron Brownstein in the National Journal:
Barack Obama on Tuesday won the most decisive Democratic presidential victory in a generation largely by tapping into growing elements of American society: young people, Hispanics and other minorities, and white upper-middle-class professionals. That coalition of the ascendant—combined with unprecedented margins among African-Americans—powered Obama to a commanding victory over Republican John McCain, even though Obama achieved only modest and intermittent gains with the working-class white voters who provided the foundation of the Democratic coalition from Franklin D. Roosevelt’s election in 1932 to Humphrey’s defeat 36 years later.
“Obama is reimagining a Democratic coalition for the 21st century,” says Simon Rosenberg, president of NDN, a Democratic group that studies electoral trend and tactics. “Democrats [are] … surging with all the ascending and growing parts of the electorate. He is building a coalition that Democrats could ride for 30 or 40 years, the way they rode the FDR coalition of the 1930s.”
Simon was also quoted in USA Todayabout about the changing demography of America and its significance for the future of politics:
Dramatic rises in Hispanic participation, support or both put Obama over the top in Florida, Nevada, New Mexico and Colorado. The trends were similar in Arizona and Texas, though the two states went for Republican John McCain. The group also made its presence felt in Indiana, Virginia and North Carolina.
"If the Republicans don't make their peace with Hispanic voters, they're not going to win presidential elections anymore. The math just isn't there," says Simon Rosenberg, head of the NDN, a Democratic group that studies Hispanic voters.
Simon also weighed in on "Obama, Race and the End of the Southern Strategy" in a featured post on Huffington Post which was also picked up by OpenLeft.
In addition to the new demographics, Simon also talked about the use of new technology and media. He spoke to both how Obama used technology to win, and how he will use it to govern. From a piece in the Washington Times:
The campaign won't say whether the BarackTV and live-streamed events will continue after the inauguration, but all signs point to a revolutionized way of White House communication with America and the world.
"The most interesting thing to watch will be what do they and how do they reinvent the way a president speaks to the American people," said Simon Rosenberg of the liberal think tank NDN and a veteran of the Clinton White House.
"There's no doubt this is going to be more of a YouTube presidency than a fireside chat presidency," he said. "President Obama will be reinventing the relationship between the president and the American people using these new tools."
New NDN Fellows Michael Hais and Morley Winograd were featured in the Post-Bulletin about the Millennial vote. Michael had an essay in Grist about the opportunities for the new administration to invest in clean infrastructure and clean energy. Finally, Rob talks about the economic challenges facing the new administration in the AP, Accountancy Age, and the Irish Left Review.
The historic victory of Barack Obama last night and increased majorities for Democrats in the House and Senate create a huge opportunity to build a high productivity, low carbon economy. The last eight years have been lost economic years The rare exceptions in the form of the housing and financial markets have now, of course, imploded. The silver lining to the crash, however, is that it has cleared the way for a new round of economic growth built on new economic policies. And if the right lessons are learned, with new leadership in place, the next round can be one of real engineering, not financial engineering, high paid jobs, not low paid ones, and inclusive, broadbased growth, not speculative fortunes for a few.
The number one priority of the United States must be to raise the real incomes of the middle class. To do that, however, we must accomplish a variety of things at once that include creating new high paying jobs to replace old ones that have moved overseas, taming energy costs, and creating a modern, high efficiency plant and infrastructure to undergird higher productivity and our future prosperity.
Fortunately, as President Elect Obama has joined NDN in arguing, clean energy has the ability to address many of our economic problems at once. For this reason, President Elect Obama has indicated that he believes clean energy must be a key priority next year. At NDN, we are rolling up our sleeves to embark on this economic journey with him.
In the short term, spending on clean infrastructure--to modernize the grid, weatherize homes and buildings, and upgrade transportation--has the ability to jumpstart the economy. The long backlog of infrastructure projects means that many are teed up and ready to go. There is a short lead time between appropriating money for infrastructure and shovels in the ground, and infrastructure investments, because they occur in the local economy, have a high multiplier effect.
Second, investments in clean energy have the potential to create millions of high paying jobs, many of which can go to people without extensive education. Because these jobs cannot be done overseas, and are either inherently domestic or have a high technology component, there is reason to expect them to be high paying.
Third, investments in clean energy will pay long term dividends in taming our volatile energy costs. Even though oil costs have fallen, the virtual destruction of the American auto industry as a result of the twin blasts of soaring gas prices this summer and the credit implosion, shows that we cannot afford this sort of volatility in a critical commodity. Meanwhile, the underlying trend of energy prices remains upwards.
Fourth, investments in clean energy and infrastructure will benefit our environment and the environment of our children. The costs of climate change in the form of erratic weather and rising water levels have already been considerable and may increase. We cannot afford not to make these investments.
Clearly, clean energy and clean infrastructure are ideas whose time has come. As the new Administration takes form, we look forward to working closely with it and leaders in Congress to build a low carbon economy with the potential not only to jumpstart America's current ailing economy but also power prosperity for decades to come.
In coming days, we will be making a number of specific proposals for ways that the new Administration can move quickly to achieve these goals and realize the clean opportunity.
Yesterday, we released a compendium of NDN’s best political analysis from the past several years. These memos and essays cover the main arguments coming from NDN: The end of the conservative ascendancy and the dawn of a "new politics," the emergence of new voting groups like the Millennials and Hispanics, the power that a whole array of new media and technology tools are unleashing into our democracy, and old-fashioned number crunching and analysis on everything from the role of independents, the economy and video in the elections. We've also included some of our analysis from the election of 2006, a day that saw the end of the conservative era, and set the stage for tomorrow's election, which will mark the beginning of a new one.
Millennial Makeover Authors Join NDN as Fellows - NDN is excited to announce that Morley Winograd and Michael D. Hais, authors of the best-selling book Millennial Makeover, have joined NDN as Fellows. Morley and Mike are two of the most insightful and prescient interpreters of the profound demographic shifts taking place in our country today. NDN has a long history of working with Morley and Mike; they co-authored a seminal 2006 paper, "Politics of the Millennial Generation," for our affiliate, the New Politics Institute, and have spoken at several NDN events, including one in March about the Millennial transformation of American politics. They are an important and tremendously impressive addition to the NDN Team. To read bios of Morley and Mike, please click here.
NDN Breaking Through - NDN has been a major player in shaping the narrative surrounding the 2008 election. Here's a recap of our press from the last few weeks.
Simon's election analysis was recently featured in the Financial Times (11/4), the Arizona Republic (11/4), and The Hill (11/3), on NPR (11/4/08), and in DemFromCT's daily poll roundup on DailyKos (11/1), which linked to his front-page Huffington Post (10/31) article, as well as in Newsday (10/27), the Arizona Republic (10/26), and the Huffington Post (10/28, again). He was quoted in the VIBE cover story, "The Tipping Point" (10/14) about the historic implications of the rise of U.S. Sen. Barack Obama. Dan Balz quoted Simon in the Washington Post after the third and final presidential debate (10/16). Simon also provided analysis of the election in the Independent (10/22), Reuters (10/22, as well as here on 10/17), and in several more featured posts on the Huffington Post (here, 10/21, here, 10/22, and here, 10/17). His election commentary also aired on radio stations across the country (10/22), and he was featured on WAMU's "Power Breakfast." Finally, Andres was featured in the Wall Street Journal (10/31) speaking about the increasing importance of early voting.
Our work on Hispanic issues has garnered widespread attention in the last few weeks. Our recent polling on immigration reform was featured in a front page article in the Wall Street Journal (11/1). Ron Brownstein quoted Simon about demographic shifts on MSNBC's "Road to the White House." Simon hit on similar themes involving the Hispanic electorate and the country's changing electoral map in the San Francisco Chronicle (10/26), Bloomberg (10/26), the San Francisco Chronicle (10/13), Bloomberg (10/17), and Hispanic Trending (10/9). Andres also talked about the importance of the Hispanic electorate in the Latino Journal (10/12), and our recent immigration poll of battleground states was featured in a diary on DailyKos (10/16).
On the green front, Michael was featured in the Council on Foreign Relations (10/30) discussing energy prices and cutting carbon emissions, and had a featured post about dealing with climate change in a troubled economy in the Huffington Post's Green section (10/22). Rob was featured in Grist (10/28) speaking about clean infrastructure and a second economic stimulus.
Finally, NDN also made several TV appearances recently. Our event with Simon and Joe Trippi was broadcast on C-SPAN, Simon went on BBC World News to discuss the election (relevant section begins at 1:40), and Andres appeared on several Nevada TV channels, including Fox and ABC, condemning illegal voter suppression tactics targeting Hispanic voters.
While much will be made today on political blogs and cable news channels of long lines at urban polling places, some of the most important battles in this presidential election have been fought in the nation’s exurbs. Exurbs, typically the areas painted red beyond the purple of the suburbs, are places the Obama campaign is fighting in hard, sometimes to win, but much of the time to lose by less than Kerry lost to Bush in 2004. (The New Politics Institute, and NDN affiliate, studied the exurbs extensively in 2006.)
Yesterday, Alec MacGillis wrote about these efforts in Ohio on the front page of the Washington Post, saying:
Obama has mounted an ambitious effort to correct the mistakes of Kerry's campaign, which boosted turnout in cities but lost the state by ceding exurban counties and rural areas. Obama has scattered dozens of offices and scores of paid organizers across central, southern and western Ohio, hoping to find enough pockets of support to put him over the top.
Indeed, should Obama win Ohio today, these efforts will have been crucial to that victory. But, these exurbs, which were recently some of the fastest growing areas of the country, have been hard hit by both the troubled economy and high energy prices. Over the summer, as gas flew past $4 per gallon, it was no coincidence that John McCain campaigned for a gas tax holiday, a move targeted at the Republican exurban and rural base that he needed (and perhaps still needs) to consolidate. The housing market cave-in has also not been kind to the exurbs, and this array of factors means politics of these regions could likely decay in coming elections.
Tonight, as early returns come in, savvy election watchers will be sure to look not just at urban centers for high turnout, but also crucial exurban and rural areas for the size of McCain’s margins. If Obama outperforms Kerry in these regions, look for a big night.