Economic policies debated

Posted by AzBlueMeanie:

Are Obama's economic policies actually working?

Intelligence Squared posed this question to six policy experts at a debate in New York on November 16. The statement, "Obama's economic policies are working effectively," was defended by Lawrence Mishel from the Economic Policy Institute; investor and former 'Car Czar' Steven Rattner; and Mark Zandi, the chief economist and co-founder of Moody's Economy.com.

Arguing that Obama's economic approach is failing were James Galbraith of the University of Texas; Carnegie Mellon's Allan Meltzer; and former New York governor Eliot Spitzer. (h/t Huffington Post)

OBAMA'S ECONOMIC POLICIES ARE WORKING EFFECTIVELY from Intelligence Squared US on Vimeo.

Read the debate transcript at http://intelligencesquaredus.org/wp-content/uploads/Obamas-Economic-111609.pdf

I want to focus on the comments of former Governor Eliot Spitzer, who was the terror of Wall Street when he was Attorney General of New York. I don't give a damn about about his personal sexual indiscretions, as long as he is getting convictions of the pirates of Wall Street. Attorney General Eric Holder should appoint Spitzer as special prosecutor, the Sheriff of Wall Street if you will, to pursue these white collar criminals. His legal skills are being wasted at a time when he is needed by his country. Everyone is entitled to a shot at redemption.

Eliot Spitzer's opening statement summarized:

We are not seeing any transformation in the fundamental structure of our economy that this crisis calls for. This crisis is the rare opportunity to change the direction of our economy, an economy that has been sliding in the wrong direction for many years. And that is what we have to do, that failure structurally is what we are taking about.

Right now we are still in free fall – 200,000 unemployed each month. There is not any affirmative news on the job front. Foreclosures are getting worse, not better. We all agree 2010 will be worse than 2009, which was worse han 2008. Why? Adjustable rate mortgages are going to reset next year. Fewer and fewer home owners will be able to make their mortgage payments. The crisis continues unabated.

And one of the things the Obama administration did not do that it should have done was push for the legislation to give judges the power to reform mortgages in the bankruptcy context [the "cram down" rule]. At that point when I saw that, I said, How could they not do this? It is fundamental, it is necessary, it is right. It would help the middle class that we supposedly care about the most fundamentally.

[Mark Zandi] in your testimony you say hundreds of banks will go bankrupt next year as the result of mortgages in the commercial real estate sector that simply cannot be refinanced – grossly undervalued, still accounting gimmicks. We have not faced up to it. It will be a disaster.

Credit markets are dysfunctional. Your word, we all agree with it. Small and medium sized businesses simply cannot borrow, even though we have given trillions of dollars to the megabanks that came to Washington to say, Please, please we can't pay our bonuses.

The AIG conduit payments to Goldman Sachs, the $12.9 billion, 100 percent on the counter party payments - absolutely outrageous. Tim Geithner must explain this to the American public.

State and local governments will be going bankrupt. They are down 10 to 15 percent in their revenues. We have handled it for one year. They will go over a precipice next year. That will lead to the full-time shutdown of school districts, fire districts, community services.

That is where we are seeing it because property values will plummet. Sales tax revenue, real estate revenues - all dramatically down.

GM had better numbers today.Third quarter they lost only $1.12 billion. Congratulations. We're on the road to recovery. Do you know where they saw signs of improvement? Their China subsidiaries. Sales in the U.S. are down.

Think about that and what that means. They will not survive. Chrysler will probably go over the cliff as well.

Manufacturing jobs, we are losing. We have lost a third of our manufacturing jobs in the last decade. They do not come back, ever.

It is worse now than it's ever been. That is the core of our economy. We cannot all be lawyers and investment bankers. We need clients. The clients are gone. It doesn't work.

The fundamental error of this administration is that it is continuity. They have embraced the Bush administration view that if you solve the problem of big banks everything else flows from that. They are wrong. Too big to fail is too big. They don't get it. The only two people I know who don't appreciate that are Timothy Geithner and Larry Summers. Paul Volcker, Alan Greenspan, Henry Kaufman, Mervyn King – every major academic has said that we must get rid of too big to fail. They [Geithner and Summers] refuse to cross that threshold.

Until they do, we will not reform the financial services sector and that is where they have focused to virtually the entire rest of the economy.

They do not appreciate the power they had. They do not know how to negotiate for fundamental change. We've been involved in what I call a regulatory charade, pretending the problem was lack of power. The regulators, they had the power, they chose not to use it. Who were those regulators? The same folks we're now promoting and sitting there making these misguided policies. It's time for more fundamental change.

This is one of the more substantive economic policy debates I have seen in some time. Not the kind of thing you will ever see on network or cable television. Watch the video or read the transcript.