First Posted: 12/31/11 02:07 PM ET Updated: 12/31/11 02:13 PM ET|
WASHINGTON — With yet another high-profile fight between Congress and the White House coming down to the wire, 2011 ended with a sense of deja vu. This time, President Barack Obama survived the cable news carnage with a two-month extension of the payroll tax cut and unemployment benefits — a victory in political terms, but little more than a stopgap as a matter of actual policy. This has been the story on jobs legislation all year: small-bore, short-term or substantively irrelevant. On economic policy, 2011 was a lost year.
Just one year ago, Obama sparked a tremendous outcry from progressives for offering up a one-year payroll tax cut and unemployment benefits extension in exchange for two years of the Bush tax cuts for the wealthy. As 2010 drew to a close, the payroll tax cut — which provides an average of $1,000 a year to 160 million Americans — was viewed as woefully insufficient compared to the potential job-creating revenue from new taxes on the wealthy.
Those meager provisions likely prevented the economy from falling back into recession, but in the year since Obama cut that deal with congressional Republicans, economic growth has averaged a pathetic 1.2 percent. The unemployment rate has fallen from a horrific 9.8 percent to a merely terrible 8.6 percent. But much of that progress is illusory — millions of out-of-work Americans have simply given up all hope of finding a job, a situation that isn’t captured by the unemployment statistics.
“At this pace it will take us almost 15 years to get back to the pre-recesson employment rates,” notes economist Dean Baker, co-director of the Center for Economic and Policy Research.
Today there are nearly 1 million homes scheduled for a foreclosure auction, down from about 1.5 million at this time last year, but again, there’s less to the improvement than meets the eye. Widespread legal challenges to fraudulent foreclosures have forced banks to slow down the eviction process.The same Wall Street firms that sent the economy into a tailspin remain broadly unaccountable. The robo-signing of foreclosure documents, in which banks process foreclosures at lightening speed without proper review, is still taking place. Most of the major new bank regulations required by 2010′s Wall Street reform legislation have been delayed. The new Consumer Financial Protection Bureau, perhaps the signature achievement of last year’s bill, has no director. The Federal Reserve Board of Governors is short two members.
With so little progress in so many areas, dozens of experts and pundits have deployed Harry Truman’s famous “do-nothing” epithet against the current Congress. Some statistics support the charge. According to The Washington Post, the Senate approved fewer measures in 2011 than in any year since 1995.
But lawmakers have not, in fact, been idle. As it turns out, it takes a lot of work to accomplish so little.
On two separate occasions, first in April and again in July, the government almost shut down and nearly defaulted on its debt, thanks to legislative circuses organized by the House GOP. Obama sacrificed loads of discretionary government spending (i.e. the social safety net) to keep congressional Republicans from making good on their promises to torpedo the global economy. To avert a shutdown in April, the president cut funding to emergency first responders, the Children’s Health Insurance Program and local abortion services in the District of Columbia, alongside infrastructure programs like high-speed rail. Such cuts might have been acceptable had the federal budget deficit been a big, pressing problem akin to the jobs catastrophe, and had discretionary spending been driving the deficit. Neither of these, however, were the case.
Kevin Smith, a spokesman for Speaker John Boehner, defended the inaction on jobs by insisting that the House GOP has passed 28 jobs bills this year which have not been taken up by the Senate. But the legislation generally refers to roll-backs of important regulations that have minimal employment implications, if any, and steep cuts to key programs, including the budget proposal from Rep. Paul Ryan (R-Wis.) to end Medicare.
With the GOP and many conservative-to-moderate Democrats demanding budget cuts, the prospect of the government actually spending money to create jobs was off the table for most of the year. Instead, lawmakers spent their time dividing America’s economic spoils between politically entrenched corporate titans.
For six months, the Senate argued over how to carve up $16 billion a year in debit card swipe fees between Wall Street banks and the American retail industry. In the end, the banks lost. But the American people were no better — or worse — off, as a result.
The swipe fee mess was followed by an intense push to pass a patent reform bill, an issue that has been kicking around Capitol Hill for the better part of a decade. Tech companies have been plagued by the over-issuance of broad, vague patents that lead to a glut of frivolous lawsuits. But pharmaceutical companies have a tremendous interest in securing patent rights, enabling them to maintain long-term monopolies on life-saving medicine. In the end, Pharma’s lobbyists defanged the bill. It does nothing to curb the issuance of silly patents, nor does it provide relief to the tech companies currently besieged by lawsuits over them.
None of this, of course had anything to do with jobs. Like most of what passed for economic policy in 2011, it essentially served to reinforce the status quo. But with patent reform out of the way, Congress moved on to trade policy, which presented a legitimate, albeit difficult, arena for job-creation.
When any nation’s economy is in the dumps, its leaders generally try to convince foreigners to buy their country’s products. Money from abroad creates jobs at home. It’s a difficult maneuver during a global recession in which every major economy is reeling — when everyone is trying to export, nobody is trying to import. But it’s a theoretically plausible forum for job-creation, and so both congressional Republicans and Obama himself were eager to tout three trade pacts with South Korea, Colombia and Panama — originally negotiated by President George W. Bush in 2007 — as good news for American workers.
The trade deals, Obama said in an April speech before the U.S. Chamber of Commerce, marked a break from the free-trade pacts of the last two decades, which encouraged outsourcing. “These agreements will support tens of thousands of jobs across the country for workers making products stamped with three proud words: Made in America,” Obama said.
“American job creators will have new opportunities to expand and hire as they access new markets abroad,” House Speaker John Boehner (R-Ohio) declared upon Congressional approval of the trade pacts. “By boosting American exports, these agreements — part of the Republican jobs plan — help the private sector put Americans back to work.”
But the three trade deals Congress approved this fall are actually expected to increase the American trade deficit, according to official government estimates from the U.S. International Trade Commission.
Obama and other advocates for the trade deals repeatedly claimed that the largest of the three, with Korea, would “support” 70,000 American jobs. But that statement ignores the number of jobs lost due to competition from foreign imports. Include imports in the equation, and the Korea deal alone is expected to cost the U.S. about 159,000 jobs.
That’s the lion’s share of Congress’ work this year on anything that could be described as creating jobs. Republican senators also made threats about the National Labor Relations Board, bemoaned just about everything the Environmental Protection Agency did, and blocked several of Obama’s nominees to the Federal Reserve and the Consumer Financial Protection Agency.
But in other areas, the administration and various executive-branch agencies have engaged in self-imposed economic impotence. On foreclosures, in particular, the Obama administration has steadfastly refused to promote policies that would reduce principal balances on troubled mortgages — which many view as the only viable option for curbing the foreclosure crisis. If homeowners owe more than their house is worth and can’t make their payments, foreclosure is all but inevitable. Instead, the administration has focused on programs to lower monthly payments, rather than reduce principal balances.
The most high-profile effort in this department, the Home Affordable Modification Program, has been a disaster — and a hotbed for bank abuse of homeowners. In October, the Obama team rolled out a more aggressive refinancing initiative targeting borrowers whose loans are owned by government-controlled Fannie Mae and Freddie Mac. But again, the plan didn’t relieve borrowers who owed more on their mortgages than their homes were worth. Instead, it focused on lowering interest rates for them. For many, foreclosure would still be a preferable option to the relief the Obama administration provided.
“The basic needs of the American homeowner have not been met,” law Professor Alan White of Valparaiso University says. White is one of the nation’s foremost foreclosure experts, who analyzes key data on the costs of foreclosures compared to loan modifications. “We still have foreclosure inventories at four times the level of non-crisis times.”
Foreclosures are not simply a problem for troubled borrowers. They push home values down and reduce tax revenues, resulting in more foreclosures and job losses. A June International Monetary Fund report estimated that the foreclosure problem alone is adding 1.25 percent to the unemployment rate.
A broad settlement of robo-signing activities has also been stalled, largely because a handful of state attorneys general view the deal in the making as far too lenient on banks, providing insufficient relief to borrowers and investors.
The administration emphasizes that it put forward a $450 billion, fully-paid-for package of job-creation efforts in September, which Obama dubbed, “The American Jobs Act.” Key provisions include a one-year extension of the payroll tax cut and unemployment benefits, plus $150 billion in infrastructure spending. Congressional Republicans blocked the plan.
“You had a serious measure on the table and those Republicans in Congress who opposed things like teacher jobs and infrastructure investment had to explain why they opposed this medicine for the economy,” Brian Deese, Deputy Director of the White House National Economic Council, told HuffPost. “We’ve only got part of that Act implemented so far, but I actually think that the reason why we spent the second half of this year talking about jobs in Washington was that it really did change the debate.”
A payroll tax cut of $1,000 a year per worker helps keep money moving through the economy (provided Congress can ultimately reach a deal to extend the cut for the full year). It ensures that consumers have money to spend, so that producers have customers and can afford to employ workers. But it’s remarkably similar to a tactic deployed by the Bush administration in early 2008 before the demise of Lehman Brothers and Bear Stearns. At the behest of Treasury Secretary Henry Paulson, Bush cut a $600 check for every taxpayer in the country, hoping to boost demand. It helped, but not nearly enough. And the same is likely to be the case with the $1,000 a year that the White House hopes to secure from Congressional Republicans over the next two months.
Big ideas — major research and development programs, a formal federal jobs program — all require money. And even though the government can borrow money today at lower rates than at any time in modern history, nobody in Washington is interested in actually spending it to create jobs.
That suggests that 2012 is likely to be another lost year, marked by corporate infighting on Capitol Hill and meager administrative efforts to address massive problems. In an election year, in particular, lawmakers will likely be even less willing to pass legislation of substance.
Unless Europe collapses — in which case, the world will have still more frightening problems.