Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

January 29, 2009


Where did that infrastructure go?

Boston Globe -
Five weeks before becoming president, Barack Obama urged passage of a massive economic stimulus package, vowing that it would "create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s."

But the bill passed by the House yesterday dedicates only about 5 percent of the $819 billion measure to highway, mass transit, and rail projects, analysts said. That has prompted even some Democratic supporters to complain that the transportation spending was gutted by Republicans who insisted on more tax cuts - none of whom voted for the measure anyway - and by Obama advisers who shifted priorities to advance policy goals.

Many economists have argued in recent weeks that spending on infrastructure would do more to quickly create jobs and pull the country out of recession than tax cuts for individuals and businesses, or investments in healthcare and alternative energy - such as grants for health information technology and for a smart electricity grid. The tax cuts and investments are now sizable elements of the recovery package, with Obama's assent.

Representative Michael Capuano, a Somerville Democrat on the House Committee on Transportation and Infrastructure, said he has watched with frustration as spending for rapid transit and rail dropped during negotiations over the bill. For example, after an initial burst of enthusiasm for inter-city rail projects, the amount was reduced to $5 billion and then to $1.1 billion, he said.

The bill has $30 billion for roads and bridges and $12 billion for rapid transit, with decisions on specific projects to be made by state and local officials. But that's far less than originally sought by some Democrats. . .

Big banks win big

Pro Publica - $180 billion, roughly 60 percent of the total, has so far gone to the five biggest financial institutions: Citigroup, Bank of America, AIG, Wells Fargo and JPMorgan Chase. $280.2 billion, roughly 93 percent of the total, has so far gone to the top 28 institutions, all of which got investments or loans of $1 billion and above. By contrast, the 300 smallest investments, doled out to local or regional banks, total $10.87 billion, roughly 3.6 percent of the total.

Number 3 on "What's Hot" on Reddit: Bailout question: Why not give money to homeowners to pay off their mortgages, instead of giving money to the banks? The banks get the money anyways, two birds with one stone, everybody wins. Please educate me as to why this is a bad idea.

What works; what doesn't

Martin Feldstein, Washington Post -
The plan is to give a tax cut of $500 a year for two years to each employed person. That's not a good way to increase consumer spending. Experience shows that the money from such temporary, lump-sum tax cuts is largely saved or used to pay down debt. Only about 15 percent of last year's tax rebates led to additional spending.

The proposed business tax cuts are also likely to do little to increase business investment and employment. The extended loss "carrybacks" are primarily lump-sum payments to selected companies. The bonus depreciation plan would do little to raise capital spending in the current environment of weak demand because the tax benefits in the early years would be recaptured later.

Instead, the tax changes should focus on providing incentives to households and businesses to increase current spending. Why not a temporary refundable tax credit to households that purchase cars or other major consumer durables, analogous to the investment tax credit for businesses? Or a temporary tax credit for home improvements? In that way, the same total tax reduction could produce much more spending and employment. . .

On the spending side, the stimulus package is full of well-intended items that, unfortunately, are not likely to do much for employment. Computerizing the medical records of every American over the next five years is desirable, but it is not a cost-effective way to create jobs. . .

National Mall unstimulated

DCist -
Funds for a $200 million renovation of the National Mall was removed from President Obama's stimulus package during a House Rules Committee session. The move is a blow to D.C. Del. Eleanor Holmes Norton and to groups like the National Coalition to Save Our Mall, who have been pushing hard for Mall repairs for the last several years. Mall advocates had been hoping the national spotlight on the Mall during Obama's inauguration ceremonies would shore up support for funding restoration work. Visitors to the Mall have long been disappointed to find dead grass, mud and cracked sidewalks around the splendor of the monuments and museums.

FBI knew about fraud in mortgage industry

Paul Shukovsky, Seatlle Post- Intelligencer
- The FBI was aware for years of "pervasive and growing" fraud in the mortgage industry that eventually contributed to America's financial meltdown, but did not take definitive action to stop it.

"It is clear that we had good intelligence on the mortgage-fraud schemes, the corrupt attorneys, the corrupt appraisers, the insider schemes," said a recently retired, high FBI official. Another retired top FBI official confirmed that such intelligence went back to 2002.

The problem, according to the two FBI retirees and several other current and former bureau colleagues, is that the bureau was stretched so thin that no one noticed when those lenders began packaging bad mortgages into bad securities.

"We knew that the mortgage-brokerage industry was corrupt," the first of the retired FBI officials told the Seattle P-I. "Where we would have gotten a sense of what was really going on was the point where the mortgage was sold knowing that it was a piece of dung and it would be turned into a security. But the agents with the expertise had been diverted to counterterrorism."

The FBI not only lacked the resources, but also never got the tips it needed from the banking regulatory agencies. The Securities and Exchange Commission, the Office of Thrift Supervision and the Office of the Comptroller of the Currency also failed to detect the securities issue, said the first retired FBI official. . .

Both retired FBI officials asserted that the Bush administration was thoroughly briefed on the mortgage fraud crisis and its potential to cascade out of control with devastating financial consequences, but made the decision not to give back to the FBI the agents it needed to address the problem. After the terrorist attacks of 2001, about 2,400 agents were reassigned to counterterrorism duties.

Russian and Chinese leaders slam US economy

Marcus Baram, Huffington Post
- The leaders of both Russian and China slammed the U.S. economic system, blaming it for leading the world into the current financial crisis. Speaking at the World Economic Forum in Davos, Switzerland, Russian Prime Minister Vladimir Putin and Chinese Premier Wen Jiabao both expressed their desire for cooperation with President Obama but attacked the capitalism of Wall Street. . .

The Wall Street Journal reports:

== The Russian leader mocked U.S. businessmen who he said had boasted at last year's Davos meeting of the U.S. economy's fundamental strength and "cloudless" prospects. "Today, investment banks, the pride of Wall Street, have virtually ceased to exist," he said...

While Mr. Wen never named the U.S., his critique of its failings was as sweeping as Mr. Putin's. The financial crisis, he said, was "attributable to inappropriate macroeconomic policies of some economies and their unsustainable model of development characterized by prolonged low savings and high consumption; excessive expansion of financial institutions in blind pursuit of profit" -- and other excesses. ==

Putin's other remarks were more conciliatory, focusing on his desire for cooperation with Obama on disarmament, energy security and the economy.

Welfare fathers blame labor

Sam Stein, Huffington Post
- Three days after receiving $25 billion in federal bailout funds, Bank of America Corp. hosted a conference call with conservative activists and business officials to organize opposition to the U.S. labor community's top legislative priority.

Participants on the October 17 call -- including at least one representative from another bailout recipient, AIG -- were urged to persuade their clients to send "large contributions" to groups working against the Employee Free Choice Act, as well as to vulnerable Senate Republicans, who could help block passage of the bill.

Bernie Marcus, the charismatic co-founder of Home Depot, led the call along with Rick Berman, an aggressive EFCA opponent and founder of the Center for Union Facts. Over the course of an hour, the two framed the legislation as an existential threat to American capitalism, or worse.

"This is the demise of a civilization," said Marcus. "This is how a civilization disappears. I am sitting here as an elder statesman and I'm watching this happen and I don't believe it."

Donations of hundreds of thousands, if not millions, of dollars were needed, it was argued, to prevent America from turning "into France."

"If a retailer has not gotten involved in this, if he has not spent money on this election, if he has not sent money to [former Sen.] Norm Coleman and all these other guys, they should be shot. They should be thrown out their goddamn jobs," Marcus declared.

Percent unemployed

December 1998 - December 2008

Whites: Up 2.8 to 6.6
Blacks: Up 4.2 to 11.9
Latinos: Up 1.5 to 9.2

January - December 1998

Whites: Up 2.2. to 6.6
Blacks: Up 2.7 to 11.9
Latinos: Up 2.8 to 9.2

Bureau of Labor Statistics


Post a Comment

<< Home