Economy -- The Case For Walking and Chewing Gum

March 13, 2009

by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, Benjamin Armbruster, Ali Frick, Ryan Powers, and Pat Garofalo

ECONOMY

The Case For Walking and Chewing Gum

In September, after Sen. John McCain (R-AZ) famously suspended his presidential campaign to focus on the financial crisis, then-candidate Barack Obama said, "I think that it is going to be part of the President's job to deal with more than one thing at once." Now that President Obama has laid out an ambitious agenda aimed at economic recovery and reforming the nation's health care, energy, and education systems, conservatives are claiming that he is doing too many things at once and should put aside his other plans in order to "fix the economy first." Rep. Eric Cantor (R-VA) said that Obama "should be focusing on the 'economic crisis,' as opposed to holding four-hour meetings on health care." Meanwhile, Sen. Mitch McConnell (R-KY) said that Americans "want the administration to fix the economy first. That's the first priority." The media has piled on, with cable outlets lending "credence to the accusation that the president has loaded his agenda with unrelated items when he should be focusing on the economy." But as Obama said yesterday while addressing the Business Roundtable, "we must not use the need to confront [financial problems] as an excuse to keep ignoring the long-term threats to our prosperity: the cost of our healthcare and our oil addiction; our education deficit, and our fiscal deficit." Indeed, it is only by addressing all of these areas that the economy can be set on the path toward long-term sustainability.

PRODUCTIVE AND HEALTHY WORKERS: First, the notion that Obama is not focusing on the economy is simply untrue. In the first two months of his presidency, Obama has signed a $787 billion economic stimulus package, proposed a fix for the housing crisis, and laid the groundwork for rescuing the banking system and restoring lending. That said, as Office of Management and Budget Director Peter Orszag pointed out, "the single most important thing we can do to improve the long-term fiscal health of our nation is slow the growth rate in health care costs." Health care spending makes up one out of every six dollars in the economy, and $700 billion per year is wasted on unnecessary or ineffective care. Furthermore, "as the unemployment rate grew by 0.8 points in December and January, nearly 100,000 people a week or 14,000 people a day lost their health coverage," while the percentage of people who reported having trouble paying for needed health care or medicines rose from 18 percent in January 2008 to 21 percent in December. Even the Business Roundtable pointed out that "Americans in 2006 spent $1,928 per capita on health care, at least two-and-a-half times more per person than any other advanced country." As National Institutes of Health bioethicist Ezekiel Emanuel said, "everything is affected by health policy, and every decision should be examined for its impact on health care reform." Both America's short- and long-term fiscal state depend on getting the outlandish costs of health care under control.

GREEN JOBS: As former President Bill Clinton said this week, "it's difficult to see how America can be a preeminent country in the 21st century...without becoming more energy independent through clean energy and greater efficiency." Nevertheless, Cantor has criticized Obama for trying to "impose these cap-and-trade schemes." CNN's Wolf Blitzer asked if cap-and-trade is "wise at a time of economic distress." But Obama's plan -- which does not begin until 2012 -- drives investment in a clean economy and and fuels improvements that will save everyone money. As McKinsey and Company has found, putting a cap on carbon emissions corrects market failures by encouraging investment in efficiency and fuel economy improvements. It also spurs the expansion of renewable energy, creating new green jobs and a competitive advantage in the international marketplace and leading to technologies that America can export. Furthermore, the Center for Budget and Policy Priorities (CBPP) has found that a properly designed cap-and-trade system actually insulates working Americans from both energy price volatility and costs passed on to them from industrial polluters. In fact, CBPP estimated that "less than 60 percent of the auction revenues [from a cap-and-trade system] would be sufficient to provide relief to a substantial majority of U.S. consumers." Obama has gone above that mark, proposing to use 80 percent of the revenues to fund his 'Making Work Pay' tax credit.

AN EDUCATED WORKFORCE: As Obama said when laying out his education agenda on Tuesday, "America's place as a global economic leader will be put at risk...if we don't do a far better job than we've been doing of educating our sons and daughters." Indeed, investing in education is critical for long-term economic growth, while in the short-term, education funding can provide key economic stimulus. Ensuring that teachers keep working, universities don't layoff staff, and students can continue to pay tuition keeps dollars cycling through the economy. Plus, as former Secretary of Labor Robert Reich wrote, "America's future competitiveness and the standard of living of our people depend largely on our peoples' skills, and our capacities to communicate and solve problems and innovate." Projections on the real fiscal rate of return on public educational investments are high: 10 percent for high quality preschool programs, 15 percent for innovative K-12 reforms, and 10.3 percent for investments to encourage college access and graduation. And of course, "one of the best documented relationships in economics is the link between education and income." A lower education level means that "income is lower, which means lower tax contributions to finance public services." As The Wonk Room's Ben Furnas has pointed out, "better educated people are more productive, get sick less often, are less likely to require public assistance, commit fewer crimes, make more money, and pay more in taxes. Creating more of them is a good idea."

ECONOMY -- SANTORUM: 'I REALLY BELIEVE THE FUNDAMENTALS OF AMERICAN ECONOMY' ARE 'STRONG': On his radio show Wednesday, conservative talker Hugh Hewitt asked former senator Rick Santorum to give his "sense of where the economy is headed right now." Santorum replied that he had "an innate sense that America is never going to revisit the Depression era again." After criticizing President Obama's "doom and gloom" predictions, Santorum declared, "I really do believe that the fundamentals of American economy is [sic] still strong." Unfortunately, Santorum's McCain-esque declaration is overly optimistic. Earlier this week, a survey of 51 economic forecasters found that "the recession-hit U.S. economy is proving weaker than economists expected just a month ago." The survey was conducted before last Friday's jobs report that "showed the unemployment rate surged to a 25-year high of 8.1 percent last month as employers cut 651,000 jobs." Last week, Harvard economist Robert Barro wrote in the Wall Street Journal that "there is ample reason to worry about slipping into a depression," putting the odds at "roughly one-in-five." Economist Nouriel Roubini, who warned about the housing bubble in 2005, told Time that "unless we take the right policy actions, we'll end up in a near depression." Unlike Santorum, these economists don't have an "innate" feeling; they have knowledge and understanding of the weak state of the economy.

ECONOMY -- SANFORD'S 'POLITICAL POSTURING' ON STIMULUS FUNDS COULD COST 7,500 TEACHERS THEIR JOBS: Earlier this week, South Carolina Gov. Mark Sanford (R) announced that he would seek to pay down the state's debt by redirecting $700 million of the state's stimulus money meant for school funding and public safety. Ironically, Sanford claimed that cutting school funding would ultimately benefit children. "[T]he idea of digging a $1.2 billion hole whose costs ultimately will be born by school-aged kids to me is not in their best interest," he said. However, Sanford's rejection of the money could cause up to 7,500 teachers to lose their jobs. John Cooley, deputy superintendent for finance and operations at the state's department of education, explained that the stimulus funds have helped fill a 15 percent budget cut already inflicted on the school system. "If those funds are not permitted to be used in that way, it will create a significant problem," he said, explaining that a resulting 15 percent of the state's 50,000 teachers could be negatively impacted. Both Democrats and Republicans have accused Sanford of playing politics with South Carolina's future. Rep. James Clyburn (D) called Sanford's decision "100 percent political posturing." Republican state senator Hugh K. Leatherman, Sr. -- who is leading efforts to override the governor -- said Sanford was trying to "gain national attention and position himself for a presidential run in 2012."

HEALTH CARE -- HEALTH CARE TALKS CONTINUE DESPITE MISGUIDED WORRIES ABOUT 'EXPLODING' THE COST OF HEALTH CARE: Time magazine reports that a bipartisan group of senators, dubbed the "Gang of Nine," is "nearing an agreement on the broad strokes of a health care reform bill." Their talks run parallel to Sen. Ted Kennedy's (D-MA) discussions with business and industry leaders as well as three House committees that have also started drafting legislation. Committees in both chambers, according to Time, hope to see the legislation reach the floor by August. Despite the apparent progress, there is still division over the potential costs of comprehensive reform. Sen. Kent Conrad (D-ND) said, "This is an area that gives many of us great pause," claiming that the costs would weigh down an already "bloated system." Another one of the nine, Sen. Judd Gregg (R-NH) said, "You're exploding the size of health-care spending, on top of the health-care spending which already exceeds any other industrialized country in the world by about 5 percent." The Wonk Room's Igor Volsky responded to Gregg's statement, explaining, "You can't stabilize the economy without lowering the costs of health care, and you can’t lower health care costs without investing in the system." Indeed yesterday, at the first White House-driven regional health care forum, Domestic Policy Director Melody Barnes reminded legislators, patients, doctors, and business leaders, "Our economic house is on fire, and one of those reasons is the costs of the health care system."

In their much-anticipated face-off, The Daily Show host Jon Stewart told CNBC's Jim Cramer, "I understand that you want to make finance entertaining, but it's not a f**king game." Lobbing a series of tough questions at Cramer, Stewart got increasingly upset over CNBC’s complicity in sheltering a financial industry built on lies and deceit. "Who are you responsible to? The people with the 401(k)'s or the guys on Wall Street?" Stewart asked. (Watch the videos here, here, and here.)

Two judges in California recently said that it is unconstitutional for the federal government to deny benefits to legally married same-sex couples. The Office of Personnel Management has "instructed insurers not to provide the benefits," citing the Defense of Marriage Act. President Obama -- who promised to "fight hard" for the rights of same-sex couples -- has not yet said whether he will side with OPM or the judges.

"Sen. Joe Lieberman (I-Conn.) is not ruling out running as a Democratic candidate in his reelection race in 2012," The Hill reports. Though Lieberman said being an "independent Democrat" gives him "options," when asked whether he would be more likely to run as a Democrat in 2012, he replied, "I wouldn't reach that conclusion."

The Federal Reserve said yesterday that the "wealth of American families plunged nearly 18% in 2008," a loss totaling $11 trillion. The bust follows an "extraordinary boom" that saw "household wealth more than [double] from 1990 to 2000, and then, after a pause, [rise] nearly 50% before the bust of 2008."

According to the Wall Street Journal's most recent forecasting survey, in a poll of 49 economists, "more than 40 percent of respondents thought a second large stimulus package is necessary to jump-start the economy.""

A new Government Accountability Office report released today says that "[f]raud and abuse helped boost Medicare spending on home health services 44% over five years as some providers exaggerated patients' medical conditions and others billed for unnecessary services or care they did not provide." In 2008, "Medicare spent about $16.5 billion on home care for the services reviewed by the GAO."

Democratic lawmakers in Texas have "vowed to try to overturn" Gov. Rick Perry's (R) decision to turn down $555 million or expanded unemployment benefits from the federal stimulus package. State senator Wendy Davis (D) said, "After declaring his unconscionable decision today...Gov. Perry will be resting comfortably tonight in a home paid for by Texas taxpayers."

"The world is facing an increasing risk of 'irreversible' climate shifts because worst-case scenarios warned of two years ago are being realized," according to a new report. The report, which came at the close of a three-day conference where nearly 2,000 researchers gathered to discuss climate change, calls on "policy-makers to use all tools available to reduce dangerous emissions of greenhouse gases."

And finally: "With the world swirling about it, the House took a moment Thursday to honor pi, the Greek letter symbolizing that great constant in mathematics representing the ratio of the circumference of a circle to its diameter," reports Politico. "I'm kind of geeked up about it,” said Rep. Brian Baird (D-WA). Rep. John Murtha (D-PA) was a little less into it, saying, "We were never good at math in my family. I thought I was voting for p-i-e."

"David Ogden was confirmed as deputy attorney general Thursday, overcoming opposition by Republicans." The vote in the Senate was 65-28.

THINK PROGRESS: Fox News's Glenn Beck: People "pushed to the wall" by "political correctness" may turn into "psycho" killers.

WONK ROOM: Rep. Scott Garrett (R-NJ) and CNBC peddle misinformation about taxes, productivity, and business investment.

YGLESIAS: The public wants to believe in big government.

CAMPUS PROGRESS: A look at new New York Times columnist Ross Douthat's college writing.

NORTH DAKOTA: "North Dakota is about the only state 'doing well' on the tax front as it saw sales tax collections tick up 14.4 percent in the last three months of 2008."

EDUCATION: Schools across the country are already making plans with federal recovery package money.

SCIENCE: Conservatives gear up for a political battle at the national and state levels on stem cell research.

"I really do believe that the fundamentals of American economy is still strong."
-- Former senator Rick Santorum, 3/11/09

VERSUS

"The consensus of the 51 forecasters surveyed looks for U.S. gross domestic product to tumble at a sharp 5.3 percent annual rate in the first quarter and to decline at a 2 percent pace in the second quarter."
-- Reuters, 3/10/09

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