Housing, not taxes, are forcing people out of California

by Brian Leubitz

There is much ado about the “job creators” fleeing California because of the high taxes. These uber wealthy are leaving, so we are told, because the high income taxes just aren’t worth it.

Except that isn’t true at all. In a new analysis by Trulia.com chief economist Jed Kolko, housing is the culprit:

Here are the basic facts. In 2011, 562,000 people left California, and 468,000 came, according to the Census’s American Community Survey. That means 120 people moved out of California for every 100 people who moved in. Out-migration reached its peak in 2005, when 160 people moved out of California for every 100 people who moved in. The California exodus rose with the housing bubble and subsided in the recession. Lower home values in 2008-2011 made California more affordable, encouraging in-migration and discouraging out-migration, as well as pushing some California borrowers underwater, further discouraging out-migration. (Trulia blog)

The graph on the right isn’t the only one that makes the case clear. If we are to really continue our growth, we must address the housing crunch that is going on, especially along the coast. That isn’t accomplished through slashing services and budgets, but rather working to create new affordable housing solutions and ways for young families to stay here in California, where most would rather stay.

Thus, the slashing the government approach that the Legislative Republicans, far from being the panacea they claim, would make the situation worse as affordable housing money continues to dry up. Housing must continue to be a key focus of both our state and local governments.

If there’s one thing that’s been particularly consistent to campaigns of the far right in San Diego this fall, it’s the unusually desperate attempts to hide the real agenda from voters. It’s one that should be cause for optimism as long as voters pay attention, and betrays an almost impressive self-awareness from the top of the GOP that the party’s agenda has drifted well outside the mainstream.

From the special exemptions of Prop 32 to Brian Bilbray’s teetering re-election bid to Carl DeMaio’s bizarre mayoral campaign, extreme conservatives are doing everything they can to hide their record and who they are.

For the backers of Proposition 32, the deception was part of the design from the very beginning. They surveyed the political landscape and found that, unsurprisingly, nobody wants millionaires and corporations to be able to buy off our political process. Rather than abandon a wildly unpopular idea, they came up with a different plan: fake it.  

Cross-posted from San Diego Free Press

That’s Prop 32, from the same white knights of campaign finance reform who broke the system to begin with by using the Citizens United case to overthrow existing regulations on special interest money. This year, they simply took it a step further, called the plan reform and packed in enough special exemptions to create a system that only works for corporations and millionaires.

It makes sense because everyone wants campaign finance reform. But the reason they want campaign finance reform is specifically because of what Prop 32’s backers have done and continue to do.

The hundreds of millions of unregulated, unlimited political cash flowing into SuperPACs exists specifically because of Prop 32’s backers, and now its being funded by the Koch Brothers and other super-rich conservatives that saw Citizens United as the starting pistol to buy off democracy. Prop 32’s hoping to trick voters. Will they see through it?

At the same time, there’s Brian Bilbray. He has cobbled together a decades-long career of faking moderation when election time comes around, but the reality just doesn’t match the myth he’s built for himself when push comes to shove. Bilbray wants to cast himself as an environmentalist, but mustered just a 17% score on the League of Conservation Voters 2011 scorecard. And it was Bilbray’s early work trying to gut the Clean Water Act that once inspired Donna Frye to become a clean water activist.

He’s done his best to avoid the ramifications of the national GOP’s war on women, right on through to Todd Akin’s ‘legitimate rape’ comments. But the reality of his record remains, including a pitiful 8% score from Planned Parenthood’s scorecard. Brian Bilbray may not want to be lumped in with the war on women, but if that’s what he’s hoping for, maybe he shouldn’t have signed up for it in the first place.

All of that could maybe be overlooked if Bilbray had taken up the mantle of the millions of Americans devastated when the economy fell apart near the end of the Bush administration. But while Bilbray will certainly have populist talking points on the stump, it’s worth remembering that he voted for the Paul Ryan plan to dismantle Medicare and destroy Social Security in response to increased economic security.

And Bilbray’s plan for economic recovery? One part rewarding tax-evading corporate interests, one part Let them eat a Yacht Race! Not exactly your tired, your poor, your huddled masses.

For Carl DeMaio, the attempt to whitewash nearly twenty years as a professional politician has been even more depraved than elsewhere. After coming up with the likes of Newt Gingrich, Virginia Thomas, the Jack Abramoff crew, and the Koch Brothers, it seems to have dawned on Carl that the city of San Diego, well… really doesn’t like that at all.

During his tenure on the council, DeMaio has received the lowest cumulative score on the annual Environmental Quality Report Card. And despite being appointed since joining the council, DeMaio hasn’t appeared in the minutes of a single meeting of the San Dieguito River Valley Regional Open Space Joint Powers Authority since January 2011.

Reality didn’t matter to DeMaio though when he took a week out to declare himself an environmentalist. He didn’t get very far with that, so he moved on to a plan to encourage biking by investing in more roads. Doesn’t make sense? It isn’t supposed to. It’s just supposed to distract from his career-long record on the wrong side of these issues.

Word on the street is, DeMaio spent some time recently trying for an endorsement from the Victory Fund, which led to an unexpected declaration from Carl that he was pro-choice. It has to be considered unexpected since it was certainly news to Planned Parenthood. Why? Because despite the clear reasons that choice matters at the local level, DeMaio has always refused to fill out Planned Parenthood’s questionnaire. And today, if you’re looking for pro-choice candidates in November, you sure aren’t going to find Carl DeMaio on the list.

There are still more examples. He runs as a fiscal conservative while voting against hundreds of millions in taxpayer savings and getting the BS treatment from Mayor Jerry Sanders. He tried out medical marijuana but that fell flat once anyone read past Carl’s own statement.

He took a quick stab at being for the middle class and affordable housing over the summer, trying to pass off support from a landlord group as support for tenants. The claims were called “preposterous,” and the former CEO of the San Diego Housing Commission said in no uncertain terms that “Carl DeMaio is not an advocate for more affordable housing.”

Heck, DeMaio has even tried reaching out to the Latino community while trumpeting an endorsement from Pete Wilson, the father of Proposition 187. And after casting the only vote on the council in support of Arizona’s SB1070, his Latino outreach has featured a plan to have local police enforce federal immigration law.

The most amazing part is the special brand of doublethink that DeMaio has going on in all this. He isn’t just making up an entirely new self for the general election, he’s doing it while criticizing others for the same thing. Like last week at the KPBS mayoral debate:

“The U-T CEO mentioned that he got support from labor, and yet labor has not supported it, that he got support from business groups, but very few groups that are out there have supported the plan,” DeMaio said. “And so I just think that the email probably was making some claims that are not grounded in reality.”

Now, it wouldn’t be shocking to discover the UT making claims that are not grounded in reality. But compare that to DeMaio’s recent record. He’s an affordable housing advocate unless you ask affordable housing advocates. He’s an environmentalist unless you ask environmentalists. He’s a medical marijuana advocate unless you ask medical marijuana advocates. He’s pro-choice unless you ask Planned Parenthood. He’s a friend to the Latino community except for wanting them to be harassed by the police. He’s a fiscal conservative except for imposing a billion dollar tax increase without a vote of the public.

But when Doug Manchester and John Lynch — the very same duo who helped DeMaio defeat essentially the same tax increase in 2005 — don’t poll well, then maybe reality has come loose.

Does it work? Maybe not with anyone who has the time and interest to dig into the substance. But those who never catch more than headlines because they have lives full of working to make ends meet, struggling with health care bills, working into retirement thanks to Wall Street, trying to figure out what to do after a foreclosure… they understandably won’t ever have that time.

And that’s the whole idea. Keep up the game of whack-a-mole long enough that voters never get a chance to examine the truth.

It’s said that great writers steal outright, so here’s a heartfelt tip of the cap to the inimitable Ann Richards before saying: Poor Carl.

He’s never once had a job that asked him to appeal to a majority, or even anyone resembling moderates. So now that he’s stuck in a general election, he’s like Columbus discovering America. He’s found the environment. He’s found the middle class and working people. He’s found women. He’s found the sick and suffering. He’s found Latinos.

Poor Carl. He can’t help it. San Diego just doesn’t want what he’s been selling his whole life.

I’m proud to work for San Diegans for Bob Filner for Mayor 2012

If you are like me, you’ve given some money in the last few weeks to causes you believe in and you’ve given generously.  Even though my family has faced some tough financial times I know we’re lucky to have as much as we do despite a job loss, health issues, etc.  I know that there are families out there that are struggling far more and fairing even worse.

The last decade has seen the further decline of the middle class as massive amounts of wealth as transferred to the top 5%.  For many the last vestige of hope remained in their homes.  That too is crumbling, for many, due to no fault of their own.

And the feeble attempt by the Government to bail out these homeowners has been a failure compared to the massive bail out Wallstreet received and the big banks received from our Government.  There is just no comparison in fact.

Now, anyone here who reads regularly knows that HAMP, etc. has been ridiculously unsuccessful and Foreclosures are on the rise.

State attorneys general and regulators have been pushing banks to perform more loan modifications and the report shows these efforts have had mixed results.

Overall home retention actions taken by banks dropped by 17 percent compared to the second quarter, but most of that was due to decreases in the Home Affordable Modification Program (HAMP), the Obama administration’s leading foreclosure prevention effort.

In the third quarter, HAMP loan modifications slid by almost 46 percent, according to the report.

Of course Republicans are arguing that HAMP is a huge failure and the program should be ended.  The issue isn’t the program (although it could have been a better program) but the banks dragging their feet for months now and the illegal activity involved with the foreclosure process that leaves many homeowners without any protection from their banks is unprecedented.  That is the issue, it is the greed by the banks to put the bottom line before keeping people in their homes.

This is, to me, this is the middle class.  Homeowners make up a huge part of the middle class, those who have invested a great deal in owning a home, putting down roots in a community and investing in an area.  I don’t think it should be seen as a time gone by, I don’t think it should be seen as something that has past because it is part of what makes people want to invest in the common good of their shared communities, those around them.  (And no, I’m not saying that renters do not want to invest in the community around them, this argument always sends my left eye twitching.)  . . .

But I have fallen into that idealistic bunch of people that believe the equity in a home is just one way a family can build some wealth, a middle class to upper middle class family can put money away each month as they pay their mortgage rather than paying someone else’s mortgage.  But ultimately this has been destroyed by the mortgage meltdown, the banking system failure and the absolutely dismal reaction by our Government to protect homeowners and the middle class.  This has been thirty years coming.

And I often hear people say, good.  Let home prices come down, they were too high, screw the boomers, screw the people who bought their houses for too much and let others get in on the market as those prices begin to decline.  This will give so many other people a chance to be homeowners.  (Which is true on it’s own, home prices are down, they were too high and should come down).

And to that I say, why not just be a fucking Republican then?  This is where the downfall of millions is the only way that many can afford a home? (The let them fail mentality)  It’s just not how progressives should think.  It’s not how this progressive thinks and every time I would see that argument, I would shudder at the thought.  It merely allows that right wing meme of the have and have nots win rather than the ultimate issue come down to fair wages, more jobs in the US, and the idea that we have to actually make it where more people can afford to BUY HOMES.  It needs to be both, fair wages and a fair cost of home which would mean more people being able to afford a home, not just sprawling suburbia but condos, townhomes, etc.

These are people.  And so, today, the Wall Street Journal published a piece entitled, “Faces of the Home-Foreclosure Crisis”.  This is what we need to remember.  Every piece of paper has a face to it and every home has a story, a life and family.  Every family is part of a street, a cul-de-sac and a community.

So this is is what I ask of you.  If you’ve read this far, donate $5 to your local legal aid society.   They are doing the work to help keep families in their homes.   You can use Google or go to the link above.  That’s all I ask.

Crossposted from FDL.

There’s lots of significant news in the Legislature’s last week regarding various bills, and it’s extremely difficult to keep up with it all, probably by design.  I should point out that, while the legislative calendar has an end date, there’s no actual reason for some of the forced bottlenecks that result in hundreds of bills being passed at the last minute.  It creates a shroud of secrecy in which special interests rule, and saps the public trust.  A Democratic leadership actually interested in positioning government as somewhat decent would remove these forced bottlenecks from the internal legislative rules and allow bills to be approved on a rolling basis.  That said, this is the system we have now, and here’s a bunch of news about various bills:

• A new bill would exempt non-General Fund workers from furloughs.  This would reverse one of the dumbest provisions in the budget bill, the practice of forcing furloughs on workers not paid by state government, saving almost no money and depriving people of needed services.  Of course, the Governor will probably veto this one, because he hates admitting how wrong he is.

• Democrats on that vaunted water committee have decided against floating a bond to pay for any restoration or overhaul of the Delta.  This means Republicans won’t vote for it, and very little will come of this very important committee thrown together at the last minute.  Some conference committee reports are here, but a deal looks remote, as it would need votes from some of the empty chairs in the Yacht Party.

• One bill that has cleared both chambers would set up “Education Finance Districts”, “in which three or more contiguous school districts can band together to try to increase local taxes.”  This is a small step to make it easier for districts to pass parcel taxes to fund schools, but at this point every little bit helps.  The 2/3 rule for approving such taxes would remain.

• With all the talk of health care reform, it’s notable that an anti-rescission bill has once again passed the legislature.  The bill would also simplify insurance forms.  Last session, Arnold Schwarzenegger vetoed it.  There’s something you don’t hear much about from the Democratic leadership – Arnold Schwarzenegger vetoed a bill that would have banned insurance companies from dropping patients after they get sick.  He sided with the forces of insurer-assisted suicide.  This is your modern Yacht Party on this issue:

“Any of those who have read the various exposés in the Los Angeles Times and others . . . is aware that health insurers have admitted and acknowledged they engaged in a form of post-claims underwriting,” said Sen. Mark Wyland (R-Escondido). “It is unethical and, considering what some of these people have endured, it really borders on the immoral.”

However, Wyland said he would not vote for the bill because the Department of Insurance has proposed new rules to solve the problem, and he wants to see how they work.

Hey, give ’em a chance to see if the immorality stops!  If not, we can think it over.

• The Legislature may extend a homebuyer’s tax credit passed in a previous budget agreement that was nothing but a bailout for developers.  It only credited new construction, and was structured only to benefit high-income households who could afford new construction.  By the way, sales of new units have fell since this was enacted, so it’s not even meeting its intended purpose.  But it’s a giveaway to a special interest, so off the money may go, even though we cannot afford it at this time.

• A bill to ban bisphenol A (BPA) from children’s products was delayed after the Assembly couldn’t muster 41 votes.  The debate in the Assembly last night was pretty fierce.

• Cities and counties reacted angrily to a proposed bill to slow local government bankruptcies until vetted by the California Debt and Investment Advisory Commission.  On the merits this looks to be a bill that would install more control on locals from Sacramento, although there are arguments on both sides.  But mainly it’s about the fate of union contracts in local bankruptcies, I don’t think either side would deny that.

• A roundup of other bills passed yesterday can be found here.

You won’t get much argument here that the budget “plan” has a few holes. Beyond the fact that the plan hinges on getting $1B+ for a state worker’s compensation fund that seems unrealistically optimistic, there is a bunch of borrowing and gimmicks in the deal that will leave us vulnerable in coming budget years.  My guess? We’ll be back talking about the budget in October or so.

But, a report by the credit rating agency Moody’s puts a specific number on it: $15 Billion.

The plan signed by Gov. Arnold Schwarzenegger this week to balance the state’s budget could leave California facing shortfalls in future years of more than $15 billion, according to an analysis released Thursday by a major Wall Street credit rating firm.

Moody’s also criticized California’s plan to take more than $1 billion from counties’ redevelopment agencies this year to help close its $24 billion deficit, saying that could jeopardize those agencies’ credit ratings.(SF Ch ronicle 7/31/09)

Such a number wouldn’t really shock anybody in Sacramento either. After all, there were a slew of stories after the signing of the deal stating this exact notion of the deal not actually closing any big budget gap. Besides the fact that the deal was full of gimmicks, there’s also the fact that California’s economy is still struggling, and the massive cuts in state spending will only amplify the problems we already have.  Problems like the continued busting of the housing bubble.

About 1 in 10 Californians with a home loan is now in default, and there’s growing evidence that the mortgage meltdown is spreading to commercial real estate.

The home mortgage delinquency rate — the percentage of borrowers who have missed several payments and are in the first stage of foreclosure — climbed in June to 9.5% in California and 9.9% in Los Angeles County, according to First American CoreLogic.(LA Times 7/31/09)

And furthermore, the rate of foreclosures in the region most affected by the state budget cuts, the Sacramento area, is also shooting up. We still have a ways to go before we get through this economic mess. And the Hooverism of the latest budget deal only exacerbates these problems.

Note: this is a cross-post from my group blog, The Realignment Project.

From Whence We Came:

As much as some people cling to the idea that the United States has always been a land of anti-government, laissez-faire bustling capitalists, the fact is that the specters of democratic statism haunt the chronicles of American history, all the way from the beginning. One of the oldest and most powerful phantoms is the Bank of the United States that died and was reborn, again and again through the history of American politics like the immortal monsters of slasher horror films.

Because the Bank was there from the beginning – Hamilton drafted it, Washington signed it, and Adams maintained it. Even when the anti-central government Democrats took possession of the Presidency in 1800, Jefferson maintained the Bank and Madison actively promoted it (due to the support of Albert Gallatin (the Secretary of the Treasury and a Democratic-Republican who had begun to learn the virtues of Federal activism in such matters as the Bank and Federally-funded public works). The Second Bank of the United States was established in an era of Democratic-Republican dominance, suggesting that the Bank of the United States had a rough political consensus between 1800-1832. Now, two caveats should be made – first, that the original bank was a public/private venture, and second, that the Bank was highly politically controversial, leading to thirty years of Jacksonian decentralized state banks – but the larger point remains that the Federal government of the Revolutionary Generation was not some libertarian paradise of limited government that left the economy to laissez faire.

The second half of the 19th century saw an enormous explosion of central banking. The Civil War gave us the Second Banking System, whereby the Republican Party, strong nationalists that they were, created for the first time a single, national, paper currency, a system of national banks with reserve requirements (held in Treasury securities), regulated by the Comptroller of the Currency.  When this system began to fail (largely due to the requirement to back all notes with Treasuries and the lack of a lender of last resort, as well as the restrictive monetary policy of the era), the Federal Reserve was called into being. However, what few people realize is that the public-private nature of the Fed was the result of a political bargain struck between conservative Republicans like Nelson Aldrich (who wanted a 100% private Fed), Progressives (who wanted a 100% public Fed), and conservative Democrats (who wanted a decentralized and private Fed).

This was not a single grand vision, but a messy compromise, and there remains in the history books, the vision of a Fed that might (and should) have been, a People’s Bank exercising political authority over the economy.

Where We Stand Today:

This brings us to our current dilemma. In the last twenty years, the so-called FIRE sector (finance, insurance, and real estate) of our economy has metastasized out of control – helped along by deregulation, regulatory capture, and refusal to establish new regulations to keep up with a changing industry. The vast increase in essentially paper value of derivatives, collateralized debt obligations (CDOs), mortgage-backed securities (MBSs), asset-backed securities (ABS), credit-default swaps, and other financial instruments have dramatically raised the stakes of a potential financial collapse, while making some Wall Street firms and their chief executives wealthy on a scale that puts the Gilded Age to shame. Rockefeller and Morgan were rich as they came, but they at least had the good sense to not order gold-flaked ice cream for dessert.

All of this would be merely troubling if the financial industry was merely off in its own little world making up imaginary money, if it wasn’t for the fact that the financial industry has begun to infect the rest of the economy with a dangerous instability. As Matt Taibbi’s piece on Goldman Sachs shows us, the financialization of the economy has had a predictable effect – with too much money chasing too few vehicles for investment, the financial sector begins to create speculative bubbles in new and untried areas of the economy. In the late 90s, they turned to the internet and tech stocks as their new bubble, because investors who might be wary of new and untried firms in something they understood, like steel or cars, promising massive and infinite returns didn’t know what this magical thing called the Internet might do – maybe their stocks really were worth their weight in solid gold. Then it was the housing bubble, where the massive profusion of new investment vehicles (MBSs, default swaps, etc.) and the deliberate compromising of ratings agencies were used to hide the on-the-ground reality (that money was being flung at mortgages on the expectation that home values would never fall, so it didn’t matter that people couldn’t afford their mortgages) behind the illusion that you could slice up debts into risk-free chunks, hedge yourself with insurance so that you couldn’t lose money, and that prices were only ever going to go up.  Even more recently, it’s been commodities futures, where speculators have been bidding up the price of oil and other basic commodities, leveraging the huge sums they now control to pump up prices in a fashion that Jay Gould would have approved of.

All this has huge consequences in the real economy – if you over-invest in internet and tech companies, you get the boom and bust in Silicon Valley, which made some people rich, left a lot of computer programmers and engineers high-and-dry, and somehow we’re still behind the rest of the advanced world when it comes to broadband. When you turn the housing industry from a way for people to buy homes into a gigantic casino/piggybank, then people can’t afford to live where they work, sprawl accelerates, net savings turn into massive net debt, and when it all goes belly up, we have huge foreclosure rates, ghost towns, millions of people’s homes “underwater,” homelessness, nosediving public revenues, and Depression-level unemployment in areas dependent on the real estate industry. When oil contracts are traded twenty times between production and sale, oil prices go up to $145 a barrel and $4-5 per gallon at the pump, the price of everything else (because we generally burn oil to transport goods) goes up, consumers’ purchasing power goes down, and the economy sours. You know things have gotten bad when we’re actually considering limiting speculation in oil.

And every time we try to fix the mess they made, the financial industry sticks a gun to its head and threatens to pull the trigger unless we give them trillions in public funds. So they make money when the bubble goes up, they make money when it goes down, and they make money when someone else is stuck with the cleanup. Meyer Lansky would be proud.

How Do We Get Out of Here?

Someone like Matt Taibbi can feel comfortable telling people there’s nothing we can do. It’s the journalist’s prerogative, well-honed since the days of H.L Mencken, to stand back and cynically chuckle as the world burns. But as an activist, I don’t feel that I can leave it at that. I think there are things that we can do, or at least try to do. A lot of ink and pixels have been spent talking about the need for new regulation, and I don’t really have much to add there for the moment.

But one idea that I do want to explore is to return to where we should have gone with American central banking – the idea of a public finance sector, a People’s Bank. In my imagination, the People’s Bank would focus on three key areas where we need an active, not-for-profit public presence:

1. Secure Deposits, Open to All– despite the success of the FDIC in making people’s savings and checking accounts more secure than they used to be, the large numbers of bank failures in the recent crisis suggests that we have a need for something even safer than an FDIC-insured bank – a Federal bank where you can put your money without ever having to be afraid of losing it. However, I wouldn’t be a very good progressive if I didn’t extend this idea one further to explore a whole area of the “shadow financial sector” which really hurts people who don’t make enough money to be worried about losing it.
   1. Free Checking/Savings Accounts –  Twenty-eight million Americans don’t have either a checking or a savings account . Usually, this is because they don’t have enough money on hand to make it over the minimum required to open an account, or because they live so close to the line that they can’t wait three days for their paychecks to cover it, or because they’ve become overdrawn and hit with so many bank fees that they owe more than they can put in. Thus, the working poor are forced to turn to check-cashing companies who charge up to 391% interest for their services.  Simply by giving working people a way to put their money in a safe place, we would be increasing the net income of twenty-eight million working poor people by hundreds if not thousands of dollars a year.
2. Availability of Basic Transactional Credit – in addition to being exploited when it comes to simply getting access to their own paychecks, many Americans, including the working poor but also comprising vast swathes of the working class, are also routinely victimized by their lack of access to basic transactional credit. Instead, they turn to  payday lenders, who charge up to 911% interest, and auto-title lenders who charge up to 300% interest. These companies, together with the check-cashers discussed above, collectively rake in $8.5 billion a year in fees. And if the financial crisis’ underbelly – the racial profiling of subprime loans revealed in the Wells Fargo lawsuit in Baltimore,  the abuse of so-called NINJA loans by middle-men, the ridiculous spectacle of the banks defeating cramdown legislation and watering down credit card interest rate reform – has shown us anything, it’s that the so-called legitimate finance industry isn’t so much better in how it deals with working and middle class Americans. Thus, the second basic function for the People’s Bank – one that I have to give credit to Matt Yglesias for linking to – is Steve Waldman’s suggestion that the government should provide “basic transactional credit as a public good…Every adult would be offered a Treasury Express card, which would have, say, a $1000 limit. Balances would be payable in full monthly. The only penalty for nonpayment would be denial of access of further credit, both by the government and by private creditors…Unpaid balances would be forgiven automatically after a period of five years. No interest would ever be charged.”
3. Non-Profit Yardstick Home Lending –  in the wake of Fannie Mae/Freddie Mac, it would seem counter-intuitive to argue for a public institution to guarantee home loans. However, I would argue that the failure of those two institutions is more an argument against privatization – for decades, the two institutions worked well at what they were supposed to do, namely guarantee long-term loans; it was when they tried to chase the subprime money (which they came late to) that they went belly-up. So if we’re going to have an institution designed to make it easier and safer to buy mortgages, and as we just spent huge amounts of money rescuing these two institutions, let’s actually do the job right. In the wake of the failure to cramdown mortgages or otherwise deal with the foreclosure crisis, let’s have an institution that values homes correctly (one of the other market failures of the housing collapse was the corruption of home value assessors), that lends wisely, that provides long-term fixed rate mortgages to people who need primary residences…perhaps even using the returns on middle-class loans to make loans affordable to working people without creating crooked sub-prime practices.
4. A Truly Public Fed – finally, and this would be the largest, most politically fraught, and most unlikely reform, we need to fold the Federal Reserve’s central banking powers into the People’s Bank. An institutional accommodation from 1912 left us with a central banking partly public and partly private, and we all know what happens to a house divided. I believe in central banking, and of the various political groups out there, I have the most contempt for the gold-standard loving Fed-abolishers. But the essence of central banking – controlling interest rates, managing the supply of money, acting as a lender of last resort, and regulating financial institutions – is an exercise in public authority over the economy. I would argue that much of the current lack of faith in the government’s attempt to reboot the financial system stems, among other things, from the hidden nature of the Fed’s operations, how the Federal Reserve as an institution has the singular authority to loan trillions of public funds without any democratic control, accountability, and virtually no oversight. (on a side note, I would also argue that the public-private nature of the Fed is why it for so long has focused on inflation over unemployment, as well as its habitual paranoia over wage growth) So if we’re going to have a central bank, as we should, let’s forgo the inane illusion of laissez-faire, and actually have a people’s bank.

January 11, 1944:

When Franklin Delano Roosevelt gave his State of the Union Address on January 11, 1944, the United States was engaged in the largest two-front war of its, or any nation's history. In the European theater, Allied forces were bogged down in Italy south of Monte Cassino and Operation Overlord was still in the planning stage. In the Pacific, Allied forces were advancing through New Guinea following the bloody Battle of Tarawa.

And yet, in the middle of a crucial address at a time when the successful outcome of the war was still very much in doubt, FDR spoke instead to what would come after, in what might have been the last New Deal speech he ever gave. The theme began with him pledging that:

We are united in determination that this war shall not be followed by another interim which leads to new disaster- that we shall not repeat the tragic errors of ostrich isolationism—that we shall not repeat the excesses of the wild twenties when this Nation went for a joy ride on a roller coaster which ended in a tragic crash.

Roosevelt continued by re-framing the objectives of the war as “not only physical security which provides safety from attacks by aggressors. It means also economic security, social security, moral security.” The invocation of Social Security, the seemingly jarring transition from foreign to domestic policy was the opening movement of a speech whose moral center was the home front. In the bridge of his speech, FDR decried the “uproar of demands for special favors for special groups,” and recognized that “we have not always forgotten individual and selfish and partisan interests in time of war,” a rather unusual tone for a period we prefer to remember in glowing, sepia tones.

Even more unusually, he went on to challenge an even more sacred cow than national unity – individualism. Far from being an expression of American rugged independence, Roosevelt argued that “In this war, we have been compelled to learn how interdependent upon each other are all groups and sections of the population of America,” following the thread of prices and wages from farmers and workers and factory owners to “teachers, clergy, policemen, firemen, widows and minors on fixed incomes, wives and dependents of our soldiers and sailors, and old-age pensioners.”

Shifting to explicitly addressing the issue of the post-war world, FDR explicitly returned to the theme of his 1936 Inaugural Address, the theme that more than any other idea than “security” defined the New Deal – “one third of a nation.” The first condition for a new America, the first war aim would be not merely the achievement of economic prosperity but rather the leveling upwards of the poorest of Americans towards a universal minimum standard of living. (Sadly, the first, more anodyne goal of GDP growth would become the standard for post-war liberalism, while the second and higher aim would be marginalized)

It is our duty now to begin to lay the plans and determine the strategy for the winning of a lasting peace and the establishment of an American standard of living higher than ever before known. We cannot be content, no matter how high that general standard of living may be, if some fraction of our people—whether it be one-third or one-fifth or one-tenth- is ill-fed, ill-clothed, ill housed, and insecure.

America could not be content with a return to prosperity because of the re-discovery of economic interdependence, he argued. This economic reality, once hidden behind the veil of the free market, was being made plain to Americans, and just as the recognition of political community had reshaped an America in 1776, he believed that the recognition of economic community in 1944 would engender similar results in the post-war America:

This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights—among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty.

As our Nation has grown in size and stature, however—as our industrial economy expanded—these political rights proved inadequate to assure us equality in the pursuit of happiness.

We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. “Necessitous men are not free men.” People who are hungry and out of a job are the stuff of which dictatorships are made.

Linking the Depression to the rise of the Nazi ideology and movement that it empowered, FDR here linked the cause of economic security to the cause of the war, bringing the theme of the home front into unity with the reality of a world war against fascism.

And then he introduced the Second Bill of Rights:

In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all regardless of station, race, or creed.

Among these are:

   The right to a useful and remunerative job in the industries or shops or farms or mines of the Nation;

   The right to earn enough to provide adequate food and clothing and recreation;

   The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;

   The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

   The right of every family to a decent home;

   The right to adequate medical care and the opportunity to achieve and enjoy good health;

  The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;

   The right to a good education.

It has been argued in the past that America has been exceptional in defining rights solely as legal and political in nature, and avoiding the economic and social rights spelled out in later 20th century constitutions. FDR's speech stands as a powerful rebuttal to this argument, a momentary glimpse of another America. Because Roosevelt did not intend this Second Bill of Rights to be a mere legal letter; there was instead a legislative movement to enact them into law, through the combination of the Wagner-Murray-Dingell Bill (universal health care plus a national cradle-to-grave welfare state), the Full Employment Bill (establishing full employment and the right to a job through Keynesian planning and the government as employer of last resort), and what would later be the Housing Act of 1949. This political drive was blocked in Congress, but for a moment in 1944, the United States seemed to be moving to a new recognition of human rights.

And for Roosevelt, the Second Bill of Rights really were about the United States and the world at the same time. We often forget that American politics and public policy doesn't happen in a vacuum, that there is a conversation that goes on across oceans and national borders. And 1944 was a time when there was a Trans-Atlantic conversation about what the post-war world should look like. In the United Kingdom, John Meynard Keynes had established his economic theories into government practice and William Beveridge was in the process of writing his two famous reports, the 1942 Beveridge Plan for a National Health Service and a cradle-to-grave welfare state, and Full Employment in a Free Society (1944). In Sweden, Gunnar Myrdal and the Stockholm School were solidifying the intellectual foundations for the Swedish social-democratic model. Throughout every occupied country in Europe waiting for Operation Overlord, people imagined a new, better world to come. And here was FDR, speaking with the world.

All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being.

America's own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for our citizens. For unless there is security here at home there cannot be lasting peace in the world.

July 4, 2009:

In the sixty-five years since FDR's Second Bill of Rights, the larger historical mission of the progressive movement in America has really been the adoption of the Second Bill of Rights for all Americans, regardless of race, class, and gender. Truman's failed Fair Deal was built from the intellectual foundations of the Second Bill of Rights. The Great Society and the War on Poverty were incomplete attempts to establish health care, education, and protection from poverty; the Civil Rights Movement's call for “Jobs and Freedom” and the 1963 “Freedom Budget” echoed even more deeply the spirit of Roosevelt. And even in the darkest years of the left's nadir, when America seemed to be permanently the land of Reagan, the “dream that will never die” that kept people going ultimately is that same dream.

So where do we stand today?

   * The Right to a Job – here, we've made the least amount of progress at the time when we have a nigh-unprecedented need for it. Even in the wake of the first stimulus bill, 9.5% of the country is officially unemployed. Unofficially, the number's more like 18.4%. After health care, this must be the goal of our political efforts, because it has become all to clear that each future recovery will become even more of a jobless recovery.
   * The Right to a Living Wage – here, we actually have made some progress, both in terms of restoring some of the lost value of the minimum wage, and on a state and local level, establishing a living wage as the legal minimum. As I have said before, I think this is an important and productive part of our politics, a ritual of reconsecration to social justice.
   * The Right to Farm – ironically, here we succeeded far more than we ever intended to, and the result has been a permanent system of subsidies to agro-business and a distortion of our agricultural, energy, and food policy by the sheer political gravity of corn.
   * The Right to Freedom From Monopolies – if the financial crisis has shown us anything, it's that we need a return to stronger anti-monopoly regulations.
   * The Right to a Home – as I've said before, we really need to work on extending this to mean something more than Federal subsidies to middle-class suburban home construction.
   * The Right to Health Care – after the successful scoring of the HELP committee's new bill and the AMA's endorsement of a public option, I feel more confident than ever before that we will finally enact this right into law.
   * The Right to Social Security – while we did establish a system of old age, disability, and unemployment insurance, it is in desperate need of improvement, especially in regards to unemployment insurance (more on this later).
   * The Right to a Good Education – while we have made some steps in the right direction in improving and expanding public education, a lot more is needed to make this right a reality for all (more on this later).