The New Republic

The fanaticism is on the part of the Democrats. Faced with the decline of socialism in Europe and the impending collapse of Medicare and Social Security at home they want more of the same policies that got us into this mess. Democratic policies (and too often the Republican policies are hardly different) have a common flaw: they insulate corporations and individuals from the consequences of their actions. The disastrous results are predictable, and they have been predicted by market-oriented economists and for that matter just about anybody possessed of common sense. If you mandate mortgage lending to people who are unlikely to be able to pay back the loans you are asking for trouble. The irony, as always, is that policies supposedly intended to help the poor generally end up hurting them most of all. C'mon folks, even Fidel Castro has finally admitted that socialist economics doesn't work. His brother announced the layoff of tens of thousands of government employees. Maybe the Democratic Party should hire Raul as a consultant. Freedom to most Americans is a sacred value, the source of human dignity and prosperity. To liberals it is only an outmoded concept standing in the way of the utopia that would result if liberal "experts" were in charge.

- bulbman1066

June 8, 2011 at 1:19am

The disasters in our economy have nothing whatever to do with: 1. Medicare 2. Social security 3. Community reinvestment standards for banks 4. Socialism 5. Regulation The have everything to do with right-wing economic fanaticism. Specifically, we had an epic bust in the real estate market, not in entitlement financing. That bust was due to the absurd economic policies advocated by such as bulb, including structural deficits in a boom (entirely attributable to the Bush tax cuts). They are also responsible for the asset bubble (too much money in the hands of the investor class relative to consumption demand that sustains investment) and for the fragility of demand (not enough income in the hands of consumers resulting in unsustainable levels of consumer debt). All of this was in turn enable by deregulation of the financial industry. Community reinvestment lending was miniscule compared to the size of the sub-prime mortgage pool. The only thing wrong with the bulbman theory of the world is that it is contradicted utterly and at every turn by the facts. We suffer from rampant market libertarianism. Period. The solution is most definitely not more of the same. Yet that is what the people who gave us this disaster urge upon us. The disaster is not yet large enough to suit their tastes.

- roidubouloi

June 8, 2011 at 1:38am

"Community reinvestment lending was miniscule compared to the size of the sub-prime mortgage pool." The size of the sub-prime mortgage pool *was* the problem. Nobody but you mentioned "community reinvestment lending", whatever that is. "Market libertarianism". Redundancy is a sign of illiteracy. "Bush tax cuts". I nowhere defended the Bush tax cuts. I think John McCain was right to oppose them at the time. I do think that the Democrats have worn them out as an excuse for the failure of their own policies. "It's all Bush's fault" - that dog can't hunt any more. As usual, you mindlessly repeat ill-understood leftist catchwords without making the slightest effort to understanding what others are saying. I repeat, "democratic policies (and too often the Republican policies are hardly different) have a common flaw: they insulate corporations and individuals from the consequences of their actions". That implies to me that we need to bring back something along the lines of Glass-Steagall and not allow situations to arise where private and government corporations can invest knowing that the taxpayer will pick up the tab for any losses. So I'm not against needed regulation. I am against foolish regulation like requiring banks to lend to people who aren't credit worthy. That policy, which was bipartisan, resulted in disaster, most of all for the people it was supposed to help. .

- bulbman1066

June 8, 2011 at 4:32am

Thoughtful though disturbing analysis, Jonathan. But at least three other factors are at play, two structural and the third a matter of leadership: 1. You correctly point out that the House and Senate are structurally tilted in the Republicans' favor, but you do so in the context of explaining that they do not sufficiently exploit that advantage. Another salient consideration, though, is that if that structural advantage were not present, the Democratic Party (as fractured as it is) would be more effective. 2. The historical accident known as the cloture rule similarly tilts the structure of government in the Republicans' favor. They are usually united, so can muster 41 votes to block legislation. The divided Democrats usually cannot do so when they are in the minority. But take away that "minority rule" rule, and even a divided Democratic majority could pass much more and much stronger legislation--and would have done so in 2009-10. 3. Finally, there is the question of leadership. I like some of what Obama has done and appreciate the huge challenges he's facing cleaning up the multiple messes left by Bush. But I wish he were pushing a more aggressive narrative featuring a level playing field and equality of opportunity. In the wake of the financial meltdown, voter anger (including even that of some Tea Party types) might have been turned in a constructive, more progressive direction.

- Thunderroad

June 8, 2011 at 6:01am

I am not sure that an "admirable willingness to accept risk to achieve their goals" really describes the Republican leadership. Their audacity in throwing caution to the wind and defying the political laws of gravity in the singleminded pursuit of a right wing agenda is not a matter of choice. As the titular leaders of a revolutionary movement that would rather destroy those institutions of our democracy it cannot control, the GOP establishment has little choice it seems to me but to follow the mob wherever that mob takes them or be devoured by it. The alternative is political exile. Many have said as much themselves.

- TedFrier

June 8, 2011 at 6:12am

You desperately need a viable third party. The Derivatives party or the Randians, really isn't much of a choice. What's that work out at? Half a vote each?

- IggyPop

June 8, 2011 at 6:34am

It can happen in this country. An American form of fascism lies at the end of the road that the Republicans are constructing. When this road to an authoritarian, corporate state is completed they will call it Liberty.

- paskunac

June 8, 2011 at 6:38am

Bulbman Tax cuts with two unfunded wars and an unfunded prescription drug benefit weakened our fiscal strength so that when it came time to deal with the subprime crisis, (which became a crises of the magnitude of AIG only because of the excesses of Wall Street and not because many individuals could not repay their mortgages). we were already $5 trillion in the hole. And what is the Republican solution? Lower top tax rates. Who benefited most from the bailout of Wall Street? The same people who benefited from the lower tax rates. Who will pay the cost of trying to revive the economy with lower top tax rates proposed by the Republicans?

- Nusholtz

June 8, 2011 at 7:29am

"The size of the sub-prime mortgage pool *was* the problem. Nobody but you mentioned "community reinvestment lending", whatever that is." This is where you demonstrate that you have no idea what you are talking about, bulb. The Community Reinvestment Act is the legislation that puts pressure on banks to provide mortgage credit locally. It is what is being referred to, knowingly or unknowingly, by those who talk about forcing lenders to extend credit to the uncreditworthy. As I said, the amount of such credit is miniscule, but the frauds on the right pretend that it had something to do with the subprime mortage crisis. The other government mechanism for assuring access to mortgage financing are the mortgage agencies. However, the very definition of a "sub-prime" mortgage is one that does not qualify for agency financing. Hence, here too, government credit regulation and management had nothing to do with the sub-prime mortgage crisis. That is entirely the product of the "free market." The contribution of the government to the mortgage crisis was lax regulation of financial institutions. "'Market libertarianism'. Redundancy is a sign of illiteracy." I use the modifier market to distinguish from social libertarianism the subject of which is the regulation of non-market behavior. Be careful when you make such accusations. You make yourself look foolish. It bears repeating that the economic crisis we are in is entirely the result of leaving too much money in the hands of the wrong people and of lax regulation. Both of these are constantly urged upon us by the market libertarians of various stripes. They and their wacko economic theories are the problem. They continue to insist that maximum economic freedom produces the best outcomes despite endless and copious evidence to the contrary. When their program is implemented and quickly leads to disaster, as people who understand economics would predict, they insist that what we need is even more of the same disastrous polices, more money in the hands of the investor class and even less regulation. The market libertarians are religious extremists. There is no more possibility of dissuading them with facts than there is dissuading any other religious fanatic with facts. They are one in the same and a threat to the safety and well-being of society.

- roidubouloi

June 8, 2011 at 7:44am

"If we do not all hang together, then most assuredly we will all hang separately." It could be that the Republican Discipline to hold to dogma despite all evidence to the contrary, and to punish wayward members who stray from the dogma line, is as powerful as you say. It could also be that the Democrats are unable to maintain this discipline, first of all because they don't WANT to enforce such a lock-step approach. Secondly because the Democrats are a "big tent" so having a wide variety of viewpoints is important to them. What MUST stop happening is Democrats treating Republicans as if they were Democrats. Offering compromises to a group that defines "compromise" as "our way or the highway" results in damaging good policies by compromising them with dogma. And since the compromise never goes far enough (because it IS a compromise) the Republicans ultimately reject that too.

- AllanL5

June 8, 2011 at 9:41am

This article reads as if Glen Beck's alter ego wrote it. Sweeping generalizations, backed up by non-sequitur. Everyone in the asylum is CERTAIN the others are crazy, and is certain they AREN'T crazy. JC writes: "The only question is not whether but how far Republicans will yank the direction of government their way." As if the dems didn't (and aren't right now?)? do you remember the "drain the swamp" comment from Pelosi that set the tone for their reign? it would have been much more interesting if you listed all the times dems had compromised. That'd be one short list.

- seattleeng

June 8, 2011 at 10:31am

Nice of bulb and seattle to show up as examples of right-wing fanaticism, yes? Dude, the list of times Democrats had compromised or failed to take advantage of their majority would overwhelm the server hosting tnr.com, not that your blinkered, blinded brain could ever figure that out. Did you even read the article, or just shoot off as soon as you saw the description?

- cspencef

June 8, 2011 at 11:15am

it would have been much more interesting if you listed all the times dems had compromised. That'd be one short list.. Someone has a short memory, or an unwillingness to recognise reality. Or has Democrats and Republicans mixed up 08-10 was very marked by Democrat (perhaps not willingly) but definitely compromising with Republicans. The PPACA was a very fine example of this, as were most other things that passed the Senate. Going back a few more years, clearly Democrats were compromising, especially when they controlled the Senate. Or perhaps 01-03 was a period marked with unprecedented use of the fillibuster and the governing of the nation just ground to a halt? This is course assuming that there is a shared understanding that "dems had compromised" means something other than "just do what the GOP wants".

- Nari224

June 8, 2011 at 11:48am

The Teabagger Party is not conservative. It is sociopathic and selfish. It is not libertarian. It is libertine. Bush and his republican congress fought wars with tax cuts and deregulation (with the help of democrats). That is why the US economy, and therefore the world economy, is in the ditch. Now the teabaggers are driving the republican bulldozer and will push the economy out of the ditch and over the cliff into a bottomless chasm. Witness Pawlenty's new call for even more tax cuts

- danadcock

June 8, 2011 at 11:49am

Good column. And this GOP intransigence comes at a time when the party has lost the popular vote for president 4 out of the last 5 elections, with their one win, 2004, being the narrowest percentage victory of an incumbent in history.

- vermonter

June 8, 2011 at 12:57pm

Time for some serious structural reforms. Expanding the size of the house of representatives would be a big plus, eliminating filibuster and cloture abuse would stop the insane "house of lords" style Senate we have now (both parties implicated, though the GOP's recent abuses are pretty horrific), and eliminating the electoral college for presidential elections.

- Pnaut

June 8, 2011 at 1:08pm

Pnaut, filibuster and the "'House of Lords' style Senate" are what keep the ship of state on an even keel. If, as is possible, the Republicans take the House, the Senate, and the Presidency you will be happy that the Democrats in the Senate have the power of filibuster. The Constitution is all about checks and balances, including checks against the "tyranny of the majority".

- bulbman1066

June 8, 2011 at 3:01pm

Let's carve New York City out of NY State, Chicago out of Illinois, LA out of California, and give them each two seats in the Senate. Why are we listening to little yappers like Wyoming? The Democrats have to focus on economic issues. That would be to their natural advantage and help divide the libertarians from working class religious conservatives. Unfortunately, Obama had his Roosevelt moment and squandered it.

- amidut

June 8, 2011 at 4:37pm

Maybe the Democrats should not automatically renominate Obama. They should look for a more dynamic leader in 2012.

- amidut

June 8, 2011 at 4:39pm

bulbman -- The "liar's loans" (Stated Income loans) that were the real downfall of the housing market weren't handed out like candy by lenders because the government wanted them to put more poor people in houses -- they made those risky loans because they found a way to make money on them while handing off the risk to someone else. They could take a few hundred or thousand of these loans, put them together into a "mortgage-backed security," sell them to investors, and, just like magic, they were no longer the mortgage lender's problem. Lenders loved these loans. Realtors and everyone else in the housing industry loved these loans, too -- because they helped fuel the market and inflate prices. In some markets liar's loans made up 60% of the loans being made -- and they certainly weren't all made to "poor people." Many were made to very affluent people who just weren't affluent enough to afford the McMansions they thought they deserved, and many other borrowers were speculators and "flippers" expecting to make easy money in an over-heated market. Every market is different, but in my own if you look at the foreclosure market this is what you see -- an awful lot of Million + mansions at one extreme and half-finished "fixers" in middle class neighborhoods (that some cash-strapped "investors" thought were going to be easy to flip) at the other.

- esmense

June 8, 2011 at 5:35pm

Esmense, alas, you have just highlighted the problems government intervention in the lending space. Money was loaned to people that would NEVER had gotten a loan if the lender actually had to use his own money. Money was being loaned to people that had >50% chance of defaulting. At interest rates that came nowhere close to covering the risk. Had the government NOT been guaranteeing all this, the risky loans would not have happened. Period. Nari writes: "08-10 was very marked by Democrat (perhaps not willingly) but definitely compromising with Republicans. The PPACA was a very fine example of this, as were most other things that passed the Senate." The PPACA, that passed in the senate without a single republican vote is an example of compromise? I'm sorry, but that is laughable. If they got not republican votes, then why did they have to compromise? At all? The dems act just like the republicans do when they are in power. There is no difference. Again, if you want to convince me otherwise, find some examples where dems compromised more than they had to. But PPACA is not it.

- seattleeng

June 8, 2011 at 6:47pm

seattleeng -- This behavior went into full gear in 2002 -- under Bush. The Bush administration was encouraging this risky behavior not to benefit poor people (as I pointed out in many cases these loans went to affluent and middle class people simply seeking more house than they could afford, and a lot of it went to speculators) but to goose the housing and financial markets. A housing bubble was created to replace the dot.com bubble and it all came to a bad end. If you want to know who to blame, it's obvious; the people who made a killing off of this bad behavior. And the adminstration that aided them in doing so.

- esmense

June 8, 2011 at 7:17pm

Seattle, What horseshit. Did you follow the process that negotiated the PPACA through the Senate at all? Grassley, Snowe and others were neck-deep in it, and negotiated many, many important features of the bill, before ultimately backing out in the face of pressure from GOP leadership and activists, though Snowe voted for it before she voted against it (reportedly, she'd promised leadership she'd vote with them on all procedural issues, regardless of the content of the bill. Think on that for a bit). As Chait notes, Dems had (and have) several reasons for compromising, including that several important Democrats like Max Baucus and Evan Bayh believe in compromise. Many of the same are clearly desperate for cover on their right flanks, so there's that, too. You have to wonder why Bayh retired; he's been described as a bland, not so deep sort of fellow who believes instinctively in compromise and centrism. Maybe he left because it looks less and less like there'll be any partnership across the aisle.

- Curran1

June 8, 2011 at 8:02pm

"Had the government NOT been guaranteeing all this, the risky loans would not have happened. Period." Seattle, this is but another of your absurd inventions. On what basis are you claiming that sub-primed mortgage debt was guaranteed by government? If it had been, there would not have been a crisis, or at least not the sort of crisis that we had. The sub-prime mortgage fiasco and the derivatives fiasco were entirely the work of the private market. The only government role was its failure to regulate those markets. Where do you get all this nonsense?

- roidubouloi

June 8, 2011 at 9:04pm

March 2002 HUD study: "Though the GSEs currently only purchase about 14 percent of subprime loans originated, market analysts expect that within the next few years the GSEs could purchase as much as 50 percent of the overall subprime mortgage volume. The GSEs are increasing their business, in part, in response to higher affordable housing goals set by the U.S. Department of Housing and Urban Development (HUD) in its new rule established in October 2000. In the rule, HUD identifies subprime borrowers as a market that can help Fannie Mae and Freddie Mac meet their goals, and also help to establish more standardization in the subprime market." I believe they got as high as 50% subprime market share, but averaged closer to 25% over the next 5 years, but not sure how much was direct purchase and how much guarantee. Moreover, the GSEs were drivers in the ALT-A market, accumulating 500 BIL, which is where their truly big losses came from. So they didn't guarantee or buy everything, but their influence, mainly through the big aggregators (countrywide, wamu, et al) was substantial in making funds more readily available to the smaller fish in the subprime and alt-a spaces. Many others do share the blame though, and a market existed well before the GSEs got involved. They just helped to turbo-charge it.

- ds111

June 9, 2011 at 4:41pm

"Companies competing with these GSEs generally only securitize mortgages which the GSEs will not securitize, either because they are too large (jumbo mortgages) or because they do not meet the GSE's underwriting standards (subprime mortgages)." http://en.wikipedia.org/wiki/Mortgage_GSE_controversy "Because Alt-A loans were not primarily purchased by the GSEs, they thus became more expensive and much harder to find as a result of the general crisis in markets for mortgage-backed securities. Alt-A loans were still available from individual institutions which held them "in portfolio" rather than re-selling them to investors, and as of mid-2008 there was a strong push for the FNMA and FHLMC to be permitted to buy more of them. However, the interest rates in this lending category increased substantially between 2006 and 2008 as a result of the shrinking secondary market." http://en.wikipedia.org/wiki/Alt-A Sorry, ds111, but the GSE's did not cause the mortgage crisis or "turbo-charge" the market, whatever the hell that is supposed to mean. This claim is just another bit of supply-side nuttery. Indeed, supply-side nuttery caused this crisis with a combination of radical deregulation of finance and absurd theories of public finance that put far too much money in the hands of the investor class with not nearly enough real opportunities to invest in. Hence, and asset bubble of unprecedented magnitude. Now that we are living through the after-math of the supply-side wacko driven disaster, there is no end of false claims (and let's face it, outright lies) that seek to place the blame other than where it belongs.

- roidubouloi

June 9, 2011 at 11:24pm

seattleeng: "it would have been much more interesting if you listed all the times dems had compromised. That'd be one short list." On health care: single payer not even on the table. Public option dropped (even though it had popular support). Stimulus: far smaller than many liberals advocated. Largest portion consisted of tax cuts when many Democrats wanted more direct spending. Fiscal reform: not as tough as many Democrats wanted. Tax cuts: Dems caved on allowing the upper income tax cuts to expire. There are probably other examples, but these are the ones it took me only a few minutes to come up with. Now come up with a list where Republicans have given ground. I think that would be a much shorter list. "The PPACA, that passed in the senate without a single republican vote is an example of compromise?" Yes it is. Democrats kept giving ground as Republicans (at least those involved in the negotiations) kept moving the goalposts. These Democrats are lousy negotiators, a point made repeatedly in Chait's posts (which I know you must read).

- dsimon

June 10, 2011 at 1:30am

bulbman: "If, as is possible, the Republicans take the House, the Senate, and the Presidency you will be happy that the Democrats in the Senate have the power of filibuster." I won't. I think elections should have consequences. I think the solution to being in the minority is to win more seats the next time around, not to employ procedural tactics to block the democratic process. "The Constitution is all about checks and balances, including checks against the 'tyranny of the majority.'" Yes, and even Hamilton and others in The Federalist Papers said that legislatures should operate by majority rule, and that it would be pernicious to allow a minority to block legislation. The "checks and balances" pit one branch of government against the others, not each branch within itself. The "tyranny of the majority" issue is addressed by requiring three different majorities to get anything done: a population-based majority in the House, a state-based majority in the Senate, and another once-removed national majority (through the Electoral College) in the presidency. The Senate was adopted because it was the only way to get the Constitution approved by small states, not because the Framers were enthused with the idea of an undemocratic body (read the accounts of the Convention). How much more undemocratic do you want to make the process? Why not give 30 Senators the power to block legislation? 20? Why not require unaminity? The filibuster is nowhere in the Constitution. It's nowhere in The Federalist Papers. Yes, the Framers made it hard to pass legislation. But the idea that they might have thought it was a good idea for an already undemocratic Senate to operate according to minority rule is bunk.

- dsimon

June 10, 2011 at 1:46am

If the Republican Party had been the slightest bit interested in compromise, then several GOP names would have been at the bottom of the Affordable Care Act. It is in fact the gold-standard example of a broad Democratic policy objective that has nonetheless been strikingly influenced by Republican ideas about health care reform over the last 15-20 years. When the Obama administration picked up these very ideas, curiously enough they became poisonous. The GOP was suddenly and more passionately interested in denying Obama a victory than sharing in a major national reform from which the vast bulk of Americans will benefit in the future. Romney is the tragic clown in this story.

- ironyroad

June 12, 2011 at 2:47am

Dsimon, these are not areas the dems compromised with republicans. These are areas they compromised with the sane elements of their own party. Things like single payer have NEVER been an option. The math doesn't work. Period. Dems know this but they pretend that "if only the republicans would get out of the way we could do this" to placate the clueless in their party. the dems could have rammed single payer through just as easily as the bill they did. If only their party would have let them. Lucky for us, not everyone in their party is mathematically challenged.

- seattleeng

June 15, 2011 at 1:40am

roid writes: "Sorry, ds111, but the GSE's did not cause the mortgage crisis or "turbo-charge" the market, whatever the hell that is supposed to mean. This claim is just another bit of supply-side nuttery." There are enough great books out on this topic from great writers from the NYT and WSJ. I don't think we need to refer to a wiki page you work on in your spare time as the definitive account.

- seattleeng

June 15, 2011 at 1:43am

Very interesting article. I despair that the contemporary Democratic Party has proved completely ineffective in advancing a progressive, liberal agenda. Part of this stems from the bizarre fixation of the Administration on culling any modicum of support from the GOP and business community. If Obama had spent half as much time galvanizing the Democrats and working- and middle-class voters, the Democrats might still control the House. I don't however, think it is simply a problem in the White House. The problems were quite evident under Clinton and, after '06, under Bush. Perhaps we need a new party or at least a disciplined liberal party within the Democratic Party that has the balls to torpedo DINOs from time to time. I don't think that leads to more compromise, but right now we alternate between periods of right wing victories and Democratic ineffectiveness. Something must change to stem the catastrophic right wing trend.

- rjosborne

June 24, 2011 at 11:26am