EconomistMom.com

First, congratulations to President-Elect Obama.  We are truly participating in an historic moment and all have a reason to celebrate.  And hopefully there is much more good history to make going forward.

Yesterday Stan Collender wrote in his “Fiscal Fitness” column in Roll Call that there has been:

…no credible leadership on the credit and stock market crises and economic downturn at a time when the country desperately seems to want it.

At this point in its last year in office, no one in the Bush administration, including the president, is able to provide this leadership. If it ever existed at all, that opportunity passed a long time ago. And the House and Senate leaders on this issue don’t have the national credentials to take control.

That leaves only one person: whoever is elected president.

Unlike the situation in almost all previous elections, the country is likely to look to the president-elect for guidance and reassurance almost immediately after the results have been announced.

Stan is right.  This morning the inside-the-Beltway policy wonks (and the media as well of course) are excitedly, anxiously speculating about who will be in President Obama’s cabinet–but in particular, who we expect will immediately be put to work on economic policy in the (very short) “transition” to the Obama Administration.

The real work on the economy has to begin right away, and it’s going to involve hard choices and a coming together of lots of ideas and personalities that are pretty out of practice in terms of “getting along.”  And I believe President-elect Obama understands the critical need for cooperation, compromise, and broadly-shared sacrifice in any solution to our economy’s very challenging problems, and he understands that Americans are now relying on him to encourage that coming together.  From his victory speech last night:

This is your victory.

And I know you didn’t do this just to win an election. And I know you didn’t do it for me.

You did it because you understand the enormity of the task that lies ahead. For even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime — two wars, a planet in peril, the worst financial crisis in a century…

There’s new energy to harness, new jobs to be created, new schools to build, and threats to meet, alliances to repair.

The road ahead will be long. Our climb will be steep. We may not get there in one year or even in one term. But, America, I have never been more hopeful than I am tonight that we will get there.

I promise you, we as a people will get there.

There will be setbacks and false starts. There are many who won’t agree with every decision or policy I make as president. And we know the government can’t solve every problem.

But I will always be honest with you about the challenges we face. I will listen to you, especially when we disagree. And, above all, I will ask you to join in the work of remaking this nation…

It can’t happen without you, without a new spirit of service, a new spirit of sacrifice.

So let us summon a new spirit of patriotism, of responsibility, where each of us resolves to pitch in and work harder and look after not only ourselves but each other.

Let us remember that, if this financial crisis taught us anything, it’s that we cannot have a thriving Wall Street while Main Street suffers.

In this country, we rise or fall as one nation, as one people. Let’s resist the temptation to fall back on the same partisanship and pettiness and immaturity that has poisoned our politics for so long.

As the Washington Post’s Dan Balz writes today, Obama’s first challenge on economic policy will be how to balance his “big and ambitious agenda” with a feasible “strategy to reach those goals over time”–in other words, how to listen to the advice of all of his economic advisers, both the Jared Bernstein (bigger government) types and the Bob Rubin (fiscal hawk) types:

Obama advisers, who agreed to talk about the future only on the condition that they not be quoted, said they are well aware of the dangers of interpreting the results as a mandate for unabashed liberal government.

One top adviser recalled what happened after the Democrats regained control of the House and Senate in the midterm elections and suggested they were ready to end the war in Iraq and enact a bold Democratic agenda. “We’re all wary of the lessons of 2006, when expectations were raised so high prematurely,” he said.

This adviser said Obama knows that he must move strategically to balance his pledges to govern inclusively while promoting a progressive agenda. “It’s up to him to educate people on a strategy to move forward.” Part of that strategy, he added, will be persuading people to be patient about the pace of change.

Obama advisers take seriously the senator’s rhetoric about governing in a bipartisan fashion. They are ready for potential conflict with some Democratic constituencies or with some liberal Democrats in Congress, whose pent-up demand for action may clash with Obama’s priorities, and are prepared to say no.

Obama has yet to truly confront the realities of a domestic platform that calls for significant increases in federal spending and a fiscal problem that has worsened dramatically. Given the projected spending of $700 billion for a financial rescue package and hundreds of billions more for an economic stimulus package that Democrats say is needed, the deficit could approach $1 trillion or more next fiscal year, even without any of Obama’s other priorities.

In the final stages of the campaign, Obama spoke in generalities about scrubbing the federal budget line by line, looking for cuts. He has yet to identify specific reductions, but soon after he is sworn in, his administration will have to present an alternative budget. At that point, Obama will reveal more of who he is. 

And toward the end of last night’s (brilliant and inspiring) speech, Obama clearly articulated that who he is and who he intends to be as President is a “uniter”:

…while the Democratic Party has won a great victory tonight, we do so with a measure of humility and determination to heal the divides that have held back our progress.

As Lincoln said to a nation far more divided than ours, we are not enemies but friends. Though passion may have strained, it must not break our bonds of affection.

And to those Americans whose support I have yet to earn, I may not have won your vote tonight, but I hear your voices. I need your help. And I will be your president, too.

…That’s the true genius of America: that America can change. Our union can be perfected. What we’ve already achieved gives us hope for what we can and must achieve tomorrow…

America, we have come so far. We have seen so much. But there is so much more to do. So tonight, let us ask ourselves — if our children should live to see the next century…what change will they see? What progress will we have made?

This is our chance to answer that call. This is our moment.

This is our time, to put our people back to work and open doors of opportunity for our kids; to restore prosperity and promote the cause of peace; to reclaim the American dream and reaffirm that fundamental truth, that, out of many, we are one; that while we breathe, we hope. And where we are met with cynicism and doubts and those who tell us that we can’t, we will respond with that timeless creed that sums up the spirit of a people: Yes, we can.

So there’s plenty of hope and inspiration for all of us.  Now we just have to get to the real work, working together.

This is great… the ad maybe even better than the free Starbucks itself!  (It was beautiful on HD when I first saw it on Saturday night.) 

Nothing like economic incentives…  Hey, and a first for me?  My first embedded YouTube video!…

It was just yesterday when I wrote:

Call me naive, but I’m hopeful that going forward and working with the next Administration and the next Congress, that the Dean Baker-type critics of the fiscal hawks will start to realize that there’s actually a lot of common ground between us, and not so much “one side” versus “the other.”

And in an op-ed in today’s New York Times, fiscally-conservative Bob Rubin and liberal-leaning Jared Bernstein, both Democrats who support and advise Obama, together explain this common ground:

As economists and policy advisers try to sort out where we are, how we got here and where we must go for both the short term and the longer term, we are surrounded by polarizing dichotomies: Fiscal recklessness versus fiscal rectitude; capital versus labor; free trade versus protectionism.

The next president, the prevailing wisdom goes, will have to choose between these polarities. But how real are these differences? Our view — and we come from pretty different analytical perspectives — is that in many important ways, they are false, and serve as more of a distraction than a map.

Fiscal rectitude versus stimulus and public investment: The Bible got this right a long time ago (paraphrasing slightly): there’s a time to spend, a time to save; a time to build deficits up and a time to tear them down. Though one of us (Mr. Rubin) is often invoked as an advocate of fiscal discipline, we both agree that there are times for fiscal discipline and times for fiscal largess. With the current financial crisis, our joint view is that for the short term, our economy needs a large fiscal stimulus that generates substantial economic demand.

We also jointly believe that fiscal stimulus must be married to a commitment to re-establishing sound fiscal conditions with a multi-year program that includes room for critical public investment, once the economy is back on a healthy track.

One of us (Mr. Rubin) views long-term fiscal deficits — in combination with a low national savings rate, large current account deficits and foreign portfolios that are heavily over-weighted in dollar-dominated assets — as a serious threat to long-term interest rates and our currency and, therefore, to our economic future. The other views these economic relationships as much weaker.

At the same time, we both agree that our economic future also requires public investment in critical areas like education, health care, energy, worker training and much else. In our view, then, the next president needs to proceed on multiple tracks, with both the restoration of a sound fiscal regime and critical public investment.

These are themes I’ve repeated many times here on this blog, and I’ve pointed out that the Concord Coalition emphasizes them, too (see our recent issue brief).  Deficit-financed economic stimulus can still be “fiscally responsible“…

[F]iscal responsibility is a much broader concept than having a goal of a balanced budget.  It means prioritizing those fiscal policies that would contribute the most to economic stability and economic growth, then determining how to finance those policies in the most efficient and fair way possible.  It means formulating our fiscal policies to maximize their net benefits to society. (10/18/08)

And indeed, given how we got into this “mess” in the first place, over the longer run we’ll need to do better about saving more and expanding our “means.”  Now is not the time to abandon that broader notion of fiscal responsibility, but instead to make sure that we make wise choices about how we spend our money and what is worth increasing our indebtedness for: 

Now is exactly the time we need to be smart about fiscal policy: any stimulus should not encourage the same bad behavior–on the part of either the government or the private sector–that got us into this trouble in the first place.  Temporary, deficit-financed fiscal stimulus may be needed to simply keep the economy going–to allow us to “keep living” (consuming).  But we shouldn’t enact permanent proposals that permanently encourage consumption over saving (living beyond our means); we should be moving toward policies that encourage investments in workers and new technologies that are likely to pay off in the longer run, steering more of our limited resources toward boosting human capital–in other words, increasing our means.  But such investments will cost a considerable amount of up-front money.  Given that our budget constraints have gotten much tighter, it’s important that the next president set clear priorities and be willing to make tradeoffs, so that we will pursue policies that over the next several years (beyond these next several weeks or months) are most likely to get us back on the path of higher national saving and a stronger economy. (10/10/08)

As Bob and Jared explain, we can pursue more public investment and be willing to pay for it, too, and have both priorities provide that winning combination that we saw in the 1990s in terms of economic growth:

We both agree that individual income tax rates and other taxes for those at the very top could be moved back to the rates of the Clinton era. It’s worth remembering that rates at this level helped finance deficit reduction and public investment that contributed to the longest economic expansion in our history.

In addition to restoring a sound fiscal regime, we could improve our personal savings rate and expand retirement security by establishing some kind of individualized account separate from Social Security, financed by an appropriate revenue measure…

Capital versus labor: Here again, for all their alleged friction, our dynamic and flexible capital and labor markets have combined to generate impressive productivity gains in recent years. The problem is that the benefits of this productivity growth have largely eluded working families…

Tight labor markets, the kind we saw in the 1990s, are another source of bargaining power, helping to rebalance the claims of labor and capital on growth. Sound public policy, like public investment in education, health care, energy, infrastructure and basic research, financed by progressive taxation, can also drive strong growth and business confidence to invest and hire. Moreover, the policies that are requisites for strong growth also increase wages by better equipping workers to succeed in a global marketplace and by encouraging businesses to create jobs.

And Bob and Jared seem to be asking the same question I’ve asked about the pitfalls of economic policymaking when in “crisis” or “life support” mode:  are we really helping the people who need the help when we frantically throw the money out there?…

We know, too, that Wall Street and Main Street are intimately connected. The consequences of the financial market crisis are profound for Americans in terms of lost jobs, lower incomes and reduced retirement savings. Measures to reform and strengthen the financial system should be evaluated by this measure: Do they ultimately translate into improving the jobs, incomes and assets of working Americans?

In other words, an enlarged federal budget deficit is inevitable over the next couple years.  The question for the next Administration and Congress is:  can we make it worth it?  We’re much more likely to come up with a successful policy strategy if those who support more and better government spending work together with those who still believe fiscal responsibility matters.  As Bob and Jared conclude:

False choices, grounded in ideology, have kept us from effectively addressing all these issues. The next president must do his utmost to avoid being drawn into these Potemkin battles. At this critical juncture, we face both the most significant economic upheaval since the Depression and the long-term challenge of successfully competing in the global economy. We have no choice but to move beyond such false dichotomies and toward a balanced pragmatism whose goal is broadly shared prosperity and increased economic security.

I think Senator Obama gets that.  And I’m therefore hopeful that the next Administration and the next Congress will recognize the need to avoid the bickering and get along–and not just “get along” but really work together (Democrats and Republicans, fiscal conservatives and bigger government types)–to start turning this economy around.

I’m the Ph.D. economist, but I learned something about economic policy this week from my “laid off” friend from Chrysler.  He’s not really “laid off”–not yet, at least.  What he is right now is an employee being “bought out.”  The distinction, in theory and on paper, is supposed to be this:  a “laid off” worker is one who has been involuntarily fired from his job; a “bought out” worker is one who is voluntarily quitting his job.  In practice, particularly in the case of the GM-Chrysler merger, there’s very little difference: the bottom line is that my friend will almost surely lose his Chrysler job within a couple of months, either way.  (This story on the Wall Street Journal’s economics blog says that “30,000 to 40,000 of Chrysler’s 67,000 employees would lose their jobs” if the GM-Chrysler merger goes through.)  And his losing his job will be far from “voluntary.”

Seeing so little practical difference between losing one’s job by being bought out versus laid off, I did not realize until yesterday that if my friend chooses to accept the buyout Chrysler has offered him, he would not be eligible for unemployment benefits.  That’s supposed to be OK, because he would be walking away with $50,000 (gross of tax, by the way), a $25,000 car voucher, and six months of health coverage.  But let’s face it:  that may be better than being pushed out with nothing, but it really amounts to hardly anything relative to what he’s “walking away” from.  Doing the math it’s easy to figure out he’ll be far from “held harmless.”  Like the vast majority of his colleagues at the truck plant, my friend has worked in the auto industry for most of his career and lived in the Detroit area for most (all) of his life.  He’s not just losing his job at Chrysler; he’s being displaced from his industry and his entire line of work.  For someone like him, being “bought out” doesn’t feel like a golden opportunity to take that better job offer that’s just waiting for him; it feels like being handed a tiny suitcase (the buyout package) wearing just the clothes on his back and being booted out the factory door.  That suitcase seems pathetically small when one has a long, uncertain path to travel.

(Here’s a couple years old AP story on the tough decisions autoworkers face when being offered a buyout package.  The only difference now: the buyout packages are less generous, and the job prospects for employees who choose to take the buyouts fewer.)

And here I sit inside the Beltway, working on federal fiscal policy issues, and suddenly my world collides with my friend’s as federal policymakers contemplate the terms of a possible $10 billion loan to GM and Chrysler for their possible merger–a loan and a merger which to me no longer seem just “possible” but more and more inevitable.  (We learned this morning that discussions about the federal loan are now on hold until after the election.)  And I keep hearing that if the federal government does decide to assist in the GM-Chrysler merger, they would want it to be under the condition that the auto companies “spare as many jobs as possible.”  But I don’t know if it’s possible, or desirable, for federal aid to reduce the number of jobs lost, if the goal is to “save” the Detroit auto industry.  The auto industry needs to pare down, consolidate, get more efficient in how they produce and what they’re producing, in order to ultimately survive.  They shouldn’t be encouraged to artificially keep up the number of workers who would just be producing more and more vehicles that aren’t being bought.

I’ve said before that I see a lot of promise in some of the ideas Senator Obama has to help Detroit “transform” into a vibrant, cutting-edge, center of manufacturing for energy-efficient vehicles and technologies.  I hope they will be pursued by the next Administration and Congress.  But the transformation will take time and involve a painful purging of sorts on the way there.  And that purging involves a massive loss of jobs from the Detroit area, and perhaps a substantial (at least temporary) loss of population to the extent that the displaced workers are fortunate enough to be able to move where jobs are more plentiful.

So if the federal government does decide to provide aid to the automakers, the first installment likely to assist the GM-Chrysler merger, I think all of us (since we’re paying for it) ought to be asking:  who exactly will be helped by this intervention?  Are we trying to help the owners, investors, and top executives of the auto industry, or are we trying to help the much broader class of people who work for the industry?  And if there’s a desire to help the workers, how best to do that?  Working out the “terms” of the federal agreement to minimize job losses is probably fruitless–those jobs will be gone no matter what.  Shouldn’t the federal government instead be doing more to help the displaced autoworkers themselves, who when you get right down to it are losing their jobs and really their entire livelihood involuntarily?

I’m no expert on the unemployment compensation system, but it seems one place to start is to not be so cheap about whether “bought out” Chrysler autoworkers, the real victims of the federally-assisted GM-Chrysler merger, should be entitled to unemployment benefits.  The federal government is supposed to be getting involved in this in the name of “economic stimulus” or “emergency” spending.  That “fiscal stimulus” might lead to further job losses is certainly sad and ironic, yes.  So if federal intervention can’t really save the jobs, can we at least make sure we adequately help those who are losing them?

Today The Economist magazine endorsed Barack Obama for president.  From their “leader” in their print edition:

IT IS impossible to forecast how important any presidency will be. Back in 2000 America stood tall as the undisputed superpower, at peace with a generally admiring world. The main argument was over what to do with the federal government’s huge budget surplus. Nobody foresaw the seismic events of the next eight years. When Americans go to the polls next week the mood will be very different. The United States is unhappy, divided and foundering both at home and abroad. Its self-belief and values are under attack.

For all the shortcomings of the campaign, both John McCain and Barack Obama offer hope of national redemption. Now America has to choose between them. The Economist does not have a vote, but if it did, it would cast it for Mr Obama. We do so wholeheartedly: the Democratic candidate has clearly shown that he offers the better chance of restoring America’s self-confidence. But we acknowledge it is a gamble. Given Mr Obama’s inexperience, the lack of clarity about some of his beliefs and the prospect of a stridently Democratic Congress, voting for him is a risk. Yet it is one America should take, given the steep road ahead.

Why not McCain?  Some of their reasoning:

[T]he Candidate McCain of the past six months has too often seemed the victim of political sorcery, his good features magically inverted, his bad ones exaggerated. The fiscal conservative who once tackled Mr Bush over his unaffordable tax cuts now proposes not just to keep the cuts, but to deepen them. The man who denounced the religious right as “agents of intolerance” now embraces theocratic culture warriors. The campaigner against ethanol subsidies (who had a better record on global warming than most Democrats) came out in favour of a petrol-tax holiday. It has not all disappeared: his support for free trade has never wavered. Yet rather than heading towards the centre after he won the nomination, Mr McCain moved to the right.

Meanwhile his temperament, always perhaps his weak spot, has been found wanting… on the great issue of the campaign, the financial crisis, he has seemed all at sea, emitting panic and indecision. Mr McCain has never been particularly interested in economics, but, unlike Mr Obama, he has made little effort to catch up or to bring in good advisers (Doug Holtz-Eakin being the impressive exception).

The choice of Sarah Palin epitomised the sloppiness…

Ironically, given that he first won over so many independents by speaking his mind, the case for Mr McCain comes down to a piece of artifice: vote for him on the assumption that he does not believe a word of what he has been saying. Once he reaches the White House, runs this argument, he will put Mrs Palin back in her box, throw away his unrealistic tax plan and begin negotiations with the Democratic Congress. That is plausible; but it is a long way from the convincing case that Mr McCain could have made. Had he become president in 2000 instead of Mr Bush, the world might have had fewer problems. But this time it is beset by problems, and Mr McCain has not proved that he knows how to deal with them.

And why Obama, although they have their worries about him?:

Mr Obama’s star quality will be useful to him as president. But that alone is not enough to earn him the job. Charisma will not fix Medicare nor deal with Iran. Can he govern well?…

There is no getting around the fact that Mr Obama’s résumé is thin for the world’s biggest job. But the exceptionally assured way in which he has run his campaign is a considerable comfort. It is not just that he has more than held his own against Mr McCain in the debates. A man who started with no money and few supporters has out-thought, out-organised and out-fought the two mightiest machines in American politics—the Clintons and the conservative right.

Political fire, far from rattling Mr Obama, seems to bring out the best in him: the furore about his (admittedly ghastly) preacher prompted one of the most thoughtful speeches of the campaign. On the financial crisis his performance has been as assured as Mr McCain’s has been febrile. He seems a quick learner and has built up an impressive team of advisers, drawing in seasoned hands like Paul Volcker, Robert Rubin and Larry Summers. Of course, Mr Obama will make mistakes; but this is a man who listens, learns and manages well…

Our main doubts about Mr Obama have to do with the damage a muddle-headed Democratic Congress might try to do to the economy…Worryingly, he has a poor record of defying his party’s baronies, especially the unions… His advisers insist that Mr Obama is too clever to usher in a new age of over-regulation, that he will stop such nonsense getting out of Congress, that he is a political chameleon who would move to the centre in Washington. But the risk remains that on economic matters the centre that Mr Obama moves to would be that of his party, not that of the country as a whole…

[T]his cannot be another election where the choice is based merely on fear. In terms of painting a brighter future for America and the world, Mr Obama has produced the more compelling and detailed portrait. He has campaigned with more style, intelligence and discipline than his opponent. Whether he can fulfil his immense potential remains to be seen. But Mr Obama deserves the presidency.

Oh, and “The EconomistMom” endorses Obama, too–speaking only for herself, of course.  But you readers have surely figured that out by now.

In today’s GDP report we learned that the economy contracted in the 3rd quarter–its weakest performance in seven years (CNN-Money story here).  It’s another sign–as if we hadn’t had enough of these already–that the economy is in a recession.

How bad is it?

So bad that even supply-sider Martin Feldstein is acknowledging (in today’s Washington Post) what the GDP report shows: were it not for the strength of federal government spending –which increased by 13.8 percent (annualized rate) in the third quarter–the economy would be in much worse shape.  So Marty’s now calling for more deficit-financed, demand-side government spending–and get this, on infrastructure projects:

The only way to prevent a deepening recession will be a temporary program of increased government spending. Previous attempts to use government spending to stimulate an economic recovery, particularly spending on infrastructure, have not been successful because of long legislative lags that delayed the spending until a recovery was well underway. But while past recessions lasted an average of only about 12 months, this downturn is likely to last much longer, providing the scope for successful countercyclical spending…

The increased government spending should include not only money for infrastructure such as bridges and roads but also for a wide range of equipment. Rebuilding some of the military capacity that has been depleted by the wars in Iraq and Afghanistan could be done relatively quickly and should be part of the overall package…

I wonder how quickly these infrastructure projects could create new jobs, which is what we really need to be doing triage on right now.  Might they have a job for my laid-off friend from Chrysler?…

And how much new government spending?  Marty suggests probably a lot more than last time:

A fiscal package of $100 billion is not likely to be large enough to revive the economy. The fall in household wealth resulting from the collapse of the stock market and the decline of home prices may cut aggregate spending by $300 billion a year or more.

…and no more tax rebates, even though Marty had recommended them in the last round of stimulus, because Marty understands that if we were disappointed by the stimulative effect on consumer spending the last time, we’re bound to be only more disappointed this time:

Another round of one-time tax rebates won’t do the job. The rebates that Congress enacted this spring failed to stimulate consumer spending: More than 80 percent of tax rebate dollars were saved or used to pay down existing debt.

(Not that any of us have a problem with households using at least some of their extra income to pay down debt/save more, for their own longer-run sustainability.)

So, Marty Feldstein appears to have come a long way from his old supply-sider claims that permanent extension of the Bush tax cuts would be the most effective “stimulus” for the economy.  His current recommendation is clearly for good ol’ demand-side, Keynesian government spending.  Yet he can’t resist getting in a last dig at Obama and any tax increases–including those that might be used to even later offset the cost of today’s stimulus initiatives (emphasis added):

The president-elect should focus on developing a mechanism for identifying and funding spending initiatives that can occur quickly and that would otherwise not be done. While it would be good if some of the increased spending also contributed to long-term productivity, the key is to stimulate demand. Any plan to finance this spending by raising taxes, even if postponed, as Sen. Barack Obama has suggested, would hurt the recovery by causing affected taxpayers to cut their spending now.

Wait a minute now, Marty:  let’s not abandon all of your neo-classical growth principles just because we’re a little freaked out right now about the current state of the economy.  Over the longer run, I think you’d agree that we have to start looking at ways to increase, not decrease, national saving, because as you hint above in mentioning ”long-term productivity”, it would be good to not just “flail about” throwing money at the current crisis, but act swiftly yet thoughtfully–with a wise eye to the future.  What matters for the health of our economy is not just what the government decides to spend money on today, but on how the government expects to be able to pay for such spending going forward.  Eventually, we’ll still have to get back to ”living within our means.”

I’m still not a movie star like my boss, Bob Bixby, and the Peterson Foundation’s Dave Walker, but today I just did my first-ever documentary, interviewed by Forrest Sawyer (no less!) for a PBS Frontline documentary to air in February.  (Thanks to producers Thomas Beckner and David Schisgall for snapping some photos for me after the two-hour interview, which I thoroughly enjoyed!)  The Frontline show will focus on the economy, the fiscal legacies (good and bad) left by the Clinton and Bush (43) Administrations, and the economic policy challenges facing the next President.

How great is that?!! 

Here is a post by DirectorDad in response to a Dean Baker critique of the movie “I.O.U.S.A.” that recently appeared on Huffington Post:

After reading Dean Baker’s critique of our documentary “I.O.U.S.A.”, I am left pondering one important question:  How could Mr. Baker have possibly come to the conclusion that our film is “one-sided”?
 
When we started making the film in December of 2006 we set out to find people who are highly knowledgeable and respected in their fields and also who have had a “front-row seat” on matters regarding our federal government and national economy.  The true hero — or “star” — of our film is David Walker, the former Comptroller General of the United States.  Mr. Walker is a registered independent and has been called “the most respected man in Washington”.  As Comptroller General Walker arguably knew more about the financial health of our federal government than any other person in the country. 
 
But we also wanted to speak to people from the business community, the Treasury Department, Congress, and the Federal Reserve.  We were very fortunate to get the following people to participate:  Warren Buffett and Peter G. Peterson are both interviewed in the film (a Democrat and a Republican, respectively), as are former Treasury Secretaries Robert Rubin and Paul O’Neill (a Democrat and a Republican), the two heads of the Senate Budget Committee Chairman Kent Conrad and Ranking Member Judd Gregg (one from each party, both of whom have called the film “excellent” and have commented that if more people saw this film it would make fixing our nation’s fiscal problems a lot easier), and former Federal Reserve Chairmen Paul Volcker and Alan Greenspan (a Democrat and a Republican).  Congressman Ron Paul also appears offering his unique viewpoints.  Though these individuals often disagree on different issues, every single one of them agrees that our country — both our individual citizens and our federal government — is living a lifestyle we cannot afford and that doing so will create serious problems for future generations.  If we choose to continue to live our lives this way we are going see a financial crisis in the not-too-distant future that will make today’s economic crisis seem small by comparison.
 
We had three main goals when we started making “I.O.U.S.A.” almost two years ago:  we wanted it to be accurate, educational and most importantly non-partisan.  When our film opened nationally in August of 2008 it was praised by dozens of film critics for being balanced.  The New York Times called our film “resolutely non-partisan.” 
 
In my opinion, the only thing that’s been one-sided about “I.O.U.S.A.” is Dean Baker’s analysis of it.
 
Patrick Creadon is the director and co-screenwriter of “I.O.U.S.A.”  The film has been called “the most important film of 2008″ by more than a dozen critics from across the country and was invited to be screened at both the Democratic and Republican national conventions.  For more information about where you can see “I.O.U.S.A.” please visit the film’s website at www.iousathemovie.com and click on “Events” to find a screening in your community.  You can also set up a free screening of “I.O.U.S.A.” at your school or community group by writing to press@pgpf.org.

In a front-of-Opinion-page column in today’s Washington Post, David Frum (author of the book “Comeback: Conservatism That Can Win Again”) first bemoans what he concedes is McCain’s demise (that’s today’s Tom Toles cartoon above), brought about by the McCain campaign’s own bad judgment:

There are many ways to lose a presidential election. John McCain is losing in a way that threatens to take the entire Republican Party down with him.

A year ago, the Arizona senator’s team made a crucial strategic decision. McCain would run on his (impressive) personal biography. On policy, he’d hew mostly to conservative orthodoxy, with a few deviations — most notably, his support for legalization for illegal immigrants. But this strategy wasn’t yielding results in the general election. So in August, McCain tried a bold new gambit: He would reach out to independents and women with an exciting and unexpected vice presidential choice.

That didn’t work out so well either. Gov. Sarah Palin connected with neither independents nor women. She did, however, ignite the Republican base, which has come to support her passionately. And so, in this last month, the McCain campaign has Palinized itself to make the most of its last asset. To fire up the Republican base, the McCain team has hit at Barack Obama as an alien, a radical and a socialist…

Then Frum tries to stop sulking and look ahead to where he thinks a Democratically-controlled White House and Congress will lead us, and he comes up with a ray of hope and a recommended messaging strategy for his Republican Party:

…[W]ith the financial meltdown, the federal government is now acquiring a huge ownership stake in the nation’s financial system. It will be immensely tempting to officeholders in Washington to use that stake for political ends — to reward friends and punish enemies. One-party government, of course, will intensify those temptations. And as the federal government succumbs, officeholders will become more and more comfortable holding that stake. The current urgency to liquidate the government’s position will subside. The United States needs Republicans and conservatives to monitor the way Democrats wield this extraordinary and dangerous new power — and to pressure them to surrender it as rapidly as feasible…

…We need a message change that frankly acknowledges that the Democrats are probably going to win the White House — and that warns of the dangers of one-party, left-wing government. There’s a lot of poll evidence that voters prefer divided government. By some estimates, perhaps as many as 8 percent of voters consciously cast strategic votes in favor of division. These are the voters we need to be talking to now.

I’m not suggesting that the RNC throw up its hands. But down-ballot Republicans need to give up on the happy talk about how McCain has Obama just where he wants him, take off their game faces and say something like this:

“We’re almost certainly looking at a Democratic White House. I can work with a Democratic president to help this state. But we need balance in Washington.

“The government now owns a big stake in the nation’s banking system. Trillions of dollars are now under direct government control. It’s not wise to put that money under one-party control. It’s just too tempting. You need a second set of eyes on that cash. You need oversight and accountability. Otherwise, you’re going to wake up two years from now and find out that a Democratic president, a Democratic Senate and a Democratic House have been funneling a ton of that money to their friends and allies. It’ll be a big scandal — but it will be too late. The money will be gone. Divided government is the best precaution you can have.”

It’s the only argument we have left. And, as the old Washington saying goes, it has the additional merit of being true.

There is indeed a lot of historical evidence suggesting that one-party government tends toward fiscal irresponsibility–our most recent evidence of course being most of the past eight years during the George W. Bush Administration.  As a Democrat, I’m hoping an Obama Administration would buck history on this–that even in working with a Democratically-controlled Congress, President Obama would show leadership and bipartisanship in developing policies that are fiscally responsible.  If the Democrats do as well in this election as the pundits are now predicting, it’ll be up to the Democrats to see that the Obama Administration does business in that new, “post-partisan” way, in order to blunt what would be a successful GOP strategy the next time around.

Thanks to reader Brooks for pointing out this Economist magazine column to me.  (I’m on the road and my (husband’s) Economist magazine is sitting at home somewhere.)  Some excerpts (emphasis added):

…the financial bust is almost certain to crush the government’s tax take. It has already started: the budget deficit for fiscal 2008 (which ended on September 30th) was $455 billion, or 3.2% of GDP, much more than the $389 billion projected in July. Much of the shortfall appears due to lower taxes on profits and the wealthy…

Then there’s the prospect of additional fiscal stimulus, which won support on October 20th from Ben Bernanke, the Federal Reserve chairman. The Democrats in Congress, who already have a $61 billion package in the works, are now suggesting $150 billion. Barack Obama has proposed up to $190 billion over two years, and would merge that proposal with Congress’s one should he become president…

The $700 billion Troubled Asset Relief Programme (TARP) will also add to the deficit, though less than might appear…Since [Treasury] plans to invest $250 billion in bank equity, the addition to the deficit this year will be at least that much.

This all threatens to add up to a deficit of at least $1 trillion, or nearly 7% of GDP, this fiscal year, a figure that is likely to force the next president to postpone some of his more ambitious proposals. Still, even fiscal hawks concede a higher short-term deficit is a tolerable price for avoiding a potential depression—though a 7% deficit is probably testing their tolerance. And at present the American government can borrow at absurdly low interest rates…

Yet it cannot take its lenders for granted. This year, the Treasury may have to raise more than $1.4 trillion in debt, according to Morgan Stanley, to finance not just the deficit but the TARP and the Federal Deposit Insurance Corporation…

America has long borrowed without fear of a backlash, thanks to lenders’ lack of attractive alternatives. And it may for a while yet: much of the private sector either can’t borrow or doesn’t want to, and other countries also face yawning deficits, making them far from attractive. The national debt, at 38% of GDP, is well below its 1990s peak of 49%. But much of the deficit is still financed by foreigners, and global capital flows are now being rocked by the financial crisis. The next president will no doubt find deficits at 7% or more of GDP sobering enough. Without a plan for cutting that high figure back once the financial crisis and the recession pass—and with the inexorable climb in Medicare and Social Security costs as the baby-boomers retire now under way—investors may need to be compensated much more than they are now to keep on buying America’s debt.

Compare with the issue brief the Concord Coalition released on Wed. (10/22)–and my blog post on it–and you should notice a lot of overlap.