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Wonkbook: GOP resists compromise; regulatory failure before crisis; return of gold standard?

By Dylan Matthews
Robert Zoellick
World governments should consider a return to the gold standard, World Bank President Robert Zoellick says. (Mark Gail/TWP)

Top Stories

Congressional Republicans are resistant to compromising on a Bush tax cut extension, reports Renee Schoof: "Rep. Eric Cantor, R-Va., who's expected to become the majority leader in the House when the new Congress is sworn in next year, and Senate Minority Leader Mitch McConnell said on Sunday news programs that they'd insist on an extension of the tax cuts for wealthy. McConnell said that higher taxes on upper income earners would harm small businesses. ... Cantor said Republicans could achieve their goal of 22 percent spending cuts and rejected Democrats objections that spending that deep would cut such things as preschool education for poor children, research at the National Institutes for Health and a dismissal of 2,700 FBI agents."

Regulators were warned about the mortgage crisis before it erupted in 2008 but did nothing, reports Zachary Goldfarb: "When two banks -- J.P. Morgan Chase and Wells Fargo -- declined to cooperate, the state officials asked the banks' federal regulator for help, according to a letter they sent. But the Office of the Comptroller of the Currency, which oversees national banks, denied the states' request, saying the firms should answer only to inquiries from federal officials. ... But even as it closed the door on state oversight, the OCC chose itself not to scrutinize the foreclosure operations of the largest national banks, forgoing any examination of their procedures and paperwork."

World governments should consider a return to the gold standard, writes World Bank President Robert Zoellick: "The G20 should complement this growth recovery programme with a plan to build a co-operative monetary system that reflects emerging economic conditions. This new system is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalisation and then an open capital account. The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today."

Drum and bass interlude: Amon Tobin's "Chomp Samba."

Still to come: Obama is worried about a "new normal" of high unemployment; Texas is seeking immunity from federal climate regulation; Congressional Democrats will not attempt to pass non-urgent legislation in the lame duck session; and baby otters learn to swim.

Economy/FinReg

Obama is worried that high unemployment will become a "new normal" for the economy, reports Lori Montgomery: "'What is a danger is that we stay stuck in a new normal where unemployment rates stay high,' he said in an interview aired Sunday night on CBS's '60 Minutes.' 'People who have jobs see their incomes go up. Businesses make big profits. But they've learned to do more with less. And so they don't hire. And as a consequence, we keep on seeing growth that is just too slow to bring back the 8 million jobs that were lost.' ... Obama renewed his call for fresh investments in the nation's crumbling infrastructure to help put the hard-hit construction sector back to work."

Most economists think a return to the gold standard would lead to lower growth and higher unemployment.

Big banks are giving up hope that they'll avoid the Volcker rule's reach, report Aaron Lucchetti and Liz Rappoport: "At some meetings, federal officials have rattled financial-industry lobbyists by saying they intend to hew closely to the 4,631 words about the Volcker rule contained in the new law. One lobbyist says a Treasury official working to craft the provisions told him: 'We take a view that the rule is more inclusive.' The lobbyist responded: 'Are you trying to scare me?' ... As a result, many bank executives have abandoned their hope that trading on client desks will be untouched by the Volcker rule."

Obama announced a plan to expand trade with India.

Republicans will seek to use the upcoming vote on the national debt cap to limit spending, reports Damian Paletta: "Republican lawmakers, including South Carolina Sen. Jim DeMint, and congressional aides have said major spending cuts are the primary demand they will make going into the discussions over whether to raise the limit. ... Raising the debt ceiling won't be easy in Washington's new political environment, with dozens of new Republicans elected to Congress on pledges to crack down on spending and shrink the debt. Many tea-party backed candidates, such as Mike Lee, who on Tuesday won a U.S. Senate seat in Utah, have suggested they would vote against raising the debt ceiling."

Fed Chairman Ben Bernanke insists Milton Friedman would support quantitative easing.

Bernanke's public statements are undermining the Fed's actions, writes Paul Krugman: "The idea that higher inflation might help isn’t outlandish; it has been raised by many economists, some regional Fed presidents and the International Monetary Fund. But in the same remarks in which he defended his new policy, Mr. Bernanke -- clearly trying to appease the inflationistas -- vowed not to change the Fed’s price target. ... Think of it this way: Mr. Bernanke is getting the Obama treatment, and making the Obama response. He’s facing intense, knee-jerk opposition to his efforts to rescue the economy. In an effort to mute that criticism, he’s scaling back his plans in such a way as to guarantee that they’ll fail."

Brad DeLong outlines a centrist's deficit reduction plan.

It's time to think big about tax reform, writes Ezra Klein: "For one thing, a 21st-century economy should be able to get rid of the worst mistakes it made in the 20th century. The deduction for employer-based health care is one of those mistakes. It was a carryover from World War II's wage-and-price controls, and it's given us a system that costs too much but in which most of us are so far from those costs that we're not willing to make the sacrifices reform requires. On top of that, it's awfully regressive: In effect, it means that people without health-care insurance, or with insurance that doesn't come from an employer, are subsidizing the people whose employers do give them insurance -- and those folks are, on average, the richer group."

Adorable animals in kiddie pools interlude: Baby otters learn how to swim.

Energy

Texas is trying to avoid all federal climate regulation, reports Neela Bannerjee: "With Republicans in control of the House of Representatives, powerful Texans such as Rep. Joe L. Barton of the House Energy and Commerce Committee have vowed to check the Environmental Protection Agency's efforts to use its existing authority to curtail greenhouse gases...State Atty. Gen. Greg Abbott, with the support of Republican Gov. Rick Perry, has filed seven lawsuits against the EPA in the last nine months. 'At times, they're their own country,' said Bill Becker, executive director of the National Assn. of Clean Air Agencies, a group of state environmental regulators."

Voting for Waxman-Markey barely affected members of Congress' reelection chances.

G-20 nations are not living up to commitments to cut fossil fuel usage, reports Alan Beattie: "The study from campaign groups Earth Track and Oil Change International, which will be published on Monday, says that governments’ assessments of progress involve crediting themselves for actions they were already planning. 'No country has initiated a subsidy reform specifically in response to the G20,' the report concludes. 'Although half of the member countries reported at least one policy supporting fossil fuels that they have targeted for reduction or elimination, all actions appear to be programmes or changes that were already in process prior to the G20 communiqué and rely on previously established timelines.'"

The BP oil spill killed gulf coral.

Conservatives should care about global warming, writes Bracken Hendricks: "With temperature increases in this range, studies predict a permanent drought throughout the Southwest, much like the Dust Bowl of the 1930s, but this time stretching from Kansas to California. If you hate bailouts or want to end farm subsidies, this is a problem. Rising ocean acidity, meanwhile, will bring collapsing fisheries, catch restrictions - and unemployment checks. And rising sea levels will mean big bills as cash-strapped cities set about rebuilding infrastructure and repairing storm damage. With Americans in pain, the government will have to respond. And who will shoulder these new burdens? Future taxpayers."

Lower fossil fuel prices are hurting clean energy.

About $100 billion a year is needed to handle climate change, write Trevor Manuel and Nicholas Stern: "If rich countries introduce domestic carbon taxes or auction emissions permits based on this price level, they could potentially provide $30 billion a year for developing countries by using just 10% of the revenues. A carbon tax on international shipping and aviation set at the same level (or auction revenues from emissions caps, if that pricing route is followed) could generate $10 billion annually for international climate action from just 25-50% of the revenues, even after ensuring that costs borne by developing countries are covered. ... All these measures together could raise about $50 billion annually in net public funding to help developing countries adapt to climate change."

Great moments in R/C aviation interlude: A remote-controlled plane shaped like a shark.

Domestic Policy

Congressional Democrats will not act on non-urgent agenda items during the lame duck session, reports John Harwood: "Conservatives warned that Democrats might use the session to push through their cap-and-trade plan to curb climate change by limiting carbon dioxide emissions; environmentalists hoped that was possible. That prospect has now vanished. And the initial post-election reaction of Congressional leadership aides in both parties suggests the chances for action on a series of other issues, from passing food safety legislation to repealing the “don’t ask, don’t tell” policy barring gay men, lesbians and bisexuals from serving openly in the military, are diminishing."

Harry Reid had promised to address the DREAM Act and a union organizing bill in the lame duck session.

Telecom companies stand to benefit from a Republican Congress, reports Stephanie Kirchgaessner: "Most analysts agree that whatever slim hope internet companies had that Congress might pass so-called 'net neutrality' legislation, which would have barred internet service providers from giving certain content preferential treatment over their networks, has been reduced with the demise of the Democratic majority. ... Republicans on the House energy and commerce committee will now have oversight of the Federal Communications Commission and will put pressure on the media regulator to abandon plans to set new rules for broadband companies."

Senate Minority Leader Mitch McConnell will consider an earmarks ban.

Outside spending made the difference in some House elections, reports Brody Mullins: "In the race for the House, TV advertisements paid for by conservative organizations helped force Democratic candidates to spend their resources widely, leading to the defeat of some incumbents thought to be safe. A Wall Street Journal analysis of campaign spending shows that Republican groups prevailed in nearly 75% of the House races in which they significantly out-spent Democratic organizations. The analysis also shows that Republicans won 53 House seats in races where the Republican groups spent at least $200,000 more than rival Democratic organizations. "

The Senate should eliminate the filibuster in January, writes Tim Fernholz:

We need a training corps for math and science teachers, writes Jim Simons: "Selection would be based on subject knowledge, as measured by a nationally administered exam, and on evidenced skill in teaching and inspiring students. During their five-year renewable terms, members would receive annual federal stipends boosting their regular salaries roughly 25 percent, participate in corps activities, and act as leaders in their departments and schools. The corps would initially aim to comprise 5 percent of the nation's 450,000 teachers of math and science, and grow to as much as 20 percent. These able, knowledgeable individuals would inspire students and colleagues, and at maximum size this transformational program would cost roughly $2 billion per year."

Dylan Matthews is a student at Harvard and a researcher at The Washington Post.

By Dylan Matthews  | November 8, 2010; 8:47 AM ET
Categories:  Wonkbook  
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Comments

Robert Zoellick's opinion goes beyond the gold standard. The discussion he references (back in 1983) wasn't solely about protectionism: back then, there was also concern about nation-states defaulting on debts.

It is true that "Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today." Continuing a discussion from Thursday, many would argue, quite logically, that the global economy cannot functionally survive without a gold standard or similar finite reference: in parallel, how can economies totally dependent on conflicting governments' fiats survive? Which econo-government wins and why?

I'm glad the topic is returning to the forefront; however, many people now discussing global economic matters weren't alive during the 1983 debacle and haven't studied the situation in sufficient detail.

Posted by: rmgregory | November 8, 2010 9:17 AM | Report abuse

"'People who have jobs see their incomes go up. Businesses make big profits. But they've learned to do more with less. And so they don't hire. And as a consequence, we keep on seeing growth that is just too slow to bring back the 8 million jobs that were lost.'"

I've always argued that Obama will win in 2012. But . . . dang, he sure seems to be aggressively pursuing the Jimmy Carter model.

Come on. We've been doing more with less (and doing less with more, thanks to more available at-work distractions) since there have been employers and employees. When the economy is hot and demand is up, companies hire. They always will. There is no "new normal", unless the economy continues to flatline.

Very reminiscent of "malaise". I think the government, and certainly any one administrations policies, are relatively tangential as to whether the economy stays cool or heats up, but as far as the political ambitions of the Democrats, "there's is nothing that can be done, but we can still fix the potholes, vote for us" sounds like extremely weak tea.

Posted by: Kevin_Willis | November 8, 2010 9:27 AM | Report abuse

Obama still doesn't get it. He doesn't get "It", but not in the way that "conservatives" are pounding. The headline at the top speaks of the GOP overtly refusing to compromise, presumably because they have a mandate, or they're inspired by the spirit of Thomas Jefferson or Ronald Reagan, whatever. Meanwhile, in the past few days Obama has confessed publicly that over the last two years he has sometimes stooped to partisan speech, that he had so contributed to the unpleasantness, the gridlock in Washington, and that he is sorry. He'll try to do better.

When Obama was elected the Republicans, rather than behaving as though chastened by their recent losses immediately began demanding that Obama reach across to them, work with them, compromise. Obama, rather than claiming a mandate and replying that it was up to the losers of the election to work with him (he did state something like this occasionally, but weakly, defensively), responded in mostly conciliatory fashion and spoke a lot about bipartisanship. He allowed the LOSERS of the past two elections set the terms of
debate by responding in a conciliatory fashion to their overt belligerence.

During the next two years, at no time that I recall, did Obama from the Bully Pulpit, or the Dems on the Senate Floor, ever call the Republicans bluff. The Repubs, although in a distinct and recently configured minority, with enormous audacity claimed over and over that they represented the will of the American people, and obstructed everything the Dems tried to accomplish unless it was watered down and pushed, policy-wise, to the right of where it started. Bipartisanship was Republicans attacking everything the Dems tried and diluting it. Again, their bluff was never called and if Obama was ever anything but conciliatory toward them, I
must have missed it.

The result at this time, as I see it, is that the Republicans, the "Conservatives" DO, at this time, represent, to a certain extent, the will of the American People, but mainly because by their very scrappiness they've convinced America that they're about SOMETHING. America's casting about, and willing to go in the direction
of those who seem sure of themselves rather than defensive and apologetic.

Obama may really, actually despise partisanship and propaganda. I sure wish he'd learn that, as the Republicans continue to show, those unpleasant kinds of activities are both effective and necessary for anyone who has an agenda they wish to accomplish in the Washington arena. Till he does, he's going to
continue to get bullied and beaten. Whatever mandate for change that he did come into the presidency with will have been largely wasted.

Posted by: jonboinAR | November 8, 2010 10:36 AM | Report abuse

Obama still doesn't get it. He doesn't get "It", but not in the way that "conservatives" are pounding. The headline at the top speaks of the GOP overtly refusing to compromise, presumably because they have a mandate, or they're inspired by the spirit of Thomas Jefferson or Ronald Reagan, whatever. Meanwhile, in the past few days Obama has confessed publicly that over the last two years he has sometimes stooped to partisan speech, that he had so contributed to the unpleasantness, the gridlock in Washington, and that he is sorry. He'll try to do better.

When Obama was elected the Republicans, rather than behaving as though chastened by their recent losses immediately began demanding that Obama reach across to them, work with them, compromise. Obama, rather than claiming a mandate and replying that it was up to the losers of the election to work with him (he did state something like this occasionally, but weakly, defensively), responded in mostly conciliatory fashion and spoke a lot about bipartisanship. He allowed the LOSERS of the past two elections set the terms of
debate by responding in a conciliatory fashion to their overt belligerence.

During the next two years, at no time that I recall, did Obama from the Bully Pulpit, or the Dems on the Senate Floor, ever call the Republicans bluff. The Repubs, although in a distinct and recently configured minority, with enormous audacity claimed over and over that they represented the will of the American people, and obstructed everything the Dems tried to accomplish unless it was watered down and pushed, policy-wise, to the right of where it started. Bipartisanship was Republicans attacking everything the Dems tried and diluting it. Again, their bluff was never called and if Obama was ever anything but conciliatory toward them, I
must have missed it.

The result at this time, as I see it, is that the Republicans, the "Conservatives" DO, at this time, represent, to a certain extent, the will of the American People, but mainly because by their very scrappiness they've convinced America that they're about SOMETHING. America's casting about, and willing to go in the direction
of those who seem sure of themselves rather than defensive and apologetic.

Obama may really, actually despise partisanship and propaganda. I sure wish he'd learn that, as the Republicans continue to show, those unpleasant kinds of activities are both effective and necessary for anyone who has an agenda they wish to accomplish in the Washington arena. Till he does, he's going to
continue to get bullied and beaten. Whatever mandate for change that he did come into the presidency with will have been largely wasted.

Posted by: jonboinAR | November 8, 2010 10:46 AM | Report abuse

You guys should stop complaining because, one the health care we have now isnt as good as it was supposed to be. also the law has just been signed so give it some time. so if u want to say u have the right to choose tell that to ur congress men or state official. If you do not have insurance and need one You can find full medical coverage at the lowest price check http://bit.ly/bandYw If you have health insurance and do not care about cost just be happy about it and trust me you are not going to loose anything!

Posted by: kevinmarlo07 | November 8, 2010 11:06 AM | Report abuse

Remember Zoellick's a lawyer, not an economist. He doesn't even have a bachelors degree in economics, and he appears to have learned little well independently.

Posted by: RichardHSerlin | November 8, 2010 4:49 PM | Report abuse


The market rates may have gone down, or remained the same. For the homeowner to get qualified for lower rates, there are certain prerequisites but I would recommend you search online for "123 Mortgage Refinance" before you decide because they can find the 3% refinance rates.

Posted by: davinnick | November 9, 2010 4:32 AM | Report abuse

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