This week, Rex Nutting of the MarketWatch caused a stir with his analysis correctly showing that federal spending has hardly budged under President Obama, rising at the slowest pace since the Dwight Eisenhower was in the White House. Predictably, James Pethokoukis of the conservative American Enterprise Institute cited the jump in Washington's spending as a percentage of the U.S. economy to comically "prove" that "actually, the Obama spending binge really did happen." Comically, that is, because Pethokoukis conveniently ignores the staggering economic contraction resulting from the Bush recession, with GDP only last year having returned to 2008 levels. Even less surprising, the perpetual tax-cutters of the right neglected to mention that thanks to the steep recession and the Treasury-draining Bush tax cuts, total federal tax revenues as a percentage of GDP hit their lowest level since 1950.

On January 7, 2009, Reuters reported that President Bush was bequeathing a $1.2 trillion budget deficit to his successor. That record gap was fueled by Bush's $700 billion TARP program and plummeting tax revenue due to the shrinking American economy. As Reuters noted, President-Elect Obama "said he expects deficits around $1 trillion for years, forcing tough budget choices."

Which is exactly what came to pass. But even with the 2009 stimulus program and the necessarily growing outlays for Medicaid, unemployment insurance, food stamps and other safety net programs, those trillion deficits had less to do with Barack Obama boosting spending than the dramatic loss of tax revenue. As former Reagan administration official Bruce Bartlett explained in October 2009:

According to the Congressional Budget Office's January 2009 estimate for fiscal year 2009, outlays were projected to be $3,543 billion and revenues were projected to be $2,357 billion, leaving a deficit of $1,186 billion. Keep in mind that these estimates were made before Obama took office, based on existing law and policy, and did not take into account any actions that Obama might implement...

Now let's fast forward to the end of fiscal year 2009, which ended on September 30. According to CBO, it ended with spending at $3,515 billion and revenues of $2,106 billion for a deficit of $1,409 billion.

To recap, the deficit came in $223 billion higher than projected [in January], but spending was $28 billion and revenues were $251 billion less than expected. Thus we can conclude that more than 100 percent of the increase in the deficit since January is accounted for by lower revenues. Not one penny is due to higher spending.

Obama's own tax cuts, the ones contained in the February 2009 stimulus bill, "reduced revenues in FY2009 by $98 billion over what would otherwise have been the case."

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A C&L reader sent in the following horror story:

I have continued to follow C&L through the years and enjoy the attention you give to the issues. I have seen a lot recently about home foreclosures and the ugly means banks are employing to get their hands on people’s property. I would like to ask that you also give some attention to another illegal activity going on—illegal car repossessions.

I have leased cars from Chrysler Financial and Beurge Chrysler Jeep since 2002. When my second lease came to an end in June of this year I had three options offered me by Chrysler: 1-buy the car, 2-turn the car in and begin a new lease or purchase another vehicle, or 3-extend the lease for up to 12 additional months. Since my wife and I are experiencing some rough financial times we decided to go with Option 3-extend our lease. We continued to do so each month until we could buy the car sometime in the next year. However, on September 20 a man showed up at our door claiming Chrysler had ordered a repossession. He refused to give any identification or proof of the order. He also refused to look at the documentation we had that proves our account is on good standing. In fact we had just received confirmation earlier that day that payment had been received for the next month. He took the car anyway.

We have tried, without success, to reach Chrysler Financial and resolve this issue. At first we thought it must be a simple mistake that Chrysler would correct. It does not appear that way anymore. Based on what we have been told by Chrysler reps, Chrysler wanted the car back because it had very low mileage and they could make a bigger profit than by allowing us to continue leasing and purchase at a later date. We have looked at the law and the only way a car can be repossessed is if the account is in default. I want to reiterate that our account has never been in default.

So, we are left without a car—that was our only vehicle. My wife is disabled and needs weekly treatment that she has not been getting because we can’t get her to appointments.

I am telling you this story because we have learned that we are not the only ones to have this happen. A Google search will bring up many pages of illegal repossessions being reported. I understand it may not be the eye-catching news item of 100k home foreclosures but it is happening to thousands of people who have done nothing wrong and yet are being bullied and deprived of their transportation by a company that received taxpayer money and wants to make more money. And BTW, Chrysler refuses to return the payment we made for 9/20—10/20, a period for which we do not have use of our car.

Thank you for any attention you can bring to this issue.

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With the jobs picture bleak and getting steadily bleaker, President Obama needs to shed the tightly restrained list of options that the D.C. establishment considers it acceptable to consider. The things Republicans want to consider would be laughable if they weren’t so awful: more (and more and more and more) tax cuts for the wealthiest 1 percent and biggest corporations already awash in money they aren’t using to create jobs. The list of things establishment D.C. Democrats want to consider range from the good but politically impossible (like more fiscal stimulus) to the good but really small (such as tinkering here and there with small targeted tax credit ideas) to bad ideas taken from Republicans and modified to make them slightly less extreme.

But there are ideas outside of this very narrow range of conventional wisdom in Washington that the Obama administration, along with key big states with Democratic Governors and legislatures, could do right now that could boost the economy significantly. Here are four big ideas that would make an immediate difference in pumping up the economy, things the Obama administration could do without going through Congress:

1. Use TARP. The economic crisis that spurred the creation of TARP may have stabilized, but it sure hasn’t ended. And TARP is still open for business: while most of the no-strings-attached big bank bailout money has been returned, TARP still is authorized to spend $475 billion. Since the big banks are hoarding their money and using it to give huge bonuses to their execs, why not turn the TARP money into a modern day Reconstruction Finance Corporation (the agency that FDR used to help lift us out of the Great Depression), and start lending TARP money out to small business entrepreneurs who actually planned to create jobs. This might also provide some competitive spur to the banks who are just sitting on their money. TARP is unpopular, and Republicans might score some short-term political points screaming about the money being used for this, but I think Obama would win the fight by saying that rather than investing in the big banks, it's time to invest in small businesses that are actually going to use the money to create real jobs.

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I will be celebrating (mourning?) my twentieth year since coming to work in Washington next year. I came here with the Clinton team, and even though I was President Clinton’s liaison to the progressive community, I still came to town with a bunch of moderate Democrats. Given my banging away on so many topics in my blog posts, I do get asked from time to time whether I have moved to “the left” over the years. The answer is absolutely not. I still believe virtually the same things about politics and the economy I believed a couple of decades ago, including:

1. That the America I grew up in during the 1960s and ’70s, which had a broad and prosperous middle class and a sturdy safety net for those down on their luck or too old to work, was a great country to live in for most Americans, but that the middle class had been squeezed right and left by big corporate interests and the conservative movement.

2. That the growing extremist conservative movement, which had taken over the Republican Party, blindly worshiped the free market along with the wealthiest and most powerful among us, and was determined to roll back social progress of all kinds.

3. That the Democratic Party was deeply flawed because too many Democrats were not willing to fight for progressive policies that would help the middle class and poor, but that they sure were better than the scary extremists who controlled the Republican Party.

4. That party politics alone would never win the progress we needed; that we need a strong progressive movement to fight the good fight.

5. That the New Deal and Great Society policy victories of the 1930s through the early ’70s were what moved this country forward more than any other set of policies. Social Security and Medicare gave senior citizens a measure of economic security they never had before. Labor unions were able to grow and expand, ensuring that middle-class incomes would rise, and that more working class people would get a secure foothold in that middle class. Banks were strongly regulated and kept to a reasonable size, ensuring that the financial crises that periodically wracked the country’s economy in the decades before and after those years didn’t happen. The minimum wage, the end of child labor, OSHA, and the 40-hour work week ensured more dignity and safety on the job. A wave of school building, the GI Bill, Pell Grants, the development of community colleges, and other educational initiatives meant that more Americans got good educations than ever in history. Civil rights, voting rights, and new anti-discrimination laws for women meant far more fairness and equality of opportunity for all Americans. Unemployment compensation, Medicaid, school lunch programs, food stamps, Head Start, and legal services meant that even low-income Americans had a modest amount of financial security in the hard times. The Clean Air, Clean Water, and Superfund acts made our environment far cleaner for all citizens. All of these new policies helped create the wealthiest economy, and most prosperous middle class in world history, and that our goal in politics should be to build on that success rather than tear it down.

I believed all that the day I moved to Washington to be part of the Clinton administration, and I believe it still, so I don’t feel like I have moved to the left at all. I feel very certain that I am solidly within the mainstream of the Democratic Party and progressive thought in America.

But I do think something important has changed. The corporate stranglehold on our media, government, and ideological parameters has shifted, and the Bob Rubin wing of the Democratic Party has grown steadily stronger.

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So, apparently 68% of Americans think that the political class doesn't listen to them. After TARP, where calls were running between 100:1 to 1200:1 against, passed, the failure of Congress to get out of Iraq after 2006, the failure of the 70%+ supported public option, and on and on, the only mysterious thing is why it's only 68%.

But why should the political class listen? They get the majority of their reelection funds from corporations and the rich. Their spouses and children are given good jobs by such donors, and if ordinary people do actually ever vote them out for not looking after their interests, well, as long as they went down doing what they were supposed to, they'll still be very well taken care of.

Get elected, do what your corporate masters tell you to, and you'll never ever have to worry about money ever again.

Only a sucker or an idealist would do anything else.

This is the fundamental problem with the US. There is no accountability for the political class. They and those who take care of them have made sure of it. Go to war with a nation which has never attacked the US based on a big lie propaganda campaign, or spy on millions of Americans, or torture, or deregulate the economy so that Wall Street can cash in and crash the economy, and hey, so what, there's no cost for you.

And as long as there is no cost for them, they'll keep doing it. Just like Wall Street, having been bailed out after crashing the world economy, will do it again. They got rich doing it, why wouldn't they do it again.

They'd have to be suckers or idealists not to.

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Will Howard Kurtz ask Chris Wallace why FOX News decided to make Newt Gingrich's new book their number one segment of the day? Then they followed it up by interviewing Laura Bush and proceeded into their wingnut panel discussion. Not one opposing view to Newt's movement conservative high jinks.

And about Gingrich's book: Newt's proclamation that President Obama is running a Nazi-style political machine that is as dangerous as Stalin and Hitler should be enough to drum him right out of his elitist DC Beltway bubble.

Wallace seemed upset that Gingrich went all wingnutty on President Obama:

Wallace: You also write this on the screen: "The secular socialist machine represents as great a threat to America as Nazi Germany or the Soviet Union once did." Mr. Speaker, respectfully, isn't that wildly over the top?

Gingrich: No, not if by America you mean....Just listen to President Obama's language. He gets to decide who earns how much. He gets to decide when it's too much.

Wallace: We're not talking about any company. We're talking about companies that the government has put billions of dollars in...

Gingrich: No, no..he has said publicly and generically. Some Americans earn too much. So now he's going to decide that?

Wallace:No, he's not. He has said that some Americans earn too much.

What Gingrich is doing is slyly trying to defend the CEO fat cats and his chummy Wall Street elites who screwed up the economy and their companies while they raked in millions of dollars, but he doesn't come right out and say it.

Movement conservatives like Newt are very adept at talking around their far-out beliefs in a way that almost makes them seem reasonable. They know how to manage the language and play it like an instrument. His tone is muted, never going off pitch and always in control. That's their edge. Karl Rove does it as well.

Gingrich, who has changed his religion almost as much as his wives then uses God to justify his odious assertions about the President and what he calls his "secular-socialist machine."

Gingrich was a bit surprised, methinks, that Wallace called him out on his "wildly over the top" attacks on Obama and I think it's because Newt is parroting the exact same beliefs as Glenn Beck, Sarah Palin and the Teas Partiers which have caused quite a bit of unrest for the GOP elders. And yet, Gingrich is one of the elders---never forget that.

Gingrich is a talented manipulator of the American people and he's the one that suffers no pain when the economy crashes and burns under conservative rule. It's the average working class Americans that feel the hurt.

Newt's argument frames the usual fear-mongering, boogie man beliefs that have been passed on for generations through the Republican Party. The "Commie threat" has been used for decades and was made popular by Joe McCarthy until he was ousted as a nut. But the College Republicans of the 80s--people like Jack Abramoff, Grover Norquist and Ralph Reed--took the Soviet Union "spies have infiltrated our government" paranoia to the kind of heights that can only be described as downright delusional, coupled with a Robert Ludlum-hero worship syndrome. These guys read Russian spy novels and dressed up in army fatigues, flying around the world trying to embed themselves into the action, fighting against communism while supporting the South American Apartheid regime. And it's this mindset untethered by facts that Gingrich philosophizes on.

Gingrich: Democrats Want to Impose 'Secular-Socialist Machine'

Gingrich said that he stands by his argument that the "secular-socialist machine" represents as great a threat to America as Nazi Germany or the Soviet Union, not in the sense of the immorality of those deadly regimes, but as a "threat to our way of life."

"The degree to which the secular-socialist left represents a fundamental replacement of America, a very different world view, a very different outcome, I think is a very serious threat to our way of life.

I have a lot of problems with the way the President has handled certain issues, as we've documented on the pages of C&L, but to say he's a threat to our way of life is cowardly and immoral and should exclude Gingrich from our political landscape.

Of course, in the Village, conservatives can say anything without consequences.

For all of the shouts and cries from conservatives about "bailouts", GM has just proven the wisdom of Congress' decision to lend Federal funds to keep GM afloat until they could get back on their feet. Today the company paid off their loans from the Canadian and US governments in full, five years early.

The company is paying back the loans “in full, with interest, years ahead of schedule,” Whitacre said in an opinion article in the Wall Street Journal. The two governments hold a majority of the automaker’s equity, he said.

The repayment shows “our plan for building a new GM is working,” Whitacre said. GM is “leaner, stronger” and building new vehicles whose sales have allowed the company to invest more than $1.5 billion at 20 plants in the U.S. and Canada, he said.

The GM loans have been a real talking point for conservatives. In exchange for the loans, the US and Canadian governments took an equity stake in the company as security for the loan. In any other world, this would be the prudent choice, but in our hysterical 24/7 tea and whine culture, that decision led to cries of "Socialism! Socialism!" In conservative-land, it was somehow better to allow one of our core industries to fail, to more or less end any competition between US companies, and throw 2 million people out of work, not to mention the support industries around GM's manufacturing and sales business.

I'd say it was an investment worth making. By getting GM the cash they needed to stay afloat and restructure, they've emerged stronger, more competitive, and poised to compete. Anyone who follows me on Twitter knows I'm a huge fan of the Chevy Volt and am still jonesing for the opportunity to take it for a test spin. I gave up my Honda a year ago and walk everywhere right now. I'm not planning to buy another car until I can buy the Volt or something as cool as the Volt.

Cheers, GM, and congratulations! It's good to see you roaring back.

Matt Taibbi says we should run Elizabeth Warren for president in 2012, and the more I read about how the since-appointed members of the Obama administration handled the financial crisis, the more I like the idea:

Oct. 27 (Bloomberg) -- In the months leading up to the September 2008 collapse of giant insurer American International Group Inc., Elias Habayeb and his colleagues worked nights and weekends negotiating with banks that had bought $62 billion of credit-default swaps from AIG, according to a person who has worked with Habayeb.

Habayeb, 37, was chief financial officer for the AIG division that oversaw AIG Financial Products, the unit that had sold the swaps to the banks. One of his goals was to persuade the banks to accept discounts of as much as 40 cents on the dollar, according to people familiar with the matter.

[...] Beginning late in the week of Nov. 3, the New York Fed, led by President Timothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps -- insurance-like contracts that backed soured collateralized-debt obligations.

CDOs are bundles of debt including subprime mortgages and corporate loans sold to investors by banks.

Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.

The New York Fed’s decision to pay the banks in full cost AIG -- and thus American taxpayers -- at least $13 billion. That’s 40 percent of the $32.5 billion AIG paid to retire the swaps. Under the agreement, the government and its taxpayers became owners of the dubious CDOs, whose face value was $62 billion and for which AIG paid the market price of $29.6 billion. The CDOs were shunted into a Fed-run entity called Maiden Lane III.

[...] A spokeswoman for Geithner, now secretary of the Treasury Department, declined to comment. Jack Gutt, a spokesman for the New York Fed, also had no comment.

One reason par was paid was because some counterparties insisted on being paid in full and the New York Fed did not want to negotiate separate deals, says a person close to the transaction. “Some of those banks needed 100 cents on the dollar or they risked failure,” Vickrey says.

In other words, Geithner used taxpayer money from one big disaster to paper over the fact that all the other parties were bankrupt, too - and probably still are, no matter what you read in the papers. Wait until the commercial market crashes. Wheee!

It's getting to the point where I don't even want to read Simon Johnson anymore. Yes, he's right. If we reduce oversight safeguards to "trust us," we have a system far too ripe for corruption - in fact, almost asking for it:

Buried in the late wire news on Friday – and therefore barely registering in the newspapers over the weekend – Treasury announced the rules for pricing its option to buy shares in banks that participated in TARP.

The Treasury Department said the banks will make the first offer for the warrants. Treasury will then decide to sell at that price or make a counteroffer. If the government and a bank cannot agree on a fair price for the warrants, the two sides will have the right to use private appraisers.

This is a mistake.

The only sensible way to dispose of these options is for Treasury to set a floor price, and then hold an auction that permits anyone to buy any part – e.g., people could submit sealed bids and the highest price wins.

In Treasury’s scheme, there is significant risk of implicit gift exchange with banks - good jobs/political support/other favors down the road – or even explicit corruption. For sure, there will be accusations that someone at Treasury was too close to this or that bidder. Why would Treasury’s leadership want to be involved in price setting in this fashion?

Treasury apparently sees corruption as an issue about personalities (i.e., WE aren’t ever corrupt) rather than about institutional structure. For example, if you create an arrangement that easily permits corruption, such as through nontransparent decision making or negotiation around warrant pricing, you set up incentives to be corrupt. Either existing people change their behavior, or new people will seek appointment in order to participate in corruption.

This is also a point, by the way, that Treasury has been making for years through its representatives at the International Monetary Fund – including during the Clinton Administration, when the same people were running U.S. economic policy as now. It’s a good point and never easy for countries-with-potential-corruption to hear. It applies as much to the United States as to anywhere else.

Treasury will argue the disposal of warrants is a one-off event, but this is not a plausible line: it is part of a much longer series of nontransparent decisions over finance. The attitude that “we can be nontransparent because we will never be corrupt” creates reputational risk for both Treasury and participating banks. If extraordinary support for the financial sector lasts several years, we will likely have at least one time-consuming and damaging investigation into all the details of these settlements.

Here's an example of what "Patriots" consider good clean fun...certainly nothing that could be considered "extreme" or dangerous wingnuttery

The Confluence: Did Hank Paulson use TARP as a "ruse" to rescue Citigroup?

The Reaction: David Brooks backs Sotomayor - but still espouses the racist double standard of the right

Multi Medium: Self-Promotion Fail

Consortiumblog: Tying Obama to Bush's budget mess.  Republicans blame President Obama for an ocean of red ink, but a study shows most came from President Bush

Progressive Blog Digest: All roundup, all the time