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Dodd: Jackson’s Resignation Was ‘The Right Thing To Do’

chris_dodd_color.jpg Our guest blogger is Sen. Chris Dodd (D-CT), chairman of the Senate Committee on Banking, Housing, and Urban Affairs.

As you are no doubt aware, Senator Patty Murray (D-WA) and I sent a letter to President Bush a little over a week ago calling for Housing and Urban Development Secretary Alphonso Jackson’s resignation. Earlier today he announced his resignation. While a shift in the Administration at such a critical time is never optimal, I do believe it was the right thing to do.

In this time of economic crisis and instability in the housing market, it is more important than ever that we have a HUD Secretary who is fully committed to addressing the challenges facing our economy. Given that Secretary Jackson is currently the subject of ongoing investigations into alleged misconduct at HUD, it became clear to me over the past few weeks and months that these investigations have been a distraction at a time when the HUD Secretary must devote his undivided attention to helping American homeowners.

Now, more than ever, we need a HUD Secretary who can devote his full energy to solving our nation’s housing crisis. It is my hope that the new HUD Secretary the President appoints will be ready and anxious to tackle the problems in our housing market through collaboration with the Senate Banking Committee and other federal entities. We need all hands on deck to address the problems of the mortgage industry and the Americans whose budgets are being stretched to the limit by rising mortgage payments and cost-of-living increases. New leadership at HUD will help renew our focus on the country’s economic problems, and aid our attempts to restore confidence in the housing market.

Thanks again for the opportunity to share my thoughts with you here today, and I look forward to contributing in the future.

– Chris Dodd

When Will McCain Offer A Plan To Help Struggling Homeowners?

Our guest blogger is James Kvaal, Domestic Policy Advisor at the Center for American Progress Action Fund.

Inside the Beltway, the housing crisis is finally hitting home: the value of Ben Bernanke’s home has fallen by $250,000 in the last few years.

Maybe that’s why Bush officials are finally considering steps to rescue struggling homeowners. According to today’s Washington Post, their idea is to move families into new, more affordable mortgages backed by public funds, similar to proposals from Rep. Barney Frank and the Center for American Progress.

Details aren’t available for a week or longer, and the plan is expected to help far fewer families than the 2 million reached by the Frank plan. Still, it’s an encouraging sign the Bush officials are finally recognizing the need to get beyond conservative ideology.

So when will John McCain get on board? Last week Sen. McCain pleaded with lenders to voluntarily help homeowners – like Bush officials have tried unsuccessfully for more than six months. If he stays on his current schedule, we can expect him a real housing plan sometime around September.

Conservative Class Warriors, Continued

Our guest blogger is Robert Gordon, a Senior Fellow at the Center for American Progress Action Fund.

kristolIn a nice sequel to Bob Novak’s proposal that John McCain cut the payroll tax, Bill Kristol today writes that McCain might “suggest taxing ‘carried interest’* as ordinary income, if only to watch the fur fly among hedge-fund fat cats.”

This is a good idea that conservatives hated less than a year ago. Grover Norquist said “it’s crystal clear” that taxing carried interest “violates the Federal Taxpayer Protection Pledge.” Paul Weyrich called the idea “a huge tax increase.” And the Club for Growth said it was a “tax hike” and a “war on prosperity.”

John McCain has waffled on “no new taxes,” but he has regularly said that he won’t propose any tax hikes. Under the standard conservative definition, this is a tax hike. Yet Kristol is urging him to consider it…. probably because McCain’s true conservative tax plan will be spectacularly unappealing for most voters.

More gymnastics to come.

*Carried interest is the share of profits that is earned by a hedge fund manager without a corresponding ownership stake in the hedge fund. Carried interest is usually the manager’s core compensation, but it is taxed at the lower capital gains rate, not the ordinary income rate.

In New Ad, McCain Touts ‘Middle Class Tax Relief’

Today John McCain posted a new television ad featuring his promise of “Middle Class Tax Relief.” Watch it:

Here’s a closer look at the details of McCain’s tax relief plan:

– Provides only 9 percent of its benefits to the bottom 80 percent of taxpayers
– Provides 58 percent of its benefits to the top 1 percent
– Would require, if paid for, massive cuts in benefits for middle-class taxpayers

So…what middle class tax relief!??!

$4 Billion Among Friends

Our guest blogger is James Kvaal, Domestic Policy Advisor at the Center for American Progress Action Fund.

Later today, Sen. John McCain (R-AZ) will visit the Petroleum Club of Denver to pick up a stack of cash for his presidential campaign. He should get a warm welcome from the oil and gas executives who show up.

The centerpiece of Sen. McCain’s plan to stimulate the economy — actually, the whole plan — is large tax cuts for corporations. It would deliver $3.8 billion in tax cuts to the five largest American oil companies, according to an analysis released today by the Center for American Progress Action Fund.

The analysis only looked at one of the McCain corporate tax breaks: the proposal to cut the top corporate tax rate from 35 percent to 25 percent. Read the whole analysis here.

Bob Novak, Prince of Populism

Our guest blogger is Robert Gordon, a Senior Fellow at the Center for American Progress Action Fund.

For years, columnist Robert Novak has supported Republican efforts to eliminate the estate tax and “attack double taxation of corporate income.” He has embraced the argument of Social Security privatizers that an unchanged program requires borrowing “as far as the eye can see.”

That was then. In today’s column, Novak pushes Senator John McCain to embrace a cut in the “regressive payroll tax” as “an opportunity to reach out beyond top-bracket taxpayers, big business and high finance.” Social Security now has “enough money” to sustain the cut in revenue.

Has Bob Novak converted to the “populist, class warfare” worldview? Does he now support the CAP tax plan? Senator McCain already has pretty much the agenda that Novak used to support. Sen. McCain is “attacking the double taxation of corporate income” by pushing reductions in corporate taxes. He is supporting Social Security privatization.

Novak probably knows what he is doing. The Bush-McCain-Norquist agenda will not sell come November. So Novak is trying to make space for Senator McCain to change his mind on taxes. Again.

While Bush Administration Begins To Grasp Failures Of Deregulation, McCain Wants More Of The Same

grammIn a speech this morning at the U.S. Chamber of Commerce, Treasury Secretary Henry Paulson forced conservatives everywhere to take a long, hard look in the mirror.

As Paulson laid out his prognosis for America’s mortgage crisis and last week’s disaster on Wall Street, he tossed aside the dogmatic, decades-long conservative tradition of promoting market deregulation:

”This latest episode has highlighted that the world has changed as has the role of other nonbank financial institutions and the interconnectedness among all financial institutions,” Paulson said. ”These changes require us all to think more broadly about the regulatory and supervisory framework that is consistent with the promotion and maintenance of financial stability,” he added.

While some conservatives grasp the failures of deregulation, John McCain wants more of it. In McCain’s major housing crisis speech last Tuesday, he continued to highlight an inadequate plan to resolve the problems on Wall Street by making this assertion:

Our financial market approach should include encouraging increased capital in financial institutions by removing regulatory, accounting and tax impediments to raising capital.”

Perhaps McCain’s archaic logic comes from his advisers (as we all know that McCain is no expert on the economy). Paul Krugman rightly notes that “his chief economic adviser is former Senator Phil Gramm, a fervent advocate of financial deregulation.” “I’d argue that aside from Alan Greenspan, nobody did as much as Mr. Gramm to make this crisis possible,” Krugman writes.

Saving Social Security From Bush And McCain

mbush.jpg Our guest blogger is James Kvaal, Domestic Policy Advisor at the Center for American Progress Action Fund.

If you’re in Generation X, don’t give up hope — Social Security is not going bust. That’s news from the annual report from the Social Security and Medicare trustees.

The latest projection is that Social Security will pay full benefits for more than 30 years. After 2041, it will pay only 78 percent of promised benefits. The projection for the long-run shortfall has fallen 10 percent since last year.

The report is an important reminder that the program is not in a crisis. While we need reforms to extend the life of Social Security, we do not need to panic and adopt massive benefit cuts. And the last thing we need is the radical step of privatization — as George Bush and John McCain want -– that would cut benefits and shorten the program’s life.

Instead, we can save Social Security by setting the right priorities. Its deficit projected into the infinite future is 1.1 percent of the economy — about the same size as John McCain’s tax plan. Saving Social Security would be a better use of resources than a $2 trillion tax plan that delivers 58 percent of its benefits to the top 1 percent of taxpayers.

Missing The Straight Talk In McCain’s Housing Speech

Our guest blogger is Andrew Jakabovics, Associate Director for the Economic Mobility Program at the Center for American Progress Action Fund.

McCain’s much-hyped speech today on the nation’s current economic woes turned out to be much ado about nothing. His largely superficial descriptions of the nature and origins of the housing and credit crises demonstrate that McCain is a straight talker only when he says he knows nothing about economics.

His only proposal to address the current problems homeowners are facing is to get mortgage lenders to pledge to help cash-strapped, but credit-worthy, customers. He must have been out on the campaign trail last August when President Bush announced the Hope Now Alliance, which is a coalition of mortgage lenders and servicers that agreed to do just that. Unfortunately, the Hope Now Alliance’s track record is poor. Participants have not demonstrated the ability (or, some would argue, the willingness) to make widespread, substantive changes to mortgages that would result in sustainable payments for borrowers. McCain is pushing an ineffective policy six months late.

McCain claims he is open to new proposals that provide no bailouts to investors or speculators, but he made no mention of either Sen. Chris Dodd (D-CT) or Rep. Barney Frank’s (D-MA) proposals to address the current crisis, which meet the universally accepted no bailout criterion. A true straight talker would acknowledge that there are serious legislative vehicles in Congress to address the current crisis and state his position on them either in his current role as Senator from the deeply impacted state of Arizona or in his aspiring role as president.

McCain’s Record Of Denying Assistance To Homeowners

mccainfly1.jpg Today, Sen. John McCain (R-AZ) is scheduled to give a speech to the Orange County Hispanic Small Business Roundtable in California. In his prepared remarks, McCain promises to offer “some straight talk” on the nation’s economic woes, promising to “evaluate everything” in order to help Americans. But what are his ideas to solve the crisis? From his speech:

– “[I]t is time to convene a meeting of the nation’s accounting professionals to discuss the current mark to market accounting systems.”

– “We should also convene a meeting of the nation’s top mortgage lenders.” (Note to McCain: The Bush administration already tried this approach, and it failed.)

– “I am prepared to examine new proposals and evaluate them.”

That’s right — a year after other leaders began calling for action on the mortgage crisis, McCain is calling for two meetings and is willing to study other ideas. But the time for meetings and studies passed long ago.

While others sought to prevent the emerging credit crisis, McCain has sat on his hands. In fact, on Feb. 17, McCain told ABC’s This Week that a government fund “to help borrowers who are facing foreclosure on their homes” isn’t necessary.

Both House Financial Services Committee Chairman Barney Frank (D-MA) and Senate Banking Committee Chairman Chris Dodd (D-CT) have already unveiled serious legislative proposals to stabilize the shaky housing market. Either McCain is oblivious to these plans, or he has already decided that he’s not going to bother to “examine” and “evaluate” them.

McCain has consistently voted against mortgage protections and other steps to help consumers fight unfair credit terms. A look at his record:

– McCain voted against discouraging predatory lending practices. In 2005, McCain voted against an amendment prohibiting law-breaking high-cost predatory mortgage lenders from collecting funds from homeowners who are forced into bankruptcy court. [S. 256, 3/03/05]

– McCain failed to vote on bill to overhaul mortgage lending practices of FHA. In 2007, McCain failed to vote on passage of a bill that would overhaul the mortgage lending practices of the Federal Housing Administration (FHA). The bill would reduce the required minimum down payment for an FHA-insured loan and simplify its calculation, requiring a flat 1.5 percent of the appraised value of the home. [S. 2338, 12/14/07]

–- McCain failed to sign on to the Predatory Lending Consumer Protection Act. In 2003, McCain failed to add his name to this legislation, which was intended to “protect consumers against predatory practices.” The bill, which was endorsed by a host of civil rights and housing advocates, including the U.S. Conference of Mayors, ACORN, and the Consumer Federation of America. [S. 1928, 11/21/03]

– McCain failed to sign on to Truth in Lending Act. Less than four months ago, McCain failed to sign on to this bipartisan initiative providing protection to consumers taking out home mortgage loans. Among other measures, it was designed to “establish new lending standards to ensure that loans are affordable and fair.” McCain also refused to co-sponsor this legislation in the 107th Congress as well. [S. 2452, 12/12/2007]

McCain’s primary solution to dealing with the flailing economy? Waiting it out. Also on ABC’s This Week on Feb. 17, when asked whether he was “open to helping homeowners,” McCain replied, “I am open to helping homeowners. I would rely to a large degree on the situation of time.”

Sen. Kyl Tries To Pin Blame For Economic Mess On Democrats, ‘Minorities,’ ‘The Poor,’ And ‘The Young’

Our guest blogger is David Abromowitz, a Senior Fellow at the Center for American Progress Action Fund.

Compassion, it seems, is easier in boom times.

Arizona now has the fourth-highest foreclosure rate in America, with 9,540 foreclosures in February, up 210 percent from 2007. So maybe it’s natural that Sen. John Kyl (R-AZ) would want to revise history by shifting blame for the crash in home prices plaguing Arizonans and millions of homeowners onto the Democrats, as he did on ABC’s This Week yesterday:

It wasn’t the Bush administration as much as it was Democrats in Congress who were pushing the lending institutions to get out there and lend more money, even to unqualified buyers — to the minorities, to the poor, to the young — so that everyone could own a home.

Blaming Democrats for the market meltdown ranks high on the disingenuous scale, right up with Karl Rove’s outlandish claim that the Democratic Congress pushed a reluctant, peace-loving President Bush to invade Iraq.

Under the Bush administration, former Fed Chairman Alan Greenspan and other Bush financial officials promoted easy money, low interest rate polices together with underregulation of virtually anything that could be called a free market financial “innovation.” During this time, regulatory powers to police the rise of non-bank mortgage originators pushing high cost loans without reserve or risk-retention requirements were put into mothballs. Fueled by this high octane mix, the subprime market exploded from 2001 until 2006, making up perhaps as much as 50 percent of the increase in homeownership during that period.

If only Sen. Kyl had aired his criticisms of unfettered lending practices in 2003, when he stood with Sen. John McCain (R-AZ) at a Phoenix fundraiser and listened to President Bush extol the virtues of an “ownership society.” At that time, the president said:

A compassionate society must promote opportunity for everyone, including the independence and dignity from ownership. My administration will constantly strive to promote an ownership society in America. We want more people owning their own home. We have a minority home-ownership-gap in America. I proposed a plan to the Congress to close that gap….This administration understands that when a person owns something, he or she has a vital stake in the future of this country.

When it was popular to stand for expanding homeownership, Sen. Kyl was there in 2006 to praise federal aid for minority and low income families in Phoenix:

Habitat’s work, including the partnership with HUD, has produced great results and made a truly positive impact in the Phoenix neighborhoods. The SHOP grants announced today will help make it possible for many more Arizona families to realize the dream of homeownership.

Certainly advocates for low- and moderate-income families fought for greater access to home mortgage loans for Americans historically frozen out of the Great American Dream. Some argued for nothing-down mortgages and flexible underwriting standards. But by and large, these groups also advocated full lending disclosure, extensive homebuying counseling, and other protections for consumers. The record of affordable homeownership approaches such as those promoted by community development corporations, community land trusts, and similar efforts shows a low foreclosure rate and great stability even among buyers whose income is below the median.

But with millions in foreclosure and financial markets quaking at the massive debt piled on top of “difficult to value” pools of mortgages, pointing the finger at Democrats — or blaming “minorities,” “poor,” and “young” Americans who bought houses to join the ownership society — is certainly convenient. With millions of them foreclosed on, they might not be watching Sunday morning news shows to set the record straight.

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Despite Industry Threats, Port Of Los Angeles Embraces Major Reform

On Thursday afternoon, the board of the busiest port in the United States approved by a unanimous vote the Clean Trucks Program. The program is a major element of a “landmark plan” to transform a “microcosm of the inequality of income, wealth, and public health” in America into a model of green growth.

The Clean Trucks Program involves an “employee model” that mandates that the Port of Los Angeles deal only with trucking companies who employ, rather than contract, their drivers. Currently, nearly all of the 16,800 truckers are classified by “independent contractors,” working without benefits or the right to unionize. The predominantly Latino workers must choose between safety and money as they try to run enough trips to make the equivalent of $12 an hour after an average $46,000 a year in expenses to keep the trucks running.

Moving to the employee model, proponents believe, will make it dramatically easier for the port to meet state and federal public health, environmental, and national security standards, as the port authorities will be able to work directly with the national trucking companies rather than the thousands of truckers. However, trade groups representing retailers, importers, and the trucking industry are fighting every step of the way.

Last month, the Port of Long Beach bowed to industry pressure, fearing “the employee model would get bogged down in the courts” and approved environmental but not labor reforms, leading to dramatic protests. Watch it:

“There may be lawsuits that will delay our effort, but we will not be deterred,” Villaraigosa said in an interview with Mercury News. “We think we have a strong legal case, and we are moving ahead with the most ambitious plan to clean up a major port in the United States and perhaps the world.”

Read The Progress Report’s The Greening Of America’s Busiest Port, for the story behind this major progressive victory.

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Is Holtz-Eakin Backing Away From McCain’s Economic Plan?

In today’s Washington Post, Douglas Holtz-Eakin, senior policy adviser to Sen. John McCain’s (R-AZ) presidential campaign, writes 489 words about McCain’s plan for “turning around the economy.” There is not one word about the two massive corporate tax cuts that Sen. McCain billed, barely two months ago, as the top two items in his “economic stimulus plan“:

JOHN MCCAIN UNVEILS ECONOMIC STIMULUS PLAN
For Immediate Release
Thursday, January 17, 2008

ARLINGTON, VA — Today in Columbia, South Carolina, John McCain unveiled his plan to stimulate the American economy. McCain’s plan will lower the corporate tax rate, allow expensing of equipment and technology investments and establish a permanent research and development tax credit. …

Dr. Holtz-Eakin is smart to want to walk away from this absurd Norquist pander, but will the media let Sen. McCain do the same?

Coming soon from Sen. McCain: I was against irresponsible tax cuts before I was for them.

UPDATE: My bad. Although this article didn’t mention expensing, it did mention the corporate rate cuts. Sorry for the error.

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McCain Spouts Policy Platitudes Instead Of Solutions To The Housing Crisis

mccain44.jpgOur guest blogger is Ed Paisley, Vice President of Editorial at the Center for American Progress Action Fund.

John McCain promises to put “America’s interests before political ambitions” in his first post on Forbes.com about what he considers the most important issue facing our nation — zeroing in on housing. Unfortunately, he then proceeds to offer up eight vaguely principled platitudes as substitutes for actual policy proposals.

In his piece, McCain argues:

America’s families are bearing a heavy burden from falling housing prices, mortgage delinquencies, foreclosures and a weak economy. It is important that those families who have worked hard enough to finance home ownership not have that dream crushed under the weight of the wrong mortgage.

No questioning that snap analysis as the subprime mortgage crisis cascades into the subprime and prime mortgage markets and then into the broader credit markets, reducing one of Wall Street’s storied investment banks to rubble and now threatening ever widening sectors of the economy.

Problem is, McCain’s solutions to the widening ramifications of the U.S. housing crisis rely “on sound principles” that in fact fail to advance any real solutions, or worse (in the case of the last two of his eight principles), offer counterproductive or meaningless advice. Seventh on his list, for example, is this: “Our financial-market approach will include encouraging increased capital by removing regulatory, accounting and tax impediments.”

The problem, however, is not over regulation of the various financial institutions that helped create the housing bubble, but rather regulatory underkill, as former Securities and Exchange Commission chairman Arthur Levitt notes in his recent column in the Wall Street Journal. Levitt says that policymakers “need to realize that the true competitive advantage of America’s capital markets has been their high quality,” which he does not define as more lax regulations or accounting guidelines.

And number eight on McCain’s list is this: “Where government assistance is merited and received, all parties — lenders and homeowners — must participate in financial sacrifice in order to qualify.” Yet the seven principles that preceded his last one hold out no hope of actually providing meaningful government assistance. In fact, in this most pressing issue before our nation (according to his own reckoning) McCain offers are no policy proposals whatsoever.

McCain admits he’s not a crack economist, but even his chief economic advisor, Douglas Holtz-Eagin, fails to present any cogent plan to address the housing crisis. Instead, he also dodges the issue by blaming it mostly on “speculators looking for quick profits and by investors and bankers who ignored basic rules of risk management in an attempt to cash in while times were good.” Surely he knows that most homeowners on Main Street are not speculators to be punished but rather responsible, hard-working Americans who save and invest in their homes for their and their families’ futures. An economic plan that fails to detail precisely how to deal with the housing crisis is no plan at all.

Principles are not action, and action is what’s needed today. Fortunately, progressives in Congress are moving forward with some concrete proposals to stem the fallout from the housing crisis at its source — owner occupied homes. These plans, based in large part on Center for American Progress proposals to save responsible homeowners and to help neighborhoods devastated by foreclosures, contain concrete policy steps to bring relief to homeowners, the broader economy, and our spooked financial markets.

McCain, on this critical issue, is engaged in mere political posturing.

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Health

Responding to Douglas Holtz-Eakin

Our guest bloggers are Robert Gordon and James Kvaal, Senior Fellow and Domestic Policy Advisor, respectively, at the Center for American Progress Action Fund.

One of Sen. John McCain’s economic advisers, former Congressional Budget Office Director Douglas Holtz-Eakin, has responded to this Center for American Progress Action Fund study of the McCain tax plan:

On the question of tax cuts Gordon and Kvaal had a point, he conceded, though he added voters should wait until the senator fleshes out his tax proposal before passing judgment.

“It will make deficits expand up front, no question,” Holtz-Eakin said, adding that helping corporations ultimately helps workers because it ensures their employer remains internationally competitive. “That place has to be economically viable, otherwise they have a problem.”

Apart from the signal that Senator McCain may change his economic agenda yet again, this candid response raises four questions:

1) Why is it necessary to cut taxes for corporations to make them “economically viable” when the United States already has the fourth-lowest corporate tax revenue as a share of the economy in the industrialized world?

2) Why are deficit-financed corporate tax cuts likely to increase growth when (a) in the short-run, Moody’s Economy.com ranked them the least cost-effective stimulus among 13 options, and (b) in the medium or longer-run, the effect on growth of deficit-financed tax cuts “tends to be small?”

3) How do massive tax cuts for the most fortunate further shared prosperity when income inequality is at its highest level since before the Great Depression (or earlier)?

4) Given the admission that this plan will immediately increase federal budget deficits, how will Senator McCain meet his own goal of balancing the budget by 2012?

UPDATE: Center for American Progress Action Fund Senior Fellow Jeanne Lambrew responds below to Holtz-Eakin’s comments on the criticism of McCain’s health care plan: Read more

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NEW REPORT: McCain Adopts ‘Entire’ Norquist Agenda, Will Double The Bush Tax Cuts

norquistOur guest bloggers are Robert Gordon and James Kvaal, Senior Fellow and Domestic Policy Advisor, respectively, at the Center for American Progress Action Fund.

Everyone knows that John McCain has reversed himself on the Bush tax cuts, which he once said came “at the expense of middle-class Americans.” What’s not yet well known is that McCain has offered his own massive tax cuts, mostly for corporations, that are as costly as Bush’s tax cuts and even more regressive.

McCain has won the heart of far-right tax activist Grover Norquist, who only three years ago was calling McCain “the nut-job from Arizona” and a “gun-grabbing, tax-increasing Bolshevik.” But here’s what Norquist says about McCain now:

[John McCain] campaigned on being very good on taxes in this election cycle… that he will continue to make [the Bush tax cuts] permanent, that he will veto any tax increase, period, that he wants to cut the corporate rate from 35 percent to 25 percent, that he wants to have full expensing, that he wants to abolish the AMT …. In addition to being the Americans for Tax Reform’s entire agenda, that is a very pro-growth set of policies he has put forward, and he articulates why they are important.

The McCain plan may please Norquist, but what does it mean for middle-class families? According to a new analysis released today by the Center for American Progress Action Fund, McCain’s new proposals would do the following:

Double the size of the Bush tax cuts, costing more than $2 trillion in their first decade.

Do virtually nothing for the middle class: only 9 percent of the tax cuts will go to the bottom 80 percent of households, while 58 percent will go to the top 1 percent of households.

Follow Norquist’s blueprint that’s been called a “stealth approach to tax reform” – and that aims to abandon progressive taxation in favor of a wage tax imposed mainly on low- and middle-income households.

Read the full report (pdf).

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Climate Progress

On Gas Prices, Bush And McCain Acknowledge Their Own Cluelessness

Skyrocketing gas prices are crippling the budgets of Americans, as Bush has newly discovered. But he doesn’t have a solution. Nor does Sen. John McCain (R-AZ). Bush’s every response to energy problems is to drill for more oil and blame China. McCain has a more evolved position: his solution is to drill for more oil and build nuclear power plants, and blame China and terrorists. But neither will address a major culprit in the recent shocking spike in oil futures and gas prices – the collapse of the American dollar due to a vicious circle of shortsighted right-wing economic policies.

When asked if OPEC followed his call to increase production, how much oil prices would fall, Bush replied: “I’m just a simple president. But I really don’t know what it would do.” McCain was baffled when asked on 60 Minutes what he would do for the person facing rising gas prices: “I would love to tell you that I have an immediate answer for that. And I don’t.

Watch it:

The popular explanation of increasing world demand and constrained oil supply is certainly behind much of oil’s long rise, exacerbated by the chaos in Iraq. But a myopic focus on oil prices doesn’t explain the whole picture.

Since 2000, the dollar has fallen 40% against the world’s currencies, Monday reaching “new lows against the euro and a basket of six major currencies.” Dr. A.F. Alhajji, an Ohio economics professor, outlined to CNBC the vicious circle that ties the dollar’s fall to oil’s rise:

The lower dollar reduces supply and increases demand, thus raising oil prices. As a result, the value of US oil imports increases, which in turn widens the trade deficit, which weakens the dollar further.

This cycle is worsened by the right-wing economic policies of this administration. Fed Chairman Alan Greenspan and Bush created the mortgage bubble by keeping interest rates at historic lows and failing to regulate questionable practices in the financial sector. As the curtain is pulled back, and the “securities” turn out to be junk, investors have been pulling money out of mortgage instruments and putting them into safe hedges like gold and, again, oil.

Now Ben Bernanke, Greenspan’s successor, is propping up failed hedge funds and financial institutions – despite not having regulatory oversight over them. And he’s cutting interest rates in desperation, which is, in the words of Hale Stewart of Bonddad Blog, “stoking energy inflation and encouraging the migration away from the dollar.

Bush and Bernanke’s policies are creating inflationary pressure on the U.S. economy and making our financial markets riskier. This one-two punch drives the flight from the dollar into stable foreign economies and commodities like oil. Democratic attempts to fix the systemic problems and buffer American citizens from the whiplash on the job and at the pump are being stonewalled by Senate Republicans, Bush vetoes, and corruption in the executive branch.

John McCain, who happily admitted in December that “the issue of economics is not something I’ve understood as well as I should,” followed up with a troubling preview of how he would guide the American economy through these troubled waters:

I’ve got Greenspan’s book.

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Income Disparity And Wealth Consolidation Show Eerie Resemblances To 1928

Our guest blogger is Robert Gordon, a Senior Fellow at the Center for American Progress Action Fund.

When you’re not checking the stock market today, check out Emmanuel Saez’s recently updated tables on income inequality. Here’s an interesting table:

chart55.gif
Look at incomes for the top 1% of earners — the solid black triangles. You’ll see that in 2006, their share of the nation’s income (22.9%) reached its modern peak. The only year higher? 1928.

Another table shows that the top 10% in 2006 took a bigger share (49.7%) than at any point since 1917. The year 1928 was the runner-up.

Let’s hope that 2006 and 1928 don’t end up looking similar in other ways. If they do, it will be a good reminder that growth needs to be shared not just because it’s right, but also because it’ll last longer.

Robert Gordon

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Bush Admits Free Market Failures Even As He Touts Free Market Housing Solutions

Just yesterday, a new report revealed that home foreclosure rates in February had skyrocketed 60 percent from the same month last year. The amount of equity Americans own in their homes plunged to lows not reached since 1945; and home sales remain at near record low levels.

Yet throughout this crisis, Bush has refused to lend homeowners a helping hand. In fact, he has repeatedly insisted that homeowners are at fault for intentionally buying homes they could not afford:

“It’s not the government’s job to bail out speculators or those who made the decision to buy a home they knew they could never afford.” [8/31/07]

Some borrowers took out loans they knew they could not afford. … We should not bail out lenders, real estate speculators or those who made the reckless decision to buy a home they knew they could never afford.” [12/6/07]

However, in a Friday speech to the Economic Club of New York about the state of the economy, Bush admitted that some of the borrowers now facing foreclosure may have been confused about the terms of their loans:

These mortgage agreements can be pretty frightening to people; I mean, there’s a lot of tiny print. And I don’t know how many people understood they were buying resets, or not. … And to the extent that these contracts are too complex, and people made decisions that they just weren’t sure they were making, we need to do something about it.

Watch it:

Unfortunately for homeowners, however, Bush’s shift is no more than rhetorical. Even as the Federal Reserve was in unprecedented negotiations to bail out giant Wall Street firm Bear Sterns, Bush refused to grant similar help to struggling homeowners. “In a free market, there’s going to be good times and bad times,” he said flatly. “That’s how markets work.”

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What Is The Wonk Room?

Today, ThinkProgress is launching a sister blog — The Wonk Room. To address the need for substantive dialogue and information, The Wonk Room is intended to be a rapid-response policy blog as well as a resource for in-depth policy analysis on four core issue areas: health care, economic mobility, national security, and climate change.

While the media often focuses an inordinate amount of coverage on the daily political horserace, less attention is paid to the deep philosophical and ideological differences between conservative and progressive policies. The Politico reports:

The site – which the center calls “the first-ever public policy rapid response blog of its kind” — is designed to bridge the shrillness of the presidential campaigns and the details of policy choices that will confront the winner.

The daily mission of this blog is to provide a substantive, focused, and relentless effort in each of these areas:

Promoting progressive policy solutions on the four core issue areas

Defending those progressive ideas from false attacks

Defining the Bush record

Critiquing the conservative approach

The ultimate goal of our effort is to create a mandate for progressive action in each of the four core policy areas.

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