Financial Crisis

The Social Security debate is the longest-running domestic political tug-of-war in Washington. It began in 1981 when President Reagan floated a proposal to drastically cut old-age and survivors' benefits that met with immediate rejection from leaders of both parties in Congress.

In the aftermath of a global economic collapse brought about in part by the corruption of big government by big finance, many pundits expected a voter backlash in America to take the form of a combination of populist anti-elitism and statist anti-capitalism. But that has not happened, nor is it likely to occur. In the United States, the populists are anti-statist and the statists are anti-populist.

The Great Recession continues to spread hardship far and wide. Poverty rates are increasing, and once stable households are falling behind and increasingly vulnerable to economic uncertainty. The longer economic insecurity persists, the harder it will be for families to move forward in their lives. The breadth of households turning to existing safety net programs for assistance is exposing the limits of the prevailing policy framework designed to prevent families from falling deep into poverty, mitigating hardship, and providing a pathway toward financial stability.

Tomorrow morning at the Reagan Building, the Asset Building Program is co-hosting an event with our Economic Growth Program. The focus of the event is on the aftermath of the Great Recession, the performance of the social safety net, and how programs should be changed, modernized or replaced in order to be most effective. Here's the agenda:

What if there were a new economic engine for the United States that would put our people back to work without putting the government deeper in debt? What if that economic engine also improved our international competitiveness, reduced greenhouse gases, and made the American people healthier?

At a minimum, it would sound a lot better than any of the current offers on the table: stimulus from the liberals, austerity from the conservatives, and the president’s less-than-convincing plan for a little stimulus, a little austerity, and a little bit of a clean-energy economy.

The official arbiters have spoken: The Great Recession ended in the middle of last year. Unfortunately, this decree seems a bit hollow as new evidence of pervasive hardship continues to appear on a daily basis.

Here is a scary question: What could trigger a full-blown fiscal crisis in the United States?

OK, now breathe. It is not at all clear that we will have one. There is the highly desirable possibility that policymakers will act preemptively and gradually phase in major entitlement reforms, spending cuts and tax reform.

You know the old Winston Churchill saying that Americans can always be depended on to do the right thing -- after exhausting all other alternatives. Well, there's still time.

Among the media outlets covering the financial crisis, I’ve been partial to the work of The American Prospect and Mother Jones. We often point out relevant (and usually excellent) articles by Tim Fernholz, who is a staff writer at the American Prospect and a fellow with us here at the New America Foundation. Alyssa Katz, who we featured in an event earlier this year, was recently awarded the Harry Chapin Media Award for an American Prospect piece on how housing speculators are undermining revitalization efforts.

Noam Scheiber has also produced some great work, especially focused on the politics at play in the financial reform debates. Noam is a senior editor at the New Republic and recently was named a Schwartz fellow at the New America Foundation. We are happy to have him in-house. And then there is Mike Konczal, author of the blog Rortyblog and a fellow at the Roosevelt Institute, who has a background in financial services and has been helpful in explaining for his readers the mechanics of how the financial sector actually operates. Mike will be joining us for an upcoming discussion on revisiting policy assumptions in the wake of the Great Recession.

At Mother Jones, I wanted to highlight the work of Andy Kroll, who has been on the beat for a while now and has been monitoring what is at stake in both the legislative battle to pass financial reform and now implementation. Here is a link to Andy’s latest piece, which explains some of the recent controversy around foreclosures. At issue is role that servicers play in creating an assembly line-like foreclosure process. That’s good if you want to process as many foreclosures through the system as possible, but not so good if you want to make sure proper steps are taken to determine who exactly owns title to the home. As Andy says, it is kind of a big mess right now and just the type of situation that the new consumer financial protection bureau should be called on to address.

Keep up the good work, guys.

Click here to download the slideshow, "A Recovery at Risk."

The Let’s Get Specific series is intended to help focus the national discussion on specific policies that could help to reduce the deficit and create a better understanding of the types of policy changes that will be required. The policies recommended in this series are not necessarily endorsed by all the members of the Board of the Committee for a Responsible Federal Budget.

Fig. 1: Summary of Recommendations