Time for Hearings

Hear that sound? something between a buzz and a whine? That's the sound of the finance industry lobby revving its engines (and mobilizing its membership) to kill the Obama administration's ambitious plan to overhaul how the industry is regulated.

This legislation has been flying under the proverbial radar to a certain extent because of the even more contentious battle over health care reform. While our health care system is certainly broken beyond the point of applying band-aids, it was not responsible for the economic mess we are now in (and will be in for some time). The banking/investment industry was, and bringing it to heel must be the centerpiece of an economic recovery.

It comes as no surprise that the banks and the hedge-funds would oppose any effort to regulate their behavior - though doing so requires them to deny that anything has gone wrong, that they bear any responsibility for what has happened, or that the Federal government has an obligation to protect the vast majority of Americans who aren't investors in hedge fund from their greed, dishonesty and down-right stupidity. Despite all this, they remain a powerful and effective lobby - especially with craven Congresspeople - and they have no counterweight on the Hill.

Which is why I think Congress needs to hold hearings on the financial collapse of 2008. Congress needs to investigate what happened and who was responsible for it, not so there can be indictments and trials and jail terms (though I would sorely love to see all of that). Rather, hearings are necessary to create a narrative through which the Treasury's plans for regulation can be understood by the public.

The banking industry has already framed the issue in a way which it feels will kill it: a few bad apples; don't stiffle financial innovation; regulation is unnecessary interference in the free market. The Obama administration, therefore, needs to offer a different frame: bankers and investment houses got fabulously rich at the expense of the rest of us; much of what they did was unethical; markets work best with clear and effective rules. Hearings are a way to establish that frame and to write that narrative. In other words, hearings may be the best way to generate the public anger necessary to overcome the influence of the banking lobby.

Instead, roughly 200 members of Congress have signed on to a petition (authored by -who else - Ron Paul) to create a congressional audit of the Federal Reserve. That may or may not be a fine idea, but the notion that the Fed is responsible for the Great Recession, rather than AIG, Countrywide, BoA etc, is patently absurd. Instead of directing its anger at the Fed, Congress needs to direct it those private sector players who are really to blame.

We won't get serious reform of the financial sector without public anger to support it. And if we don't get it, we can all look forward to more of the credit-default-swapping, mortgage-backed-securitizing, derivative-selling shenanigans that landed us where we are now.

What Happened to 55?

Buried in the "Science" section of today's Times is a squib reporting a new study in the current American Journal of Public Health. The study looked at highway deaths since the repeal of the national 55mph speed limit and concluded that the "failed policy of increased speed limits" accounted for an estimated 12,500 unnecessary deaths over a ten-year period. This despite all the safetly improvements that have been made in cars which should have brought the death rate down. (No word, at least in this summary, on how many non-fatal injuries could be attributed to increased speed).

When Congress imposed 55mph on the nation in 1974, car crashes weren't its primary concern. Rather, Congress wanted us all to drive more slowly as a way of burning gasoline more efficiently. During that first energy crisis, with an OPEC oil embargo, rising gas prices etc, this seemed like an easy and sensible way to help ease our dependence on imported oil.

Repealing that speed limit, which began in 1987 and was complete by 1995, was a pure piece of Reaganite political symbolism. After all, Americans have a constitutional right to drive at 65 don't we? and a 55mph speed limit was an onerous regulation imposed by pointed-headed Democrats who wanted to deprive us of our freedom. I think the speed limit in the Soviet Union was 55mph wasn't it?

So, one new energy crisis and 12,500 additional deaths later, why aren't we talking about bringing back the 55mph speed limit? Even President Obama, who has more or less mandated that the American auto industry produce more fuel-efficient cars in the future, hasn't suggested we drive at 55mph to get better mileage in the cars we are already driving.

The reason, I think, is that higher speed limits not only burned more gas and killed more drivers, but it profoundly re-shaped the American landscape. During the decade or between the elimination of 55 and the collapse of the real estate market, exurban sprawl was a major driver of the American economy. Chester county, Pennsylvania, Delaware county, Ohio, Lake county Illinois, all on the far edges of metropolitan areas, grew at astonishing rates during those boom years, as did dozens of other exurban places.

To live out on the exurban frontier doesn't simply require a car - though it obviously does. The distances between home, work, school, shopping, city culture have become so attenuated that life requires a car driven at high speeds. In this sense, 65mph help make exurbia possible.

Conversely, lowering the speed limit back to 55 would increase the time exurbanites spend in their cars by over 15% (roughly), a significant amount given how much time they already spend there. Many Americans, therefore, simply cannot fathom driving any slower, regardless of how much money they might save at the pump, or how many lives they might save.

And herein lies the double-edged nature of more fuel efficient cars: on the one hand, there is no question that we ought to have cars that get better mileage. On the other, this will simply encourage people to drive more, and will provide an impetus to sprawl, which is also environmentally destructive. The answer to this dilemma, obviously, is fuel efficient cars driven through more densely-built towns and cities, and, needless to say, that is far easier said than done. The question, therefore, is whether the rising costs of exurban life in the coming years pressure people back toward the center, toward shorter drives, better access to mass transit, and even to places where walking and biking is possible.

There are plenty of ways policy might encourage that, but speed limits are certainly one place to start.

Lost in the Sunbelt: Notes from Southern California

Rather than the usual coherent essay-style posting, I'm presenting today just a few notes in easily digestible form about life in the fiscal disaster that is California.

1. Who would have thought that in a time of financial crisis, the faculty of the UC system would be looking with envy at our Rustbelt colleagues? We are in a fiscal crisis of unprecedented depth and severity, and every day or two we receive a new email telling us how bad it is or what new calamity awaits next week. And what of the flagship university in the state hit hardest by the financial crisis? The University of Michigan is in a state where at least one city, Michael Moore's hometown of Flint, is actually debating shrinking itself and giving back whole sections of the city to nature. And yet the University of Michigan is doing fine. I would like to blame our misery on Wall Street, but clearly, the system in California needs to be redesigned (either the ways we tax and spend in Sacramento or the way we finance the whole university enterprise or both) and perhaps the Rustbelt can give us a model.

2. Am I the only person who sees what seem to be obvious examples of unnecessary spending at the local level despite the crisis? Gilman Drive, the road I take to UC-San Diego when I drive, has for a decade been a bumpy, crumbling mess. But someone picked this year to pave it--beautifully, I might add. Smooth as satin. Recall that San Diego is a city that a few months ago considered closing several libraries, and has numerous other fiscal debacles to worry about. Is this all about "use it or lose it" funding rules for government institutions?

My hometown of Highland, IN closed its public library this year, but this fiscal juggernaut did it to renovate, not to save money. Perhaps this is a mini-version of the financially sound University of Michigan.

My pet peeve wasteful spending (I actually love the new Gilman Drive) is that the University of California still prints a campus phone book for every faculty member and office. Who uses phone books anymore? Everything has been on the web for more than a decade. I'm guessing the cost of those phone books would keep at least a few staff people employed for a year or more.

3. Unrelated: Is it time to rethink the political strategy of incrementalism, at least in the culture wars? I've always thought that progressive change on cultural and regulatory issues comes best from expanding on small victories. And so, for example, advocates for gay rights should focus on the simple things, like having the Civil Rights Act of 1964 amended to ban discrimination in employment based on sexual orientation. Small changes like this do not challenge deeply held beliefs (and yes, it's still legal to discriminate against gays and lesbians on the job).

In this view, the focus of gay rights advocates on the hot button issue of gay marriage is totally misguided. Why mobilize your enemies by going after marriage rights before employment nondiscrimination rights?

But perhaps this is wrong. Note that the year 2000's Prop 22 in California, creating a statute that defined marriage as between a man and a woman, passed with 61% of the vote. In 2008, the California Supreme Court struck down Prop 22. But the voters went and reversed, passing Prop 8, which amended the state constitution to define marriage as a union between a woman and a man. What is interesting here is that this time the idea only won over 52% of the voters.

The trend for gay rights in general is toward increasing acceptance. Was the mobilizing for the right to marry by advocates for gays and lesbians the best PR campaign ever run? Unlike so many public portrayals of gays and lesbians (who can forget the story in _The Onion_ reporting that the flamboyant antics of a gay pride parade set the movement back 50 years?), the struggle for the right to marry re-brands this group as just regular folks, no different from anyone else, on the central institution of family life. Even if the right to marry fails, it may actually make all of the other nondiscrimination rights easier.

4. If America is ever again going to see economic populism, now should be the time: the Wall Street firms we all just bailed out with our tax dollars are now posting record profits and will begin to reward themselves handsomely very soon with bonuses--while contributing no visible benefits to the country. My guess is that the financial crisis is more likely to generate an anti-immigrant backlash than anti-Wall Street populism. Perhaps it is time to re-read Michael Kazin's excellent book, The Populist Persuasion, and search for lessons.