President Barack Obama on "The Tonight Show" (AP Photo)

At the risk of sounding like a broken record (kids: a long time ago people listened to music on things called records and sometimes they got scratched and skipped and played the same little section of a song over and over and over and…oh never mind) Republicans just don’t get it.

The kerfuffle over Barack Obama’s “Tonight Show” appearance is so incredibly telling — and sad if you were hoping for a reasonably adept opposition to push back on Barack occasionally. The usual suspects and brothers in arms — The New York Post and Fox News — were agog that the President “yuks it up on Leno as economy burns.”

The Post‘s am-I-a-journalist-or-an-opinionist? Charles Hurt penned a scathing column noting that while the “economy lies in ruin” Obama has “with great fanfare filled out his March Madness basketball bracket before flying off to California to parry and jest with Jay Leno….”

The conservative media was actually just riffing on a theme Republican Senators introduced Thursday during a news conference ostensibly held to discuss the AIG bonus boondoggle. Arizona Senator Jon Kyl set the tone:

He flies off to Los Angeles to be on the Jay Leno show. My suggestion is that he come back — since he’s taken the full responsibility — to get his people together and say ‘I want to know exactly what happened, who did what when and how are we going to prevent this from ever happening in the future, and how can we manage these taxpayer assets in a way to solve the banking and financial institution crisis.’

Putting aside all the times when Democrats were up-in-arms about President Bush doing things like staying on vacation in Texas for days after Katrina hit New Orleans while Republicans defended him there’s a real issue here that we’ve talked about here several times before. The electorate is not what Republicans seem to think it is.

For decades Democrats have sought the support of young voters hoping that this group could be motivated to vote in numbers similar to those of their parents. But it never happens. Sure younger voters have increasingly sided with Dems since the late 80s but the percentage of people over 45 who vote is much higher than the percentage of those under 30 who vote. That hasn’t changed much in 30 years.

What has changed is that those younger voters have become older voters and the Democrats finally cashed in on that demographic truth in the last two elections. In general polling has shown people do tend to become more conservative as they age but not necessarily more Republican. Instead they tend to become more conservative within the party of their youth.

The other change is in the way people in various age groups get their news. Pew does great research about this and in the latest poll released at the end of last year, found that people under 30 now depend on the internet as much as television for their information. And the trend lines heavily favor the internet in the future.

More telling is what kind of television shows these voters get their news from. In another Pew poll released in January 2008, the trend towards people under 30 getting at least some of their campaign news from shows like Saturday Night Live and The Daily Show, coupled with that group’s high use of the internet to watch video clips speaks volumes about how a growing number of Americans gain an understanding of what’s going on.

When Obama’s people talk about wanting to “speak directly to Americans” or when Bush talked about going around “the filter” of the mainstream media, both are simply recognizing the truth: All the self-importance of the cable news channels and network anchors is delusional. Even the highly-rated prime-time cable shows (Olbermann, O’Reilly) get a smaller audience of people under 54 years old (a demographic threshold for advertisers and a majority of voters) than the lowest-rated shows on the lowest-rated CW network.

The fact is, reaching the people who will vote in the next election means speaking to them where they are: On the internet, on social-networking sites (Facebook isn’t for college students anymore — Al D’Amato recently friended me!), on You Tube, on late-night comedy shows, on daytime talk shows, on just about anything other than news shows.

So while Republicans and their media supplicants bellyache about Obama’s apparent major miscue of going on Leno, voters don’t really see what all the fuss is about. After all many Americans now get a better understanding of the critical issues facing America from the first 8 minutes of John Stewart than they do from 30 minutes of Couric or Gibson or 60 minutes of Maddow or Hannity or Cooper.

The Wall Street Journal reports this morning that at least some of those “shovel-ready” projects we heard so much about aren’t so ready for a shovel after all. The problems run the gamut from local opposition to specific projects to lengthy bidding and contracting processes required by law.

That should be no surprise to anyone who scratched the surface of the claims made by those who said the money could be spent fast or those who complained the bill didn’t spend money fast enough. Wisconsin Republican Paul Ryan wrote in an OpEd in early February that, “The spending isn’t only poorly targeted but also neglects the urgency of our crisis. Only a small fraction of the money will be spent in 2009, and half of the outlays will be unspent at the start of 2011.”

While that’s not what the Congressional Budget Office found, it is true that hundreds of billions will not be in the hands of workers and taxpayers in the next few months. (According to the CBO about 1/3 of the direct spending will come in 2009 and roughly 3/4 will be pent by the end of 2010.)

On the other hand President Obama repeatedly made it seems as if the bill would work quite quickly. After a terrible jobs report released in early February while the Senate and House bickered over a compromise stimulus bill, he said, “these numbers demand action. It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay and politics, while millions of Americans are being put out of work.”

The fact is to spend any more than was contemplated any faster would guarantee a boondoggle of fraud, corruption, and waste. Governments are not supposed to be able to spend money too quickly lest it vanish into the pockets of connected companies and campaign donors. There’s plenty of good reason for checks and balances that require open bidding and oversight — requirements that necessarily slow the spending of taxpayer money.

Last fall when searching for “shovel-ready” projects to highlight in New Jersey, I was directed to a school in Jersey City that was already slated for replacement (the official said the stimulus money would free up money that would go for that school to planning for other school projects — sure there are planning jobs but, c’mon!). Another official sent me to a huge roadway project also in Jersey City — a project well underway and fully-funded (this time the argument was the flood of stimulus dollars would speed the repairs along but it was hard to see how much more they could possibly do and keep the road open).

The fact is both sides are right (or wrong) depending on how you define “fast.” Democrats say the money will go into the economy quickly and create jobs. Republicans say much of the money will not be spent fast enough entering the economy a  year or more from now when (they predict) the recession will be over.

The lesson is (as it often is in politics): You can’t have it both ways. If Americans want their government to spend their money to restart the economy and they want it spent prudently, it can’t also be spent quickly. Unless by “quickly” you mean, in the next couple of years.

So let’s just put this up front: Nobody really knows what the f*ck is going on with the economy. But still, there are some “experts” that really shouldn’t even be allowed to speak or write or exist.

Remember the heady days almost precisely a decade ago of the dot com boom? Thanks to new technology and supersmart economists the world’s advanced economies had little to worry about in the way of recessions or downturns. Sure there might be a hiccup here or there but the bad old days of economic cycles were a thing of the past. Our bright new future had arrived.

There were plenty of purveyors of that snake oil including many of the most “prestigious” business publications and media outlets (The Economist being a notable exception) but none quite so ostentatious as the authors of the grandly-named tome Dow 36,000. Remember that one? Authors James K. Glassman and Kevin A. Hassett published their book in late 1999 when the Dow was just three months away from hitting it’s (then) all-time high of 11,750.

Glassman and Hassett argued that despite the very rapid run-up in stock prices stocks were in truth undervalued and therefore cheap. There cockiness was on display in the first few paragraphs. Let us reminisce:

Throughout the 1980s and 1990s, as the Dow Jones Industrial Average rose from below 800 to above 11,000, Wall Street analysts and financial journalists were warned that stocks were dangerously overvalued and that investors were caught up in an insane euphoria. They were wrong.

Stocks were undervalued in the 1980s and early 1990s, and they are undervalued now. Stock prices could double, triple, or even quadruple tomorrow and still not be too high.

Market analysts and media pundits have also persistently warned that stocks are extremely risky. About this they are wrong too. Over the long term stocks in the aggregate are actually less risky than Treasury bonds or even bank certificates of deposit. Although the experts may not be very good at predicting what the market will do, they are brilliant at scaring people — not out of malice but out of a profound misunderstanding of stock prices. Whatever their intentions, they have performed a terrible disservice to millions of investors by frightening them away from the market.

Stocks are now, we believe, in the midst of a one-time-only rise to much higher ground — to the neighborhood of 36,000 for the Dow Jones Industrial Average. After they complete this historic ascent, owning them will still be profitable but the returns will decline. You won’t be able to make as much money from them each year. We believe that in the meantime, however, astounding profits will be made.

Admittedly it is easy sport making fun of bad predictions (I insisted, privately, that Al D’Amato would beat Chuck Schumer in their 1998 Senate race) but this one is worth special notice because these guys defended their theory in 2002 even as the Dow hovered around 7,500.

They wrote:

Certainly, Dow 36,000 has been put to a severe test. The U.S. has been through a lot in three years: the impeachment of a president, a disputed election for the first time in a century, the first attack on the U.S. mainland since the War of 1812, the first recession in 10 years, corporate scandals and a zealous political response that could create unintended consequences. What’s remarkable is that, in spite of this, price/earnings ratios have remained higher than historic averages–exactly what we expected.

But what about this 36000 business? If the Dow were there today, one could say that the upward pressure from the demystification of stock ownership had subsided. Since it is not, and there is no convincing evidence that the earnings history of the past 200 years is suddenly irrelevant, stocks are still a very good buy. The best way to partake in a rising market is through buying and holding diversified stock portfolios. But some people are impatient.

Wow! That’s some hubris boys. Even better they go on to say that the only theories that had been debunked by the huge drop in stocks since their book had been released as those of their critics.

So why bring all this up now? Well, Hassett is back and he’s now spouting fantastically absurd theories about Barack Obama and his economic plans thanks to Bloomberg News.

In an on-line column Hassett wrote on Monday that like Johnson’s War on Poverty and Nixon’s War on Drugs, Obama was launching a War on Business. Hassett then spins out a “Manchurian Candidate” story about how it is as if one of America’s enemies “had spent years preparing a Manchurian Candidate to destroy the U.S. economy once elected.”

Hassett goes on to relay the now-standard conservative critique of Obama’s plans (ending tax loopholes for corporations is bad, carbon cap-and-trades are bad, any non-private health care changes are bad) and concludes, “It’s clear that President Obama wants the best for our country. That makes it all the more puzzling that he would legislate like a Manchurian Candidate.”

There are certainly valid arguments to be made challenging Obama’s proposals and plans but having a thoroughly discredited hack like Hassett make silly ones in their stead only weakens those honest conservative challenges to Obama’s ideas. And Bloomberg giving Hassett space to do so only makes this business media company look ridiculous.

Gov. Bobby Jindal (R-Louisiana)

Forget the performance critiques of Louisiana Governor Bobby Jindal’s Republican response to Barack Obama’s State-of-the-Union-in-name-only speech Tuesday night. Plenty of Democrats sucked in the same role following the far less gifted orator George W Bush (remember Tim Kaine in 2006 or Harry Reid in 2005? Lordy they were bad!). Jindal’s problem wasn’t performance, it was substance and it reaffirms our diagnosis that the Republican Party is in critical condition.

Many Republicans leaders, egged on by right-wing radio hosts like Rush and Hannity, have charted a course of total opposition to the stimulus plan. It’s a big gamble that looks a lot like they’re doubling down on a 40-year political ideology that voters appear to have rejected.

The meat of Jindal’s speech was this:

“Democratic leaders say their legislation will grow the economy. What it will do is grow the government, increase our taxes down the line, and saddle future generations with debt. Who among us would ask our children for a loan, so we could spend money we do not have, on things we do not need? That is precisely what the Democrats in Congress just did. It’s irresponsible. And it’s no way to strengthen our economy, create jobs, or build a prosperous future for our children.”

In other words government is bad. That has been the (successful) message of the Republican Party since Ronald Reagan’s 1980 campaign and it  reached it’s apex during the second Bush term. The problem is poll after poll — including two prominent ones released late Monday and covered here — make a very persuasive case that a fairly healthy majority of Americans simply don’t believe that any more. And faced with very visceral economic fear they trust the government more than they trust corporations.

Jindal’s talking-points-list of “wasteful spending” doesn’t even make sense. It’s not hard for Americans to see how replacing $300 million worth of government cars would help the auto industry and therefore the economy. Even people who’ve never ridden on a train get why $8 billion for high-speed rail is an investment that will stimulate the economy by putting people to work. And the $140 million for volcano monitoring is one of those red-meat for Republicans lines that has made no real headway with shellshocked voters.

Republicans are talking to a shrinking group of primarily rural and exurban older white men from mid-west and southern states. “High-speed rail” and “government-run” anything may be hot buttons for them but they aren’t for the majority that elected Obama. A majority made up primarily of urban and suburban women and young people from coastal and big mid-western states. The country has changed but some in the GOP don’t seem to have dealt with that fact yet.

Remember that by substantial majorities voters say they approve of the stimulus bill AND the Obama’s housing plan. Republicans are now playing with fire, essentially betting that none of this will work and they can blame Obama and Democrats for it. It’s a long-shot that runs counter to the most basic rules of politics: It’s the economy stupid. If the economy is still in the tank a 18 months from now when campaigns for the next Congressional elections will be hot and heavy Republicans will try and use their opposition to win.

The problem is you can’t beat something with nothing and the public has not heard any realistic Republican big picture alternative. Cutting taxes and government isn’t selling any more. For now they simply see the GOP as being good at one thing: Saying ‘No’.

CNBC's Rick Santelli Rants

Last week the media formed a now-normal closed loop regurgitating the “news” that Americans were “deeply split” (NY Post) on Obama and his housing plan.

The cable nets went full-tilt especially after a CNBC reporter checked his credibility at the door of the Chicago Board of Trade and went on a stream-of-consciousness rant about how Obama’s housing plan reminded him of nothing more than Cuba under Castro.

By Sunday when the nets rolled out their gabfests it was no longer a question. The debates were over how bad Americans hated the housing plan, and by extension how diminished the President was because of it. But the idea that true populism could come from the floor of the Chicago Board of Trade where CNBC’s Rick Santelli actually said with a straight face as he turned to the crowd of well-to-do traders, “a pretty good statistical cross-section of America, the silent majority.”

So anyway…. Monday brought a reminder of how the incestuous media coupled with the inside-the-beltway brigade are so often absolutely wrong about what average Americans actually think. Two big polls showing Obama’s plans broadly popular with voters.

The New York Times/CBS News Poll found that voters approved the housing plan 61% – 20%. The ABC/Washington Post Poll reports voters approve the stimulus plan 64% – 35%. What was that about the “silent majority” Rick?

The most telling numbers about what Americans think of what’s happening in Washington, however, are these: In both surveys roughly three-quarters of those polled say they believe Obama is trying to work with Republicans. Fewer than a third believe Republicans are trying to work with Obama.

Of course what other conclusion could voters draw when not a single Republican House member voted for the stimulus, some Republican Governors say they would rather not take stimulus money if it means expanding unemployment benefits, and other Republicans fresh from arguing the stimulus didn’t do enough about housing now say they don’t like Obama’s housing bill because it may help some people who shouldn’t have gotten a mortgage in the first place.

The media bigshots and the markets and the bankers and the traders and the normally Republican-leaning financial industry types may all be in a tizzy about the new Administration’s historic interventions in the economy — they may claim there’s a wave of “populist revolt” spreading across the country — but Americans who actually live outside the cultured cocoons of comfort have a different, far more visceral understanding of our economic plight and what might be required to fix it.

Unlike the denizens of drummed-up “news theater”, regular Americans know plenty of people who no longer have jobs. They know plenty of people who got no severance with their pink slip and have no prospects for work. They know the desperate look of the family breadwinner facing foreclosure. And they know that we are all in this together. Your neighbor’s plight could spread like cancer.

And so perhaps the talking heads in media and money and politics could take a breath here and realize what the people got long ago: This isn’t — cue the dramatic music and animated segment intro — “America on the Ropes.” It’s not an excuse for silly gamesmanship and wordsmithing. This is a deep economic abyss that is sucking in our fellow citizens. We need clear-headed fact-based reporting. Not fancy graphics and pseudo-populist on-air ravings.

Will the Rich Take Their Rolls?

Do we need a “millionaire’s tax” to solve New York’s budget crisis? Advocates of the tax say we do because New York doesn’t make the rich pay their fair share.

Opponents say that is not true and counter that hiking taxes on the very wealthy will only cause them to move out of state, depriving Albany of hundreds of millions, if not billions in tax revenue.

So who’s right? Get Real cuts through the crap and tells the truth:

New York State taxes are too regressive meaning the rich don’t pay their fair share.

That’s the claim and in one sense it is accurate — the wealthiest pay a smaller share of their income in total state and local taxes than do people with lower incomes. But in another sense the statement is actually pretty silly. Read on.

Advocates cite statistics from the Institute on Taxation and Economic Policy showing that the “effective tax burden” on the poorest fifth of New Yorkers is 12.6% (the highest for any group) and just 6.5% for the wealthiest 1%.

That’s interesting but these numbers represent the tax burden including ALL state and local taxes – including real estate and sales taxes. Not just income tax. Advocates also point to this:

That’s also interesting and accurate but only half the story – think about it: On one hand we learn people making 40K a year are paying the same tax rate as a millionaire while on the other we are told millionaire’s pay just half the tax rate of someone making a working class wage. Both are technically correct but neither prove that New York State’s taxes are particularly regressive.

For instance EJ McMahon of the conservative Empire Center for New York State Policy points out that:

“Exemptions, deductions and credits—which are phased out or capped for high-income taxpayers—play as large a role as the marginal tax rate in determining taxes for most families.  Middle-class New Yorkers pay lower graduated rates on the first $20,000 to $40,000 of their income, while those earning more than $150,000 pay a flat rate of 6.85% on all income. Thus, for example, a family of four earning $60,000 pays an effective rate of 2.5% (about $2,100), while a family with income of $1 million pays an effective rate of more than 6% (over $60,000).”

In other words the rich pay a higher effective income tax rate than the middle and working classes.

McMahon uses different stats to try and refute the advocates’ contentions about NY’s allegedly regressive taxes: “The highest-earning 1% paid 41% of income tax in 2007, up from 26% in 1994.  The top 1% will still be paying 35% this year, despite income and market losses.”

McMahon’s numbers demonstrate that as the rich have gotten much richer they have paid more in total taxes, which is also interesting, but it too does not directly address the issue:
Are New York State’s taxes regressive?

The answer seems to lie in another chart that advocates have included in their presentations – the same chart as the first one we showed you but with a breakdown of which taxes make up the “effective tax burden.”

Note that the lowest-earning fifth of New Yorkers do not pay income taxes at all and in fact get money from the state thanks to the nation’s most generous Earned Income Tax Credit. Note also that the income tax burden increases as the groups get wealthier. What’s interesting here is that the poorest fifth of the population pay the highest effective state and local tax rate and that’s because of sales and excise taxes. This group spends the largest share of its income on taxable goods (which makes sense since the working poor often live paycheck-to-paycheck while millionaires are able to live well and save large amounts of their earnings).

Advocates say that is precisely the point – the poor pay the biggest share of their income on taxes overall and that is regressive. But that’s because New York’s sales and property taxes are among the highest in the nation. Sales taxes are indeed considered regressive (poor pay higher percentage of their income than rich) but property taxes are less so.

So what’s the answer?

New York’s reliance on sales and real estate taxes coupled with a relatively high income tax puts more of the tax burden as a share of income on those in the lower-earning three-fifths of workers. That does make the state’s tax policies regressive but compared to taxpayers in other states not remarkably so.

More directly to the point – and why the claims made for a millionaire’s tax are more smoke than fire: If we want to make the income tax more progressive, ought we not also lower the sales tax to make it less regressive? After all, New Yorkers who are in the bottom fifth of the income ladder don’t even pay income taxes. Making the rich pay more won’t change that. On to the other major claim….

Wealthy New Yorkers will flee the state if their income taxes are hiked.

Governor Paterson has most famously used this argument to explain why he was opposed to a millionaire’s tax. But there’s strong evidence to suggest that’s unlikely to happen.

Both sides like to use New Jersey as an example and for good reason. In 2004 the Garden State hiked it’s top income tax rate from 6.35% to 9% on those making more than a half-million bucks a year. What happened? Depends on who you ask.

The Fair Share Tax Reform group cites a study done late last year by Princeton University’s Policy Research Institute for the Region. The report (with the eyes-glazing-over-as-we-read title “Trends in New Jersey Migration: Housing, Employment, and Taxation”) showed that the number of people earning more than $500,000 a year grew by 70% after the tax hike, resulting in an additional billion dollars a year in revenue for Trenton.

McMahon, on the other hand, notes:

“The Garden State has become one of the nation’s worst economic and fiscal basket cases. For tax years 2004-2006, the first three years after New Jersey raised its top rate, its population of high-income filers (those earning over $200,000 in adjusted gross income) increased by 44 percent, compared to a national rate of 59 percent. New Jersey’s growth rate in high-income taxpayers ranked 47th out of 50 states during that period; only Ohio, Connecticut (which also raised its top rate) and Michigan were lower.

The point is well-taken and begs the question: What does the experience of the boom years 2004-2008 have to do with what might happen as we slide into a very deep recession? The fact is neither side knows because there is no relevant research to look at.

But you have to ask: If New Jersey’s total tax burden (including property and sales) is the highest in the nation at 11.8% and Connecticut’s is third-highest at 11.1%, are wealthy New Yorkers who currently live in the second most-taxed state at 11.7% really going to move across the river or the border to save what would amount to them as little more than a few pennies?

It seems very unlikely. In fact the US Census Bureau asked about moving in the 2000 Census and found that 78% of those who moved said they did so for either family or housing reasons. In fact housing was the primary reason for moving among the wealthiest and best educated.

Certainly even this research misses the incredible changes in technology that allow people to work from remote locations – Jackson, Wyoming has millionaires galore who work from their ski lodges via blackberry and computer.

But based on what we know now, if Albany were to institute a higher tax on the state’s wealthy, there is no reason to believe any substantial number of them would leave.

Finally it’s worth noting that the “millionaire’s tax” has recently be redefined as a “quarter-millionaire’s tax” with the Fair Share Tax plan being promoted. The arguments being made are still the same, even if the number of people effected is much, much larger.

Now you know.

House in Foreclosure

For the better part of a year people on all sides of the political and economic theory spectrum have been saying the economic meltdown cannot be fixed until the mortgage mess is cleared up. Now Barack Obama is taking action to do just that. But is it enough?

That’s been the question asked of every action the previous and current administrations have taken trying to respond to the recession and it’s entirely appropriate this time. Obama’s plan could cost $275 billion over time and will help a maximum of around nine million homeowners — some under water (owing more on their house than it’s now worth) — others facing foreclosure.

The plan is bigger and broader than expected but nevertheless came under fire from consumer groups for falling short, and wealthy homeowners for not helping them. Seriously.

The Wall Street Journal (land of extraordinary quotes — normally on it’s opinion pages) has an article detailing why some homeowners feel like they’re being left out. That’s because they are. Here’s some of the Journal’s article:

“While real-estate professionals applauded the refinance provisions, which the White House says could help four million to five million homeowners, lots of borrowers wouldn’t be eligible. For example, the refinance provision is limited to borrowers whose mortgages are owned or securitized by Fannie Mae or Freddie Mac, the government-backed mortgage companies. That essentially shuts out wealthy borrowers who would like to refinance but can’t because they own expensive homes financed with so-called jumbo mortgages, which are too large to be owned by Fannie Mae and Freddie Mac.”

How big is too big? So-called jumbo or non-conforming loans are from $417,000 and up. Big for Boise but bupkis for Brooklyn Heights or Babylon. The Journal found a few angry house-rich folks:

“Steve Rosenberg, a 44-year-old institutional stock broker in Chicago, has been trying to refinance his $815,000 option adjustable-rate mortgage for months. But his bank is requiring him to put an additional $150,000 of equity into his home, something he is reluctant to do because his income has been cut in half over the past year. For jumbo borrowers, he said, the government’s message is, ‘You’re on your own.’”

Well, yeah. Forgive me for being a little confused here but if the entire economy is stuck in reverse and most economists believe the housing crisis is a significant reason why, then don’t we all benefit from stabilizing housing prices and clearing the bad mortgages from the system? Not that Obama’s approach will do that entirely but judging from the “expert” response it seems a reasonable start to tackle homeowners in the bottom 80% of the income ladder before helping a guy with an $815,000 mortgage.

It’s one of those “you can’t have it both ways” deals. You can criticize the government for using taxpayer money to try and stimulate the economy and staunch the mortgage bloodbath but you can’t then turn around and complain that the government is NOT using taxpayer money to help wealthy people refinance their mortgages.

Surely there’s plenty of blame to go around. Once the economy is  actually working again.

Wish You Were Here? Maybe Not.

New York’s budget hole is huge and growing as Governor Patterson reminded us all on Wednesday but if you want to see how bad things can get, go west.

As the LA Times lays out in painful detail, California’s budget woes are much worse than ours. New York faces a $14 billion gap this coming budget year while California’s deficit is $42 billion over the next 15 months.

Paterson has repeatedly warned that if Albany’s legislative leaders don’t agree to structural spending changes New York “might end up like California.” Here’s what he means:

Gov. Arnold Schwarzenegger and the legislative leaders in California’s capital, Sacramento, have agreed to cut spending on schools, colleges, and public transportation while increasing some key taxes and borrowing against future lottery earnings. That seems pretty sound, no? (Especially that borrowing bit….)

Here’s what the LA Times learned: “The deficit would be wiped out with $15 billion in cuts; $14.4 billion in new and increased taxes on sales, vehicles, gasoline and personal income; $12 billion in borrowing against future profits from the lottery; short-term loans; and various accounting maneuvers.” And you thought Albany was bad.

The deal comes less than a week after Schwarzenegger forced more than 200,000 state employees to take an unpaid day off last Friday meaning almost all state offices and services shut down. That’s expected to happen twice a month for the foreseeable future.

And while New York is debating whether to raise income taxes on those making more than $250,000 per year and to tax sugary drinks, all Californians will face a 2.5% income tax hike, sales taxes that reach nearly 10% in Los Angeles, and huge spikes in car registration and gas taxes.

Most striking to New Yorkers is the proposed $8 billion cut to education. Schools in California, like New York, are one of the biggest areas of state spending and are therefore impossible to ignore. California spent more than $35 billion on education last year while New York spent roughly $20 billion. But while California appears ready to deeply slash education spending, Paterson’s proposal to increase school aid by “only” $1.5 billion has been met with howls of protest. And remember: New York already spends about 60% more per pupil than our friends out west do.

All of this has been cobbled together without including any Federal stimulus funds. When that pile of cash comes to California (and come it will — the House Speaker is from California and the state is a huge Democratic winner for Presidents) the plans will certainly change, especially as regards any borrowing. But at the end of the day California may get $10 billion from Washington and that’s just a down payment on their problem.

Fortunately it looks like Albany will be crafting it’s budget deals after DC doles out the stimulus dollars which will help to make the choices clearer. But nothing should chasten New York’s lawmakers more than what’s happening in California.

Sacramento has spent years failing to match government spending to tax revenues (largely because California voters love to approve propositions that mandate spending and those that mandate cutting taxes, but that’s a story for another day). Albany has done the same. The bill is due.

U.S. Treasury Secretary Tim Geithner

Ummm. Haven’t we heard this before? The Treasury needs a ginormous wad of cash to bail out the financial system and it will explain just what it will do with all that money…later.

Yeah it’s deja vu in DC with Treasury Secretary Tim Geithner doing his best Hank Paulson imitation while announcing the Obama Administration’s $2.5 trillion plan to save the banks.

Come again? Two-point-five-what? Trillion? As in 1,000,000,000,000? Yes, $2.5 trillion.

The plan is to use the unspent half of the original $700 billion “Bush bailout” and then commit as much as another $2.15 trillion in taxpayer money to help sort out the good banks and good loans from the bad while closing the difference between what millions of Americans owe on their homes and what their homes are worth.

The plan as presented, tanked.

As the NY Times put it, “the initial assessment of the plan from the markets, lawmakers and economists was brutally negative, in large part because they expected more details.”

Republicans and Democrats alike were openly hostile to the idea as it was vaguely presented. Alabama Republican Richard Shelby summed the problem up best in a blunt question to Geithner: “Is there a concrete plan here?” Geithner admitted there was not — yet. “You’re right. We are going to be very careful to flesh out the details.”

Wall Street was no more kind (although you might want to pause here and ask, “Who gives a crap what Wall Street thinks? They have about as much credibility here as Chris Brown would as a counselor in a domestic violence clinic).

The central problem is that a majority of Americans were never sold on the fundamental concept that spending $700 billion in taxpayer money to “bail out” the very banks that made horrifically bad and dumb decisions was the right thing to do. Last fall the Bush team managed to take the public’s skepticism and turn it into outright anger by swinging wildly from one plan to another as it spent the first $350 billion in TARP funds.

It didn’t help when bankers used the money to pay giant bonuses (for a job well done!), refurnish their palatial offices (as a reward for excellent management!), and sock away cash for a future buying spree (because that’s what companies do!) instead of actually lending again. And of course that money seems to have done nothing to keep the economy from sliding further into the toilet. How many jobs have been lost since TARP passed? The American public has good reason to be mad and suspicious.

So what the hell is Obama doing sending his Treasury Secretary out to sell another bailout — this one costing and unfathomable $2.5 trillion — without having a solid set of details about how that rather incredible sum will be spent? It’s just plain dumb.

Obama and Geithner tried to soothe frayed nerves by saying details of the critical housing component would come quickly but that’s really not good enough. If Obama learned any lesson from the Bush team it’s that playing a very strong first card works wonders in Washington. Even if it’s a bluff (or a lie — see “Weapons of Mass Destruction”).

Instead the White House will now be playing catch up and defense on what is the single most critical piece of the economic recovery puzzle. Wildly inflated home prices are what got us into this mess and until we can all figure out how much these homes are actually worth, subtract the difference, and determine who’s going to pick up what share of the tab, the economy will not recover.

The Geithner/Obama plan to deal with this may work. Once they figure out what it is.

President Obama at his First News Conference

Barack is back, baby!

That’s what liberal bloggers are writing about the President’s first prime-time newser where he seemed to get some of his campaign mojo back. With the stimulus bill on it’s way to passing the Senate and then facing a potentially messy time in the sausage factory known as “conference committee” where the House and Senate versions must be meshed, Obama came out firing.

It began during his first road show Monday afternoon in Indiana and continued at the White House: “I’m happy to get good ideas from across the political spectrum, from Democrats and Republicans. What I won’t do is return to the failed theories of the last eight years that got us into this fix in the first place, because those theories have been tested, and they have failed. And that’s what part of the election in November was all about.”

Republicans have been pretty masterful over the last couple of weeks in helping Americans forget who won the election in November by successfully repositioning the “stimulus” bill as a “wasteful spending” bill. Aided by 24/7 cable anchors who were incapable of rebutting almost any arguments made by Republicans (or Democrats for that matter), the GOP stole the show.

So what if Obama had said this early and often:

“More than 90% of the jobs created by this plan will be in the private sector. These will not be make-work jobs, but jobs doing the work that America desperately needs done. Jobs rebuilding our crumbling roads and bridges, and repairing our dangerously deficient dams and levees so that we don’t face another Katrina. They will be jobs building the wind turbines and solar panels and fuel-efficient cars that will lower our dependence on foreign oil, and modernizing a costly health care system that will save us billions of dollars and countless lives. They’ll be jobs creating 21st century classrooms, libraries, and labs for millions of children across America. And they’ll be the jobs of firefighters, teachers, and police officers that would otherwise be eliminated if we do not provide states with some relief.”

All of that is TRUE. There are honest arguments among economists about whether the government should be helping to create these jobs or whether the amount of taxpayer money used is a good investment but the underlying facts (as we have pointed out for two solid weeks here) remain the same. Almost all the money being spent will be used to do things that require workers. And that means jobs.

For now it looks like the President took the risk of reaching out to Republicans and ended up getting his hand bitten. Maybe. But perhaps that’s exactly what he wanted. Republicans got the upper hand on Congressional Democrats more than they did on Obama. If anything he has gained power at the expense of Senate and House leaders. And Monday night we got a glimmer of how Obama’s bipartisan political game ought not be underestimated.

When Chip Reid asked Obama if he had underestimated “how hard it would be to change how Washington works?” the President tipped his hand:

“You know, when I made a series of overtures to the Republicans, going over to meet with both Republican caucuses, you know, putting three Republicans in my cabinet — something that is unprecedented — making sure that they were invited here to the White House to talk about the economic recovery plan, all those were not designed simply to get some short-term votes. They were designed to try to build up some trust over time. And I think that, as I continue to make these overtures, over time, hopefully that will be reciprocated.”

In other words, I made a real concerted effort but…

“There seems to be a set of folks who — I don’t doubt their sincerity — who just believe that we should do nothing. Now, if that’s their opening position or their closing position in negotiations, then we’re probably not going to make much progress, because I don’t think that’s economically sound and I don’t think what — that’s what the American people expect, is for us to stand by and do nothing.”

…if the folks who got us into this mess (Republicans) are so crazy as to want to let America fail, what more can I do?

Obama risked a bit of his political capital during the opening days of his Presidency but it may just be that between Rush Limbaugh and the Republican Congressional leadership, conservatives fell right into his trap. He’s the adult. They believe the earth is flat.

Of course if the economy stills sucks and people are still losing their jobs in a year, none of this will much matter. Presidents get blamed (rightly and mostly wrongly) for the economy and this time will be no different.

Then again Reagan took his lumps early with a brutal recession and then rode to a landslide reelection in 1984. Obama is a student of politics and history. He could do worse than emulating Reagan on that score.