Campaign-Promises.com

President’s foreclosure prevention plan includes tough guidelines so many will not qualify, but Obama says it will help some struggling homeowners by providing them with direct government subsidies of interest payments, among a menu of measures.

By Peter Barnes, FOX Business Network

President Obama’s foreclosure prevention plan, to be announced Wednesday in Phoenix, will help some struggling homeowners by providing them with direct government subsidies of interest payments, among a menu of measures, financial industry sources said Tuesday.

“The interest rate buydown program [is] emerging as a central component of the administration’s battle plan to stabilize the housing market,” said former HUD official Howard Glaser, of the Glaser Group in Washington D.C.

He said the government could require mortgage lenders and private mortgage investors to match any federal mortgage interest subsidies. But the matches could be less costly to them than foreclosures, sources said.

Despite the fanfare around the announcement, sources said applicants for assistance will have to meet tough government guidelines to receive it. The standards are intended to discourage financially-healthier homeowners from purposely withholding mortgage payments to try to qualify for government help.

The administration’s plan will assist the people most in need, a source told Fox Business. But some families in danger of losing their homes — such as families in which one spouse has lost a job, thus cutting the family’s income significantly — will not be able to qualify because they just wont earn enough income to pay even lower mortgage payments, sources said.

Sources were waiting for details of the plan to determine if it would provide enough incentives for lenders and private investors who hold billions in untraditional mortgages — so-called subprime, Alt-A and Option ARM loans — to participate in the program.

Sources said that even with the new plan, private mortgage investors and mortgage servicers are likely to seek Washington’s support for additional steps, such as changes in federal mortgage law and certain accounting rules, to make it more attractive for hedge funds, investment funds and other private holders to modify mortgages.

“Part of what we may have to do is to make some changes in the law that make it easier for the servicers — the people who take your check every day and are managing these portfolio of mortgages on behalf of a bunch of people who own bits and pieces of the mortgage — to make it easier for them to engage in these negotiations in an efficient way,” the president said at a town hall meeting in Florida last week. “There are a couple of wrinkles in order for us to accomplish this.”

For families that do qualify for mortgage modifications, the cornerstone of the plan will be government subsidies on interest charges on their loans, sources said. The subsidies will be paid from up to $50 billion of funds in the Troubled Asset Relief Program, or TARP.

Glaser provided this example of how the program could work-and how it could be cheaper for the government than other foreclosure prevention proposals:

For a $250,000 mortgage at 7.5% interest, the borrower is currently making a payment of $1,750 per month. If the rate is bought down to 5%, the new payment would be $1,350 per month — a savings of $400 per month. The cost to the federal government, assuming a 50% match by the servicer: $200. For $1 million, the federal government could reduce the rate for 50,000 borrowers. By comparison, the same $1 million might purchase a handful of mortgages, or guarantee a few hundred.

Other remedies in the plan could include incentives for lenders and investors to reduce the principal on a mortgage — though homeowners could be required to repay the reduction or interest rate subsidies, if that is the form of assistance — at the end of the term of the loan or when they sell their home, one source familiar with the plan said. In theory, the back-end payments would be covered by a rise in the homes value over time.

“The borrower is going to have to probably, if they get some assistance, agree to give up some equity once housing prices recover, so that both sides are giving a little bit,” the president said at the town hall meeting in Florida last week. “But you avert the foreclosure.”

Regardless of the options, the goal of the plan would be to make mortgages more affordable for qualifying homeowners. The plan would seek to cut monthly mortgage payments to no more than 31% of a familys pretax income, sources said.

“We must stem the spread of foreclosures and falling home values for all Americans and do everything we can to help responsible homeowners stay in their homes,” the president said Tuesday in Denver, where he signed the new $787 billion economic stimulus plan.

To pave the way for more mortgage modifications, the administration will also announce a new national template for restructuring them, sources said. The template will provide a formula for modifying mortgages held by Fannie Mae, Freddie Mac and other government entities, as well as for lenders and private mortgage investors that may adopt it.

Sources said that in announcing the plan, the administration could also address:

–modifying mortgages for homeowners with loans that exceed the current market value of the property (underwater loans).

–proposals in Congress to change bankruptcy laws to allow judges to modify mortgages in court.

–preventing re-defaults on mortgages even after they are restructured to cut monthly payments-to date, nearly half of all struggling homeowners who nave received mortgage modifications from their lenders have fallen back into the foreclosure process, according to government reports.

Administration spokespersons did not respond to request for comment.

Popularity: 66% [?]

Obama: “…5 Days To Look At Every Bill…”

Popularity: 76% [?]

By ANDREW TAYLOR
Associated Press

WASHINGTON – Senate Majority Leader Harry Reid said Friday that Congress is nearly finished with a massive, $790 billion economic stimulus plan giving President Barack Obama a big victory, but not everything he wanted.

The Nevada Democrat said as debate resumed that the Senate would likely vote on the package of spending and tax cuts later in the day and that both the Senate and House would do the work necessary to quickly get the emergency legislation to Obama’s desk.

Obama said the heart of the emerging plan is “to create jobs.”

“Not just any jobs, but jobs doing the work America needs done: repairing our infrastructure, modernizing our schools and hospitals, and promoting the clean, alternative energy sources that will help us finally declare independence from foreign oil,” the president said.

The 1,071 page bill, eight inches thick, bill was posted on an overburdened congressional Web site late Thursday, giving lawmakers just a few overnight hours to read it before debate resumed in both the House and Senate Friday morning. Just on Tuesday, the House voted unanimously to recommend that lawmakers and the public have at least 48 hours to read the legislation before a vote.

Rep. James Oberstar, D-Minn., chairman of the Transportation and Infrastructure panel, said that just the $64 billion in key transportation investments and other infrastructure programs under his panel’s jurisdiction would “create or sustain 1.8 million jobs. Real jobs, construction jobs ….They’ll get a day’s wage and pay taxes on it.”

“Right now, we have a once in a generation chance to act boldly, to turn adversity into opportunity, and use this crisis as a chance to transform our economy for the 21st century,” Obama had said Thursday. “That is the driving purpose of the recovery and reinvestment plan.”

The plan is the signature initiative of the fledgling Obama administration, which is betting that combining tax cuts of just a few dollars a week for most workers with an infusion of hundreds of billions of dollars of government spending over the next few years will arrest the economy’s fall.

But the inclusion of a $70 billion tax break to make sure middle- to upper-income taxpayers won’t get hit by the alternative minimum tax forced a reduction of Obama’s signature tax break for 95 percent of workers.

Republicans pointed out a bevy of questionable spending items that made the final cut in House-Senate negotiations, including money to replace computers at federal agencies, inspect canals, and issue coupons for convertor boxes to help people watch TV when the changeover to digital signals occurs this summer.

“This measure is not bipartisan. It contains much that is not stimulative,” said Sen. John McCain, R-Ariz., Obama’s rival for the White House. “And is nothing short ‚Äî nothing short ‚Äî of generational theft” since it burdens future generations with so much debt, he added.

Larry Summers, a former Clinton administration Treasury secretary and now head of Obama’s White House-based economics council, was asked Friday how far the bill will go toward reviving the economy.

“It is the biggest fiscal expansion in our country’s history,” he replied in an appearance on NBC’s “Today” show.

But Summers cautioned against raising expectations too high.

“I think this is a key part of what’s gong to be a multipart strategy to contain this decline,” he said. But Summers added that the problems “weren’t made in a week, a month, a year. It’s going to take time to fix.”

He said it should not be considered a “silver bullet,” or panacea for deeply rooted business woes.

“We don’t have a viable alternative,” he said. “We’re going to have starts and stops.”

Much of the spending won’t be delivered this year or even next, and Republicans pointed to studies by the Congressional Budget Office that say that adding so much to the national debt would cost the economy by the end of the decade.

The $790 billion plan combines $286 billion in tax cuts with $311 billion in programs funded by the appropriations committees and about $193 billion in spending for benefit programs such as unemployment assistance, $250 payments or millions of people receiving Social Security benefits, and extra money for states to help with the Medicaid health program for the poor and disabled.

Obama’s “Making Work Pay” tax cut would be scaled back from $500 for most workers to $400, with couples getting $800 instead of $1,000.

Republicans, lined up to vote against the bill, piled on the scorn. “This is not the smart approach,” said Sen. Mitch McConnell of Kentucky, the Republican leader. “The taxpayers of today and tomorrow will be left to clean up the mess.”

It was clear that the measure was the result of old-fashioned sausage-making. Pet provisions were coming to light that had not been included in the original bills that passed the House or Senate ‚Äî or that differed markedly from earlier versions. Some appeared to brush up against claims of the bill’s supporters that no pet projects known as “earmarks” were included.

One last-minute addition was a $3.2 billion tax break for General Motors Corp. that would allow the ailing auto giant to use current losses to claim refunds for taxes paid when times were good. GM got a $13.4 billion federal bailout late last year — and is expected to receive more in 2009 — and argued that without the provision, its government-financed turnaround plan could force the company to pay higher taxes.

Then there was $8 billion for high-speed rail projects, a priority for both Obama and Reid, who’s up for re-election and is a GOP target. While not explicitly named, a Los Angeles to Las Vegas rail project that Reid’s been backing for years stands to win funding as does a project in Obama’s home state of Illinois.

Popularity: 75% [?]

By Jack Cafferty
CNN

NEW YORK (CNN) — Well, that didn’t take long. Three weeks into the new administration and the Democrats are squandering their advantage and threatening to snatch defeat from the jaws of victory.

Credit House Speaker Nancy Pelosi for getting the ball rolling. Under her leadership, House Democrats excluded Republicans from having any voice in crafting the stimulus package.

Acting like children who hadn’t seen Santa Claus for eight years, House Democrats busily loaded up the bill with stuff they had been unable to get for eight years. It was payback time.

Contraception, funding for the arts, restoration of the national mall, stop-smoking programs. All while Americans lose their homes, their jobs, and their savings. It was both childish and disgraceful.

Apparently tone deaf to the disgust and disappointment of Americans with the bailout package for Wall Street and the banks last year, as well as the voters’ strongly stated desire for change as represented by the election of Barack Obama, House Democrats set the table for failure — again.

Not a single Republican in the House voted for the bill, despite efforts by our new president to reach out to the other side. Nancy Pelosi strikes again.

When asked if the lack of Republican support was at least partly her fault, she gave some snotty answer about not being partisan but working for the American people. Right.

My guess is President Obama is busy these days sticking pins in his Nancy Pelosi doll. To his credit, Obama argued against a lot of the pork while stressing that time is our enemy. Pelosi could care less.

As the legislation headed for the Senate amid cries for more stimulus and less pork, the Republicans pounced. Sensing yet another Democratic miscalculation, the Republicans seized the advantage in the debate.

They want more tax cuts and more real stimulus — stuff that will create jobs now. Not some pie in the sky proposal that may pay dividends years down the road. And they’re right.

The real game starts if and when the Senate passes a bill devoid of a bunch of the garbage the House Democrats stuffed into it. Then it goes to a conference committee where the drama will be whether, in a grand twist of irony, President Obama and the Republicans wind up aligned against members of the Democratic Party in an effort to get something realistic on the table before the economy simply slides the rest of the way into a deep crevasse.

Meanwhile, angry voters are jamming Capitol Hill phone lines screaming about the politics as usual that is so far the hallmark of the new administration. Welcome to Washington, Mr. Obama.

When it comes to the Democrats under Nancy Pelosi, what was it Pogo used to say? “We have met the enemy and it is us.”

The opinions expressed in this commentary are solely those of Jack Cafferty.

Popularity: 79% [?]

By: Jonathan Martin and Manu Raju
February 9, 2009 04:23 AM EST

In the gauzy days of bipartisan good feeling before his Inauguration, there was talk of President Barack Obama linking arms with Republicans to pass a massive stimulus bill, with a big bipartisan Senate majority as proof the parties could come together in a time of national distress.

So much for that.

Now Obama and the Democrats are poised to push through an $827 billion package Tuesday with as few as three Republican votes in the Senate, after notching zero on the House side.

The risks for Obama are considerable. He and the Democrats will have no one else to blame if the package fails to boost the economy. Obama himself has said his first term can be judged on whether it succeeds, whether it creates or saves the 3 million to 4 million jobs he promises.

And if the economy fails to show marked signs of improvement — a possibility indeed — Republicans will have a megabillion-dollar “I told you so” in their pockets, just in time for the 2010 midterm elections and Obama’s own reelection bid in 2012.

Sen. John Cornyn of Texas, chairman of the National Republican Senatorial Committee, said the fallout from a Democrat-only bill will be “squarely in the president and the Democratic leadership’s lap.”

If Obama signs a stimulus bill that has been approved on a party-line vote, “which I have no confidence will work, then I think this is very serious blow early on to his presidency,” Cornyn said.

Sen. Carl Levin (D-Mich.) acknowledged the lack of bipartisan support “weakens the bill” and said voters should try to withhold judgment until a final product emerges from conference. But he warned that the GOP would suffer from withholding support.

Yet Republicans are gambling themselves — and perhaps with even higher stakes.

Still seeking a way forward from their Election Day thumping, they risk appearing out of touch as the unemployment rate jumps to 7.6 percent and a popular new president is appearing to seek their support to address the crisis. By turning their backs on him and opposing action at a time when millions of Americans are in need, they may invite a “party of no” bull’s-eye on their backs.

Polls show the public is giving Obama good grades and a 65 percent approval rating for trying to do something to stem the recession and for reaching across the aisle. And there’s the chance it just might work.

“I think they are stunned by their defeat and their minority status, and, sadly, some of them are not willing to cooperate,” said Senate Majority Whip Richard J. Durbin (D-Ill.). Sen. Charles Schumer (D-N.Y.) said that the Republicans are “helping dig their own grave.”

Both sides spent Sunday previewing these battle lines. Obama’s chief economic adviser Larry Summers blasted the Republican contention that the Democratic stimulus bill was just a return to big-government days.

“Those who presided over the last eight years — the eight years that brought us to the point where we inherited trillions of dollars of deficit an economy that’s collapsing more rapidly than at any time in the last 50 years — don’t seem to be in a strong position to lecture about the lessons of history,” Summers said on ABC News.

But Obama’s presidential rival, Sen. John McCain (R-Ariz.), said on CBS’s “Face the Nation” that the bill itself amounts to a repudiation of Obama’s campaign call for a new day in Washington, because it was constructed with little or no Republican input.

“I thought we were going to have change,” he said in a shot at Obama’s campaign slogan, “and that change meant we work together. This is a setback. This is a setback to all Americans because you promised Americans we’d work in a more bipartisan fashion, and that certainly is not the case in this bill.”.

“I know we’re in trouble. I know America needs a stimulus, we need tax cuts, we need to spend money on infrastructure and other programs that will put people to work. But this is not it,” McCain said.

As of Sunday, there was no sign of a groundswell of Republican support beyond what Obama seems to have in hand — Olympia Snowe and Susan Collins of Maine and Arlen Specter of Pennsylvania.

That’s enough to squeak over the goal line with 60 votes — but far from the 80 votes once floated by some Democratic strategists.

“That was never realistic,” said White House press secretary Robert Gibbs in an interview about the prospect of assembling as many as 80 votes for the stimulus package. “It was never something we talked about.”

Now, Gibbs said, “The number that matters is the number of jobs you create.”

Obama had spent weeks courting congressional Republicans — over lunch, over cocktails, at his place and theirs — but mustered no GOP votes from the House. His efforts to woo Senate Republicans also met stiff resistance.

So he changed course dramatically Thursday — when the president gave a stemwinder of a political speech to House Democrats at their retreat, all but mocking George W. Bush’s economic policy that left him with a doubled national debt “wrapped in a bow” when he walked into the Oval Office.

He also made clear that he believed his own economic philosophy, and the need for a big stimulus plan, were on the ballot with him in November — and reminded Republicans that he emerged victorious.
Still, Obama will be judged on this bill as much, if not more than, the lesser-known members of the legislative branch.

His handling of the stimulus represents the first test of his ability to keep the Democratic-controlled Congress in line, and to bring Republicans across the aisle.

Unlike George W. Bush, who often tried to force Congress to bend to his will, or Bill Clinton, who did the same on health care, Obama has shown deference to congressional leaders — laying out a vision for his stimulus but not writing the legislative details.

Some Democrats suggested that Obama erred by giving lawmakers too much leeway, resulting in extraneous provisions in the bill that gave the GOP fresh ammunition to argue that the bill lacks focus and that what was at one point a $900-billion-plus price tag was unwarranted.

“My advice would be next time the administration should write the bill, and not leave it to all the disparate odds and ends of the Congress,” said Sen. Dianne Feinstein (D-Calif.). “It’s kind of an institutional problem because everybody has worked for years and has certain things that they really want to get in a bill.”

Gibbs tried to remain philosophical, insisting the stimulus fight carried no “downside or long-term effect” in their relationship with Republicans.

‚ÄúI mean, look, this is a place … where old habits die hard, and it‚Äôs going to take a little while to trust each other and work together,‚Äù he said.

Popularity: 49% [?]

By Donald F. Kettl
Government Executive
February 1, 2009

The dangers of building a new social contract between government and citizens by making it up as we go along.

In a couple of weeks last September, the Federal Reserve and Treasury Department made more lightning- fast decisions, involving more government money, than at any time in the nation’s history. This was much bigger than a mega-rescue of the nation’s financial system. It was a big step toward redefining the social contract about what government does for all of us – and how it does it. The Fed and Treasury jumped in with the hope that the bailout would be brutally tough but relatively short and antiseptic. Sop up the toxic mortgages, free borrowing that had become frozen, and the Bush administration hoped the economy would right itself. But this plan (think of it as Phase I) didn’t work. As President Bush later confessed, “This is a difficult time for a free-market person.”

That led the administration in its waning days to Phase II: a shift from a hope in a self-correcting market to a conclusion that government not only had to fuel the economy but also to grab its wheel. Then President Obama intensified the shift with his own dramatic plan for the government to devote hundreds of billions of dollars to an economic stimulus program. It’s now clear that we’ve committed ourselves to a process of building a new social contract that will be brutal but also huge and wide. We’re escalating our commitments without a plan about where to go or how to get out.

Phase II is about much more than pumping out lots of cash. We also want to do big things with it. We want to save the banks and help individual mortgage holders. We want to bandage state budgets and rebuild local infrastructure. We want to help the auto companies, save employees’ jobs, and build a new generation of fuel-efficient cars.

That involves more than an all-lobbyists-on-deck call. Everyone realizes this is a historic opportunity to use government’s cash to promote big economic and social goals. But milliseconds after that cash started to flow, demands surfaced for tougher rules to prevent the crisis from happening again. And along with the funding came the irresistible urge to use the money to pursue a wide array of economic and social goals – often laudable, but frequently conflicting.

The New Social Contract

Lots of crosscutting requirements have become attached to federal cash over the years. No one who takes a nickel of Uncle Sam’s money can discriminate on the basis of race, religion, or other factors. Planners using federal funds for projects must first assess the environmental impact of new construction. Government-funded facilities must be handicap-accessible. As the bailout rolled out, giant investment banking firms meekly became banking holding companies, with tighter government regulation, as the price of a cash infusion.

On the one hand, no one actually likes all the rules. Government souvenir shops still sell acrylic-encased bits of genuine government red tape, once used to bind Civil War-era veterans’ files. (Cutting the red tape was the only way to get into the files to determine the benefits for which the vets were eligible.) But on the other hand, when public money starts to flow, we can’t resist the temptation to use red tape to direct what the money does. As we moved from Phase I to Phase II of the financial bailout, we shifted from trusting the market to insisting on government’s firm hand on the wheel. Now that government is in the game, it’s in deep. We’re heading for a public role in private life that’s unlike anything we’ve ever seen before, and many features are likely to be permanent.

We’ve long been sliding into a more expansive government role, of course. From tainted tomatoes to melamine-laced dog food, Americans expect their purchases to be safe. If storms wipe out their towns, they expect government help to rebuild them bigger and better than ever – even if that only gives Mother Nature a fatter target the next time. We want government to protect our airplanes and infrastructure from terrorists.

The financial meltdown has accelerated our expectations that government will keep us safe. And it has brought public officials directly into the big decisions about who wins and loses in the markets. We’ve gone from debates over privatizing the public sector to big steps toward governmentalizing the private sector. We’re writing this new social contract with three guides: more public money in the private economy, more rules to shape how the private sector behaves, and more citizen expectations that govern-ment will manage the risks we face. The problem? We’re making it up as we go along, and we’re not sure where we’re going.

No Exit Strategy

Barack Obama ran as the candidate of “change we can believe in.” Because of the financial crisis, change is inevitable and epic. We’ve drifted into a new brand of government-directed capitalism, in which “neither Adam Smith nor John Maynard Keynes, neither Joseph Schumpeter nor today’s econometricians, give one a clue about how to track, temper or tame it,” University of Pennsylvania political scientist John DiIulio concludes. In just a few months, we’ve gone from debating toxic mortgages to pushing the government into direct decisions about capital flows and subsidies to big financial institutions in which the government now has a substantial ownership stake.

So far, corporations have resisted pressures to unload their private jets and divulge their market decisions. When pressed about what JPMorgan Chase did with federal bailout money, a spokesman said, “We have not disclosed that to the public. We’re declining to.” That position, echoed by 20 other banks that received more than $1 billion each from the government, leaves federal officials with two options: Shovel out hundreds of billions of dollars and hope for the best, or view the bailout money as an investment – expecting certain results and insisting on openness about how the money is being used. Both the Obama administration and Congress have made clear they reject the first position and will insist on the second.

But even if that’s the case, how will they make the system of accountability work? We know we want to get out quickly, but we haven’t charted the path. In the debate over a potential bailout for automakers, one federal official asked a congressional staffer about how the government’s proposed oversight would function. “We’re too busy to worry about that now,” was the reply.

Three Puzzles

The war in Iraq shows the dangers of jumping in with the hope of a quick, surgical win but without a plan to get out. The broader and deeper the financial rescue gets, the longer the federal government’s role is likely to last and the more money will be at risk. If we care about making the rescue work – if we care about making our entire system of government work – we can’t be too busy to worry about these issues. Three big puzzles loom.

First, we’re inventing new tools on the fly and we haven’t figured out how to use them. For the last half of the last century, the government expanded most of its programs through indirect proxy tools: contracts, grants, regulations, loan programs and tax incentives. We created programs to provide nursing home care and clean the environment, to fund health care for seniors and subsidize home mortgages, to support local schools and create sophisticated military technology, to go to the moon and make airlines safer.

Now government has directly grabbed the wheel. We’re telling banks what kind of investments they can make. We’re imposing new expectations on the auto industry in exchange for financial transfusions. We’re layering government by bailout on top of government by proxy, and we’re not doing either well.

It’s tempting to label this “socialism,” because Karl Marx’s shadow provides at least a point of reference. But in fact it’s very different, with stronger reliance on market forces than Marx would have approved but a stronger government role than Adam Smith or Alexander Hamilton could have imagined.

Moreover, we’re building the new direct tool on top of old ones that simply haven’t worked well. The Government Accountability Office’s “high-risk list” catalogs a host of current programs – most of them of the government-by-proxy variety – that are especially prone to waste and mismanagement. From the conduct of the 2010 census to contract management at agencies ranging from the Energy and Defense departments to NASA and the Federal Aviation Administration, we’ve seen searing examples of government’s failure to update its management strategies to match its ambitious goals.

Building highly ambitious new tools on top of old ones that don’t work well, and doing so without thinking about how the new ones will work, is a prescription for a multibillion- (maybe multitrillion-)dollar crisis. As we seek to reshape the way markets work, we’re focusing on the nails without thinking about the hammers we’ll need to drive them.

Second, our plans frame big and largely unexplored trade-offs. In Phase I of the financial bailout, economists confidently predicted we’d get almost all our money back. As Phase II geared up, however, it became clear that, at best, it will take us a long time to unwind the infusion of public cash, and we haven’t thought much about how to run the process in the meantime.

Just how long will Uncle Sam hold a stake in private companies? How will government exercise its ownership role? Will federal representatives sit at board meetings? Will private plans need to pass muster with a government czar? How much public – including media – scrutiny will private companies have to accept as the price for government cash?

And that’s just the beginning. How will the government balance its fiduciary interest – maximizing return to the taxpayers – with its wide-ranging social and economic goals, from protecting collective bargaining to preserving industries that market competition has punished? How will we address further market failures? How will we set priorities for which businesses to save, and who will make these calls? Fannie Mae and Freddie Mac, for example, are required to pay a 10 percent divi- dend on the money the Treasury invested to prop them up. Does the goal of maximizing the return to taxpayers increase the risk the companies will fail?

We’re not very good at asking, let alone answering, such questions. We’re likely to carom along from issue to issue, without confronting the big puzzles until the implications begin to accumulate. We’ll probably slide sideways into a whole new understanding of whom government will help and how it will act. That frames the third puzzle: whether our public institutions have the capacity to act effectively in a world where all important problems are global and where international markets swiftly punish fumbles. In Phase I, the Fed and the Treasury made the key decisions with relatively little oversight. Will Congress continue to allow a White House-Treasury-Fed triumvirate to strip the legislative branch of any real role in some of the most important decisions the country has ever faced? After Congress’ struggle to move on the first stage of the rescue, the bailout of the car companies, and an economic stimulus package, can it deliberate but still govern?

Then there’s the issue of who runs the daily operations. Should we concentrate administrative power in a czar? The history of federal czars – for drugs, homeland security and faith-based programs – is not a happy one. Should we move instead to a multimember board to avoid centering too much power on a single official? Should we put the power in the Treasury, where political pressures could be greater, or in a Fed-like independent agency, where political responsiveness might be less?

The Next Government

The answers to these questions stretch far beyond our experience, but two things are certain. First, since we’re going to be in this for a long time, we need to sort out the governance issues upfront before we drift into game-changing economic decisions without political accountability. Second, if we’re uncertain about the right answers, we should put a big marker on transparency. We’re reinventing accountability on the fly, so the more we know about what’s going on, the better we’ll be able to figure out what institutional and procedural reforms we need.

If history is a guide, once we jump in, we’re unlikely to back out when the economy recovers. In 1979’s Chrysler bailout and the savings and loan rescue of the early 1990s, the government got in and out relatively quickly. But the responses to the really big crises – such as the economic recovery programs of the New Deal, the World War II mobilization, the strategies of the Cold War, and the creation of a homeland security apparatus after Sept. 11 – teach us once we advance government’s power, we tend not to roll it back. So we’re not just figuring out how to get through the next four months or the next four years. In all likelihood, we’re also permanently redefining the social contract between citizens and their government.

Trying to run a 21st century government with clumsy 20th century tactics is a prescription for disaster. But that doesn’t have to happen. We can begin by recognizing that big plans are worthless unless there’s an effective strategy to carry them out. We can follow by understanding that in such a fluid environment, we need to create a foundation of trust and accountability for what we’re doing. Follow the money and we’ll have some sense of where we’re taking ourselves.

The story is hopeful if we’re smart. At each of the big turning points throughout American history, we’ve found a way to step up to the challenges we face. What we now need is the next government of the United States, one that is nimble enough to tackle the challenges we’re facing, smart enough to steer well through the new crises and clever enough to stay half a step ahead of the strategies it is creating.

Donald F. Kettl is Robert A. Fox Leadership Professor at the University of Pennsylvania and a fellow at the National Academy of Public Administration. He is author of The Next Government of the United States: Why Our Institutions Fail Us and How to Fix Them (W.W. Norton, 2009).

Popularity: 47% [?]