Barack Obama and Joe Biden: The Change We Need |

Fact Check on ALP Jobs Ad

April 29, 2008

SCRIPT: Our economy is in trouble, rising prices, unemployment, foreclosures. So what's Barack Obama's plan? The Associated Press reported that Obama's proposals to clean up financial markets had no specifics. And the Washington Post wrote what Obama would actually do remains a mystery in too many areas. Call Barack Obama and tell him to give Hoosiers a real plan to fix our economy. Paid for by the American Leadership Project which is responsible its content not authorized by any candidate or candidate's committee.

OBAMA'S STIMULUS PACKAGE RECEIVED MORE PRAISE OVER CLINTON'S

New York Times: Clinton's Stimulus Plan "Has Generally Received Lower Marks From Economists Than Mr. Obama's Plan." The New York Times reported, "Mrs. Clinton's approach involves programs narrowly focused to deal with specific problems, a strategy that economists say has pluses and minuses. Her proposal for short-term economic stimulus, centered more on home-heating and mortgage subsidies than a broad tax rebate, has generally received lower marks from economists than Mr. Obama's plan, which emphasizes immediate tax rebates to most workers. The Clinton plan 'has moving parts' and is 'more complicated,' said Robert D. Reischauer, president of the Urban Institute and former director of the Congressional Budget Office. 'It's not as clear the stimulus would get into the system rapidly.'" [New York Times, 1/21/08]

The Economist: Obama's Stimulus Plan Is "Reasonably Sensible," While Clinton and the Republicans' "Look More Like a Fiscal Christmas Tree." The Economist reported, "So far, the only politicians to weigh in with detailed plans are people who cannot enact them this year: presidential candidates. Some are reasonably sensible. Barack Obama, for instance, wants everyone to get a $250 tax cut, which would double if economic indicators continue to worsen. Others look more like a fiscal Christmas tree. Hillary Clinton wants a $70 billion package: $30 billion in housing assistance, $25 billion in home-energy subsidies, $10 billion on expanding payments to the unemployed and $5 billion for environmental projects. The Republican presidential candidates want to make Mr. Bush's tax cuts permanent—an odd priority just now since they don't expire until 2010." [Economist, 1/17/08]

Brad DeLong: Clinton's Plan Is "Less Effective... This Is Not A Bill That Can Be Passed Quickly—The Housing Provisions, At Least, Are One Of Those Things Where The Devil Is In The Details... And Clean Passage And Implementation Is Almost Impossible." Brad DeLong: "Obama's plan looks pretty good...The plan is clean: there is no place for lobbyists to hang ornaments on it--which means that quick passage is possible. The first $45 billion of checks could be cut and sent out with this April's tax refunds. ... John Edwards's and Hillary Rodham Clinton's plans look, to me, likely to be less effective. ... These are all worthy causes--things that the government should be spending more money on. But this is not a bill that can be passed quickly--the housing provisions, at least, are one of those things where the devil is in the details of the drafting and where quick, clean passage and implementation is almost impossible. Funds to train and put to work people making public buildings more energy efficient--well, those aren't timely. The proposal is not Obama's: we are going to stimulate demand by cutting a lot of identical checks via a refundable tax credit--a thing that the government can do well and quickly. And this, I think, matters a lot. ... The best way to keep a stimulus bill from becoming a lobbyist-pleasing ineffective and destructive Christmas tree in which a lot of the money goes to people who won't spend it and a lot more to people who shouldn't get it is to keep the legislative vehicle simple and clean." [Economist Brad DeLong blog, 1/15/08]

Reich: "Obama's Stimulus Package Seems To Me To Be The Most Reasonable." Robert Reich wrote, "As I've noted several times over the past year, a fiscal stimulus is necessary if the economy is to avoid recession. We may be in recession already. We can't rely soly on monetary policy. A bold fiscal stimulus is necessary, and must be done quickly in order to prevent millions of people from losing their jobs -- and catapulting us into a deeper recession. ... The easiest way to do this is through a refundable tax credit, effective as soon as possible. I've looked at what the candidates are offering. Obama's stimulus package seems to me to be the most reasonable. It would give a direct, immediate boost to the economy. In my view, its tax cuts for workers and extra social security payments for seniors offer the fastest and most efficient way to get more purchasing power into the economy." [Robert Reich, 1/13/08]

Ruth Marcus: Obama's Economic Stimulus Plan Is At The Head Of The Class And More Likely Than Clinton's To Jump-Start The Economy. Ruth Marcus of the Washington Post wrote that Obama's economic stimulus package "is at the head of the class with an intelligently designed, $120 billion stimulus plan. He would speed a $250 tax credit to most workers, followed by another $250, triggered automatically, if the economy continues on its sour path. Obama would direct a similar rebate to low- and middle-income seniors, who are also apt to spend and could get checks quickly...Clinton said she would immediately implement a $40 billion tax rebate plan she had put in reserve in her first draft. Fine, but overall, the Obama plan devotes a far greater percentage to spending that is more likely to jump-start the economy." [Washington Post, 1/23/08]

OBAMA'S MORTGAGE PLAN RECEIVED PRAISE OVER CLINTON'S

New York Times Editorial: "Obama Has Endorsed The Best Idea Currently On The Table To Prevent Foreclosure." The New York Times wrote in an editorial, "Mr. Obama has endorsed the best idea currently on the table to prevent foreclosure: amending the law so that troubled borrowers can have their mortgages modified in bankruptcy court. That would give lenders a big incentive to work with borrowers — reducing interest or lowering principal balances — before they opted for bankruptcy protection. Mrs. Clinton has not endorsed bankruptcy reform. She has called for $30 billion in federal funds to bolster state and local foreclosure-prevention efforts and has proposed a 90-day moratorium on foreclosures and a rate freeze on subprime adjustable mortgages. Those measures also could help, but as the crisis has developed, the problem has become less one of resetting interest rates and more one of borrowers owing more than their homes are worth. Bankruptcy reform is a better way to deal with that problem." [New York Times, 3/27/08]

New York Sun: Some Critics Say That Clinton's Plan "Could Actually Make Market Conditions Worse." Clinton's "plan to rescue homeowners with a $30 billion federal aid package on top of a 90-day ban on foreclosures and a five-year freeze on interest rates for subprime mortgages could actually make market conditions worse, critics say. Private companies may be less likely to lend if they know the government can come in and override the deal, some conservative scholars warn, or they may add costly premiums to account for the uncertainty." [NY Sun, 3/25/08]

Fortune Writer Jon Birger: Clinton's Mortgage Plan Freeze Is "The Dumbest Solution To The Current Mortgage Mess I've Hear From A Top Presidential Contender" And "Would Be Disastrous." "Hillary Clinton is no dummy. Even her detractors know that. And yet in last night's Democratic presidential debate in Nevada, Clinton floated what is perhaps the dumbest solution to the current mortgage mess I've heard from a top presidential contender. 'I have a plan - a moratorium on foreclosures for 90 days [and] freezing interest rates for five years, which I think we should do immediately,' Clinton announced at what was the last Democratic debate before the Nevada Caucus on Jan. 19. A 90-day moratorium on foreclosures would throw a lifeline to some deserving homeowners, though I suspect it would only delay the inevitable for most. That's not my beef. Where Clinton goes awry is her proposal to freeze mortgage rates for five years, which is essentially a much broader version of a deal President Bush recently hammered out with lenders to assist some subprime borrowers. If Clinton's only goal were to bail out homeowners facing steep rate resets on adjustable mortgages, her plan would work just fine. For everyone else though, such a freeze would be disastrous. ... Then there's the long-term impact such a bailout would have on behavior. While Clinton's plan would no doubt save some legitimate victims who were duped into taking out bad loans, she'd also be saving the flippers and speculators who knew the risks of low teaser rate mortgages but figured (wrongly) that they could always sell their house for a profit if the reset mortgage rate proved unaffordable. Bailing out these folks now would only encourage them to take even bigger risks down the line." [Jon Birger, Fortune, 1/16/08]

Thaler and Woodward: Clinton's Foreclosure Proposal Looks Too Good To Be True: "Promising The American People That You Can Fix Things By Just Lowering Their Interest Rates Is Dishonest, A Fairy Tale That Wont' Come True." "Senator Clinton's foreclosure proposal might appeal to homeowners with adjustable rate mortgages scheduled for a rate increase. But, as with most offers that look too good to be true, this one comes with many problems. The first is its enormous scope. The plan is essentially to repudiate, revoke, or compel the revision of millions of contracts. There are approximately eleven million mortgages in America with adjustable rates, with a total value of more than $2 trillion dollars--a lot of money, even by Washington standards. Even restricting the plan to the 3.4 million subprime ARM loans (roughly $700 billion) would require an intervention of massive scale. An even more serious problem with Hillary's proposal is the nature of the solution it proposes. When someone takes out a loan with a low, so-called 'teaser rate' that is scheduled to increase in a couple years, the investors who put up the money for that loan are counting on at least some of the borrowers to hold on to their mortgage long enough to start paying the higher rates. Without the promise of this increase, the initial rate would have had to be much higher. As economists like to say, there is no such thing as a free lunch...Senator Clinton's policy amounts to a command-and-control approach to economic policy in which the government announces prices and tells suppliers what to produce. Undertaking such an intervention can only raise interest rates on mortgages (and maybe other interest rates as well) as markets attempt to incorporate risk premiums to cope with possible future interventions. Promising the American people that you can fix things by just lowering their interest rates is dishonest, a fairy tale that won't come true." [Richard Thaler/Susan Woodward, TNR, 2/4/08]

MAYOR MICHAEL BLOOMBERG PRAISED OBAMA'S INFRASTRUCTURE PLAN

Bloomberg Said Obama's "Doing The Right Thing" On Infrastructure. The AP reported, "In his answer, he praised Democrat Barack Obama for the plan the Illinois senator outlined on Wednesday that would create a National Infrastructure Reinvestment Bank to rebuild highways, bridges, airports and other public projects. Obama projects it could generate nearly 2 million jobs. Last month, Bloomberg and Govs. Arnold Schwarzenegger of California and Ed Rendell of Pennsylvania announced a coalition that would urge more investment in infrastructure. 'I don't know whether Senator Obama looked to see what I've been advocating, or not -- you'll have to ask him -- but he's doing the right thing,' Bloomberg said." [AP, 2/14/08]

RENOWNED ECONOMISTS HAVE PRAISED OBAMA'S ECONOMIC PLANS

Nobel Prize Winner Joseph Stiglitz: "President Obama Will Do A Better Job On The Economy" Than Clinton Or McCain. 2001 Nobel Prize winner for Economics, Joseph Stiglitz who worked under the Clinton Administration was asked who he thought would be better for the economy, President Clinton, President Obama, or President McCain. He responded, "I actually think that President Obama will do a better job on the economy. I think one of the problems is that the world changes. And you have to change your economic framework, your economic philosophy. And the Clinton administration...is too tied to a set of policies that were appropriate in 1992." [CNBC, 4/25/08]

Nobel Prize Winner Edmund Phelps: "It Would Be A Good Idea To Bet On President Obama" To Be Best On The Economy. The 2006 Nobel Prize winner for Economics, Edmund Phelps, was asked who he thought would be better on the economy, President Obama, President Clinton, or President McCain. He responded "I think that it's a good time to get a new set of players with the hope of some new ideas. And so I think from that point of view, it would be a good idea to bet on President Obama. He would be the new voice, and he would probably be receptive to other new voices." [CNBC, 4/25/08]

Former Reserve Chair Volcker: Obama is Offering a "Credible Approach" on the Economy. Obama, 46, is offering a "credible approach,'' former Federal Reserve Chairman Paul Volcker, an Obama supporter who attended the speech, said in an interview. "You can't solve this problem overnight, but you've got to have a thoughtful review of it and accept the logic that regulatory authority has to be extended and strengthened.'' [Bloomberg, 3/27/08]

Financial Times: "Democrats Must Choose Obama." Under the headline "Democrats must choose Obama," the Financial Times wrote, "The Democrats should move quickly to affirm Mr Obama's nomination. That is not just because his lead in elected delegates is already unassailable and the contest should be brought to a swift conclusion. It is also because he is, in fact, the better candidate. The contenders' differences on policy look small and in reality are even smaller. Their disagreement on healthcare mandates, for instance, frequently emphasised by Mrs Clinton, is of little practical significance. A mandate to obtain insurance, as proposed by Mrs Clinton, does not achieve universal coverage unless enforced with punitive sanctions, which she does not advocate." [Financial Times, 4/20/08]