Will The Unemployment Disaster Be Obama's Katrina?

There's a Category 5 storm about to make landfall, and the president and the officials in charge of preparing for the approaching disaster don't seem to be particularly worried. Sound familiar?
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There's a Category 5 storm about to make landfall, and the president and the officials in charge of preparing for the approaching disaster don't seem to be particularly worried. Sound familiar?

Just as Katrina exposed critical weaknesses in the priorities and competence of the Bush administration, the unfolding unemployment disaster is threatening to do the same for the Obama White House.

The members of the Obama administration may not be attending a birthday party at John McCain's ranch in Sedona or shopping for expensive Ferragamo shoes in New York as a great American city is destroyed, but their decidedly lackadaisical response to what job losses are doing to multiple great American cities raises the question: will unemployment be Barack Obama's Katrina?

His economic team's resistance to a second round of stimulus, "lukewarm" reaction to Congressional jobs legislation, and prioritization of deficit reduction over job creation certainly has the feel of a taking-in-the-damage-from-2,500-feet flyover moment.

"There is no discussion of a package like a second stimulus," said deputy White House press secretary Jennifer Psaki. "But we are working closely with Congress and consulting with outside experts to determine the right policies and next steps." No word on whether those outside experts include the 1 in 6 workers currently unemployed or underemployed.

Of course, the real problem isn't the outside experts; the administration's wrongheaded approach is a classic inside job. Sen. Sherrod Brown summed it up on CNN, telling John King that when it comes to putting the focus on Main Street, the president's "advisors are mixed."

Which makes one wonder: what level of unemployment would it take to unmix them? Even 10.2 percent, the highest level in 26 years, after 22 straight months of job losses, doesn't seem to have quickened the pulse of Larry Summers and Tim Geithner.

And it's not like the levees haven't begun to crack, with the real unemployment rate -- factoring in discouraged and partially employed workers -- at 17.5 percent, the unemployment rate for workers aged 16 to 24 at 19 percent, and the unemployment rate for young African-Americans at 30 percent. What's more, the average length of unemployment is at a record high, while the ratio of job seekers to open positions is now 6 to 1.

A new ABC/Washington Post poll reported that 30 percent of Americans say someone in their home has lost a job. I'm guessing that Summers and Geithner are comfortably in the other 70 percent. But even if it hasn't hit home for them, it should be clear that unemployment is going to be the singular issue of 2010.

Congressional Democrats have certainly gotten the message -- and have grown tired of waiting for the White House to take the lead. According to The Hill, House Democratic leaders, including Speaker Pelosi, are "worried they've appeared unresponsive to rising unemployment because they were absorbed by health care." The article also says that Harry Reid has told colleagues he wants a jobs bill soon.

As John Larson, the fourth-ranking House Democrat puts it: "It's jobs, jobs, jobs, jobs. Members of this caucus feel... that a jobless recovery is just simply unacceptable to us."

The problem for the White House and for the Democratic Party -- and, most importantly, for the country -- is that the administration's response on jobs is being led by Summers, who actually opposed the extension of unemployment benefits Obama just signed. At this point you have to wonder what Obama's attachment to Summers and Geithner is. We know if you become a target of Glenn Beck and cause five seconds of embarrassment to the administration you need to start updating your resume (ask Van Jones), but if you slowly bring down the administration, and the party, and the country, that's apparently fine.

Back in February, when the $787 billion economic stimulus bill was signed, Summers and company promised that it would keep the unemployment rate from going any higher than 8.5 percent. With another 3.4 million jobs lost since then -- and the official unemployment rate at 10.2 and rising -- what does Summers say now?

Really, Larry? What would getting it wrong look like?

The tone-deafness of that statement rivals the clueless response of a certain clothes-conscious former International Arabian Horse Association commissioner turned FEMA head.

I can hear it now: Heck of a job, Larry! Heck of a job, Timmy!

But though the alarm bells don't seem to be ringing in the White House, last week showed that there has clearly been a major shift in the tectonic plates on Capitol Hill.

For starters, there is increasing agreement that Obama's economic team is not up to the job of dealing with the unemployment crisis. According to Rep. Peter DeFazio, there is a "growing consensus" in the Congressional Progressive Caucus that Geithner should resign -- and that Summers needs to go, too. "We need a new economic team," DeFazio said on MSNBC. "We may have to sacrifice just two more jobs to get millions back for Americans."

And the next day, DeFazio told HuffPost's Sam Stein: "It is pretty embarrassing for a Democratic administration and a Democratic Congress to be identified with total attention to Wall Street and nothing for Main Street and jobs."

This comes just a few weeks after Senator Maria Cantwell told MSNBC's Dylan Ratigan that she was "not sure" why Geithner still has a job.

Even more dramatic evidence of the shift came in the House, where members of the House Finance Committee passed a measure to audit the Federal Reserve -- for the first time ever. The bill, sponsored by the bipartisan duo of Rep. Ron Paul and Rep. Alan Grayson, was passed over the objections of Chairman Barney Frank -- and of the Fed and its big time friends and lobbyists. That's a group that doesn't lose many votes in Congress. What's more, a last-minute "compromise" amendment that would have significantly watered down the bill was submitted by Rep. Mel Watt of North Carolina and heavily backed by the Fed. In normal times, this sort of "split-the-difference" amendment would likely have passed. But these are not normal times, and the amendment was defeated -- much to the shock of the Fed and its supporters.

The House Finance Committee was the site of another indication of how the ground is moving under the administration's feet. An hour before a scheduled final vote on the comprehensive financial regulation reform package sought by the White House, members of the Congressional Black Caucus cornered Chairman Frank and said they would refuse to vote for the bill because of the White House's lack of attention to unemployment. It was, as HuffPost's Ryan Grim reported, intended "as a direct rebuke of the White House."

When we hear about members of Congress holding up a vote (and we've heard it a lot lately), most of the time, it's a ploy to secure some kind of pork for their home district. This was an instance of the brakes being put on not for pork -- but for principle.

So, clearly, the winds of change are picking up in Washington and around the country. It's time for the White House to stop holding no-rush summits and insisting that everything is going as planned, and course-correct. Now. And there is no shortage of bold steps the administration can take to mitigate the damage before it turns into an all-out catastrophe.

Among the best ideas currently being floated:

-- Use Wall Street bailout funds left in the TARP program to hail out Main Street (via increased lending to small businesses and using money for public services being cut by states and cities).

-- Enact a one-year payroll tax holiday (creating a moratorium on Social Security, Medicare, and FICA taxes will encourage businesses to hire new workers).

-- Expand the Small Business Association's lending programs (45 percent of all job losses have been at small businesses).

-- Offer businesses a tax credit for every new job created over the next 12 months, or have the government pay a portion of the salary of new workers hired over the same period.

The bottom line: extending unemployment benefits, crossing your fingers, and waiting for things to turn around is just not enough.

In the post-Katrina fallout, video surfaced of a final briefing before the storm hit in which federal disaster officials warned President Bush that the hurricane could breach the levees and overwhelm the ability of rescuers to properly respond. Bush famously didn't ask a single question but assured local officials: "We are fully prepared." He later insisted, "I don't think anybody anticipated the breach of the levees."

Are we going to get similar protestations from Obama when the unemployment waters continue to rise?

The unemployment disaster has already inflicted great damage all across the country. And the Obama White House will be defined by its response to it.

So what is it going to be: a muscular, multi-tiered jobs plan to deal with reality or "heck of a job" delusion?

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