Bi-weekly Public Opinion Roundup

Americans are still pessimistic about employment and the economy, according to several recent polls. A majority agree that young people will not achieve the same standard of living as the previous generation or that it is more likely that families will suffer "economic reversals" in the next 5 to 10 years. Support for the stimulus bill has dropped and opinion is now deadlocked on the bill, though some aspects, such as spending on infrastructure and public works, remain popular among a majority. A majority of Americans think that some of the recent federal measures should be lasting, while fewer Americans – although still a majority – feel that President Obama's policies will help in these tough economic times.

A nationwide poll conducted in October by Gallup, consisting of 1,013 telephone interviews with adults age 18 and older, found that a small share of Americans believe now is a good time to find a quality job (10%). This percentage has been wavering between 9% and 11% since February 2009, and has dropped dramatically since January 2008 (33%). Findings from an October nationwide Pew Research Center survey of 1,500 adults are consistent with this trend: 84% of Americans say that today good jobs were difficult to find, up from 73% in July 2008 acording to another Pew survey.

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Coming Clean on the Stimulus

A report issued by the White House and the Education Department on Monday showed that the federal economic stimulus package (the American Recovery and Reinvestment Act) has so far created or saved 250,000 education jobs. The report is the first hard evidence of the Recovery Act’s contribution to the nation’s economic health, and previews more extensive data that will be released October 30.

The report is good news for at least two reasons. First, it documents how public investment is helping to pull the nation back from the brink of a devastating economic depression. And, second, it includes crucial information that should inform the ongoing investment of stimulus funds to achieve a full recovery—especially when it comes to job creation. In analyzing the full October data, however, it is important to ask not only how many jobs were created and what infrastructure was built, but also whether we are investing in a lasting economic recovery that will include our entire nation.

Because stimulus funds are flowing largely through traditional state and local channels, particular attention is needed to ensure that they reach the communities and populations that need them most, that distribution is fair and transparent, and that progress is measured in terms of greater and more equal opportunity for all Americans.

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Stiglitz: A Year After Lehman, Banking Problems Are Bigger

In an interview today in Paris, Nobel Laureate Joseph Stiglitz said that while the Obama Administration has managed to stave off the collapse of the banking system, it has also failed to address the underlying problems of the banking system. He further adds that the Obama Administration is "very reluctant to do what is necessary."

From Bloomberg News:

"In the U.S. and many other countries, the too-big-to-fail banks have become even bigger," Stiglitz said in an interview today in Paris. "The problems are worse than they were in 2007 before the crisis."

Stiglitz's views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama's administration to curtail the size of banks, and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing "excessively."

A year after the demise of Lehman forced the Treasury Department to spend billions to shore up the financial system, Bank of America Corp.'s assets have grown and Citigroup Inc. remains intact. In the U.K., Lloyds Banking Group Plc, 43 percent owned by the government, has taken over the activities of HBOS Plc, and in France BNP Paribas SA now owns the Belgian and Luxembourg banking assets of insurer Fortis.

While Obama wants to name some banks as "systemically important" and subject them to stricter oversight, his plan wouldn't force them to shrink or simplify their structure.

Stiglitz said the U.S. government is wary of challenging the financial industry because it is politically difficult, and that he hopes the Group of 20 leaders will cajole the U.S. into tougher action.

What is necessary is breaking up the banks, separating ancillary business from core banking functions as well as increased regulation. Post the collapse of the Lehman Brothers that set off the financial meltdown, there has been a marked consolidation in the US banking sector. The four largest banking companies now control more than 40% of the nation's deposits and more than 50% of the assets held by United States banks.

A principal worry is that the Obama Administration is failing to address the systemic risk caused by the creation of giant nationwide franchises overlapping and competing with each other in various local markets.

It is also of concern that some new "innovative" securities seem more apt for a Las Vegas casino than they do for a bulge-bracket Wall Street investment bank. The time has come to rein in the process known as securization. Moreover, banks that perceive themselves as "too big to fail" continue to engage in questionable practices taking on excessive risk because should they fail the government will act to prevent their collapse.

This dilemma of "too big to fail" was addressed by Federal Reserve Chairman Ben Bernanke during a March 2009 speech at the Council on Foreign Relations: "Authorities have strong incentives to prevent the failure of a large, highly interconnected financial firm, because of the risks such a failure would pose to the financial system and broader economy...However, belief that a particular firm is considered too big to fail has many undesirable effects." Chairman Bernanke noted that such a belief reduces market discipline and encourages excessive risk-taking by larger institutions, provides an artificial incentive for firms to grow, in order to be perceived as too big to fail, and creates an unlevel playing field with that of smaller firms, which may not be seen as having implicit government support.

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Is Zardari the best hope for a new Pakistan?

Given the discussions about Afghanistan, I thought this was interesting, Jerome.

Yesterday we issued our report card for Pakistan President Zardari's first year in office and, as we stated then, we are very impressed with the changes that we've seen under Zardari compared to previous Pakistani leaders. Militantism that was allowed to flourish under Pervez Musharraf and Nawaz Sharif, both of whom are now facing trial - Musharraf for constitutional violations and Nawaz Sharif for murder and corruption - is being attacked head on by the Zardari administration, an economy in shambles is being rebuilt, a political system left crippled by years of dictatorial rule is being set right, and a friendly hand is being extended to India.

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What a surprise: Top 1% reaped 2/3 of gains 2002-07 w&id=2908

I intuitively knew this was going on for the last decade under Bush, but seeing it laid out like this really leaves me at a relative loss for words.  The subtitle text reads "Income Concentration in 2007 Was at Highest Level Since 1928," and the thought strikes me that this concentration isn't the only thing that 2007 and 1928 have in common (mostly thinking about what happened the year after...).

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