OK, I admit it. I’m all out of news, and I’ve succumbed to writing a dreaded listicle, the link-bait piece that tallies up X amount of things and sends people rushing to their browsers. They’re cheap to produce and ready as brain candy, and if applied properly would get people reading a lot more classic literature.
That said, it’s worth mapping out what will be the biggest stories to chronicle in 2011, what I’ll be looking toward. I’m not at all surprised that this list includes only one actual set of legislation from Congress; the action will occur elsewhere next year.
So here’s the list of 10 (plus one), in a sort-of descending order of importance.
1) Jobs. Will the economy expand enough to produce enough jobs to bring down the unemployment rate significantly? In other words, will the stronger economy mean actual jobs for workers? I’ve been looking at this periodically over the past week. Leading indicators, including the most recent one today on first time jobless claims, can show a positive outlook. They can also show a negative one if you factor in other pieces. Will the “stimulus” from the tax cut deal hold and not get offset? Will the housing market continue to bottom out? Will state and local government shortfalls continue to drag on employment? Will external factors from Europe or elsewhere play a role?
One thing is clear; any conditions putting upward pressure on jobs are done, from a fiscal standpoint. The Administration must hope that the blueprint now in place will be enough, and that businesses will begin to seek loans, find customers, and hire US workers. It’s a big bet.
2) The Budget Showdown: This obviously plays to the first bit. We know that the Republicans were able to stop an omnibus spending bill, setting the new Republican House up for the ability to demand major spending cuts when the continuing resolution runs out on March 4. In addition, the debt limit will need to be increased sometime in the early spring, allowing for another hostage-taking situation, with the full faith and credit of the US government on the line. And, key laws from the last Congress, like health care, financial reform and food safety, have not yet been funded, setting up another roadblock that Republicans can use to their advantage.
Republicans want discretionary, non-defense, non-entitlement spending to go back to 2008 levels, which would require a cut of around 20%, or $100 billion dollars. This would cancel out any stimulus from the tax cut deal in 2011. Most of these cuts will be targeted at safety net programs and normal government operations; the effect would be to cripple government’s ability to function. Republicans could also ask for concessions on future Social Security spending.
Democrats aren’t exactly helping matters, with a bipartisan gang in the Senate planning to submit the Bowles-Simpson catfood commission recommendations as legislation in the new year. This becomes a bipartisan baseline that could be a launching pad for a bad compromise.
The President could come out today and say he won’t sign any bill that hurts the economy, which is precisely what cuts like this would do. So far, he’s both rejected 20% across-the-board cuts, but said that he would like to deal with the budget deficit and cut programs “that don’t work.” There are further rumblings of a grand bargain, with the President offering his own deficit reduction plan in the State of the Union. Stay tuned.
3) The State Attorneys General Investigation Into Foreclosure Fraud. Obviously foreclosure fraud, and the associated title problems, represent the greatest systemic risk to the economy. Banks made so many errors in the origination and securitization phases of mortgage lending, and they are trying to cover up for it by illegally forcing people out of their homes. The Attorneys General investigation, signed on by all 50 AGs across the country and headed by Iowa’s Tom Miller, is focused mainly on the consumer fraud from robo-signing and illegal foreclosures. But the early reports show that the AGs have the right idea, to permanently halt the foreclosure crisis through mandating principal reductions. Miller also recently told a group of activists that “we will put people in jail” by seeking prosecutions for consumer fraud.
The investigation will probably wrap up next year, though it’s uncertain exactly when. Congress and the federal regulators don’t really want to fix this foreclosure crisis. State AGs have more accountability and, at least at the top, understand the issue more. This could be consequential.
4) Foreclosure Fraud in the Courts: This is related to #3. Banks have more to fear than state AGs. They will have to fend off a variety of lawsuits and court cases in order to avoid the worst effects of foreclosure fraud. Defense attorneys continue to challenge foreclosures, and there’s evidence that they are getting a much stronger hearing from judges. In New Jersey, a judge next month could effectively freeze the entire foreclosure market, forcing the servicers to show cause for why foreclosure processes should not be suspended. Judges in New York and elsewhere are putting stronger pressure on lawyers to certify the information filed in foreclosure proceedings or be held personally responsible for errors.
Class action lawsuits have popped up all over the country, from Attorneys General who find loan servicers violating the HAMP program, and from foreclosure victims defrauded out of their homes. But the bigger lawsuits involve investors in mortgage backed securities, who want to force the banks to repurchase the securities because of flaws in the securitization process. The case Countrywide v. Kemp showed that Countrywide did not convey the assets of the mortgage to the trust, and if this was habitual, practically all mortgage backed securities are basically non-mortgage backed securities, which could then be put back on the banks. Matt Taibbi predicted that some bank could be brought to ruins over repurchases or foreclosure fraud lawsuits, and the numbers add up; a serious set of put-backs would make any major bank insolvent. This may not happen next year, these cases take a long time, but it’s something to watch.
5) July 2011 in Afghanistan: It seems clear that US forces will leave Iraq at the end of 2011, as scheduled. We know that July 2011 was initially seen as an “inflection point” in Afghanistan, a time when forces would transition responsibility to the Afghans and begin a phased withdrawal. More recently, the goalposts have shifted on that, with 2014 emphasized as the date when Afghans can take responsibility. There’s no real sense on what July 2011 means now; Joe Biden keeps insisting that the withdrawals at that time will be “major,” while the military keeps downplaying them. In addition, the war looks like a raging mess, and it will be fascinating to see whether the new Tea Party Republicans in Congress will break from the orthodoxy of their party and start calling for withdrawal. Democrats got over 160 votes for a withdrawal resolution in Congress this year; will that come up again?
6) Gay Rights: The passage of the legislative repeal of Don’t Ask Don’t Tell is only a beginning to an eventual repeal certified by the President and the military. I’d expect advocates to be unrelenting until that gets signed. But on other fronts, Congress will not be the main driver, at least not with new Republican strength. That will fall to the courts. There are several gay rights lawsuits in the pipeline that will get at least a partial resolution in 2011. The lawsuit over Prop 8, which banned gay marriage in California, Perry v. Schwarzenegger, should have its appeal decided by the 9th Circuit soon, and regardless of the outcome, I’d expect that to get appealed to the Supreme Court. That could get combined with a Massachusetts case which has ruled DOMA unconstitutional. It’s even possible that, under a fast track, you could see a decision from the Supreme Court on marriage equality this year, though 2012 is more likely.
Vice President Biden recently remarked that gay marriage in America is inevitable, and certainly there’s been a cultural shift on the issue. But the advances will have to come at the courthouse door for the next year. I would expect some lawsuits on anti-discrimination in the workplace as well, with the military held up as a model.
7) The Filibuster: We’re going to know the outcome of this one five days into the new year. At the beginning of the next Congress, the Senate will try to write new rules that would speed up the legislative process and potentially force the party filibustering to engage in a real filibuster. The rules reform package is starting to take shape, and while it falls short of a repeal of the supermajority requirement, it does deliver a warning shot to the obstructionists, making clear that the rules can and will be changed.
However, Harry Reid and Mitch McConnell may be working on a deal that would blunt the impact of the new rules. On a separate track from the Democratic caucus, Reid and the Republican leadership are negotiating rules changes. Reid would seem to have the upper hand in those negotiations, since he can just fall back on the changes promoted by Tom Udall and Jeff Merkley. But this could end up derailing an ambitious move to change the character of the Senate. We’ll know the result next week.
8) Wikileaks Takes on BofA: Obviously Wikileaks will remain a major story in 2011. Just a fraction of the 250,000 State Department cables in their possession have been released, and Julian Assange’s legal troubles have yet to even begin to be untangled. But Assange has another ace up his sleeve. Wikileaks is reportedly working on the release of sensitive documents that would implicate a major bank, thought to be Bank of America. Allegedly, they obtained the hard drive of a BofA executive, revealing fraud and unethical practices. Wikileaks plans to release this early next year, and while BofA is publicly not worried, they have privately started buying up anti-BofA domain names as a defensive measure. If the documents are as explosive as Wikileaks claims, this could just add to BofA’s troubles in the new year.
9) The States: Right now, public employee jobs are tracking significantly downward, following the exact opposite track as the private sector. This is because of the crisis in state budgets which has continued unabated for the past few years. This year, studies predict a $118 billion dollar shortfall in state and local budgets. Because most states have balanced budget requirements, this shortfall must get offset by tax hikes or spending cuts. Typically these fall on public employees, and Republicans in the states, who have gone to war with public employees, want to make it easier for states to go bankrupt and restructure union contracts. Some of the predictions here are overblown, but there’s no question that a new group of Republican governors want to destroy public employee unions in their states, and may not honor the sanctity of their contracts.
In addition to that bad news in the states, however, there are some interesting and hopeful signs. California may seek tax increases on the ballot next summer, which would reverse the Prop 13 trend and bring the structural budget gap more into ballot. It’s one of the biggest progressive fights of the year. Vermont may really switch to a single-payer health care system this year; it’s not a pipe dream. And Masschusetts will join several other states in setting limits for greenhouse gas emissions, as the states embark upon what the federal government couldn’t do for itself; serious carbon reductions in the atmosphere. There’s a lot going on in the states.
10) The Euro Crisis: The global economy could easily be brought down, if not roiled, by the cascading series of debt crises in Europe. We’ve already seen Greece and Ireland laid low by the bond markets and forced to accept severe austerity budgets; Spain, Portugal and Italy could be next. The austerity doesn’t help these countries with their budget gaps and only impairs the global economy, but no matter. Devaluation and a breakup of the euro is a far better option from an economic standpoint, but it’s unlikely to happen. Concurrent with the austerity has been a new wave of activism throughout Europe, which could boil over in 2011.
Bonus) the 2012 Republican Presidential primary. Strangely, no candidate has yet announced that they’re running for President, despite several announcements at this time four years ago. The leading candidates at this point on the GOP side include Mitt Romney, Mike Huckabee, Sarah Palin, Newt Gingrich, Tim Pawlenty, John Thune and Mitch Daniels. All of them have their strengths and weaknesses, but all that will matter to the GOP base is how completely crazy they are. So we’ll see this endless lurch to the right in the primaries to please the base, and it will be entertaining in a morbid sense.