While the national unemployment rate of 10.2 percent is a sobering reminder of the depth of this recession and the protracted timeline a recovery will take, the challenges posed by long-term unemployment are far greater.

“We are breaking every record post-Great Depression on long-term unemployment,” said Heidi Shierholz, an economist with the Economic Policy Institute. Right now, around 35 percent of those without jobs have been unemployed for more than six months, a figure that adds up to 3.6 percent of our country’s labor pool.

Image by: Matt Mahurin

While economists are divided about the best way to combat this growing problem, most agree on how it happened. The current recession exacerbated an ongoing economic shift from manufacturing to a service base. Troubles faced by Detroit’s Big Three automakers fanned the flames, rendering the skills of many workers obsolete. Even as local economies withered on the vine, workers were rendered immobile, locked into their homes by the real estate crash.

Long-term unemployment is dangerous because it can have a snowball effect, says Kevin Lowden, managing economist at the Milken Institute. The longer someone is out of work, the more likely he or she is to default on his or her mortgage, even low-risk borrowers at the time when the loan was originated.

“You also see significant issues in terms of the effect on consumer demand due to the dramatic increase in savings rate,” he said. While this increase in savings is good for the economy long-term, right now that frugality comes at the expense of consumer spending that could lead to employers hiring more workers.

This epidemic of long-term unemployment also puts an added burden on government coffers. “This is direct drain on budgets in two ways,” said Dean Baker, co-director of the Center for Economic and Policy Research. Government doesn’t collect income tax on laid-off employees, and when these workers go onto unemployment or disability rolls, this creates an additional drain on the system.

For instance, the increase in workers applying for disability has shot up. Currently, some 7 million adults are on disability, an influx so overwhelming that the trustees of the Social Security program predict that the disability fund will be emptied by 2017 if nothing changes.

This mass migration to disability status is primarily a function of our employer-based health care system, according to Lawrence Katz, a professor at Harvard University. “If you have a pre-existing condition, even if you get another job there will be problems with your coverage,” he said. “The one place you can go is disability, where you get onto Medicare. And once they go on, they basically never come off.” Health plans currently under debate in Congress would subsidize low-income citizens and families, which would include the unemployed, as well as ban insurers from eliminating pre-existing conditions, which make going off disability feasible. Currently, those jobless for a long period of time have nothing to fall back on after their COBRA benefit expires.

Even if those who have been unemployed long-term make it back into the workforce, their future earning power suffers. There’s some evidence that post-layoff retraining can mitigate this, but only under certain circumstances. A study out of the University of Chicago’s Harris School of Public Policy Studies found that attending one year of community college gave displaced workers a 5 percent wage boost. Unfortunately, the vast majority of workers enrolled in such programs don’t stick around for even a semester, let alone a whole year.

However, for workers that stick it out and specialize in vocational training, science or mathematics, the returns can be even greater. The study’s authors found a 10 to 15 percent jump in wages for this subset of workers, as well as higher returns for those who already had some degree of college education prior to their participation in the program.

To this end, much of the work that is being done to combat long-term unemployment focuses on retraining workers so that their skills are more in alignment with today’s service-based economy. “The economy has changed fundamentally and our workforce system has not,” said Andy Levin, Michigan’s chief workforce officer, who runs that state’s No Worker Left Behind program. “Most people who lose their jobs can’t replace their standard of living without getting significant training because of the rapid and ongoing march of technology and globalization,” Levin said.

No Worker Left Behind began operating in August 2007 and is funded primarily by the Workforce Investment Act, which was created in the 90s and received $1.25 billion in stimulus funding to help dislocated workers. Since then, No Worker Left Behind has trained 102,000 at-risk or jobless Michigan residents for jobs in growing industries like health care, technology and transportation.

Levin has put into place bureaucratic efficiencies, such as standardizing which types of jobs are eligible for training subsidies throughout the state and streamlining the process that lets jobless workers continue to receive unemployment benefits while pursuing additional education. When the program conducted a survey this April, they found that nearly half of the workers who had completed training had landed a job, 86 percent in a field that related to their training.

Other economists say that programs such as No Worker Left Behind, while helpful, don’t do enough to address the root of the problem: the overwhelming lack of jobs. Although the pace at which companies are laying off workers has slowed, companies aren’t rehiring, which means there are still too few jobs to go around. Traditionally, small businesses are the first to hire when the economy picks up steam after a recession; however, small-business financing has dried up due to the credit crunch, preventing entrepreneurs from expanding and adding employees.

“The crisis is just so big at this point with 10.2 percent unemployment that we’re thinking about new direct job creation proposals because the scale of the problem is so large,” said Allegra Baider, senior legislative associate at the Center for Community Change. That group, along with a host of other advocacy and labor organizations, recently released a joint statement calling for new investment in job creation in fields such as infrastructure and education.

“A top priority ahead of job training is we’ve got to fix the labor market and start generating jobs,” said the Economic Policy Institute’s Heidi Shierholz. The Obama administration plans to hold a jobs summit next month examining incentives like tax credits to encourage businesses to hire new workers.

John Challenger of Challenger, Gray & Christmas acknowledged that even if such programs succeed, many Americans will have to make adjustments. “One of the things that’s happening is a steady career at one large company or in a company town is no longer available, and people at all levels can no longer think of their careers as always progressing upwards in income.” Even as they learn new skills, employees also have to be taught how to be flexible so they can adapt to the twists and turns of the 21^st-century economy.

By the end of October, Angelides said at this morning’s first FCIC meeting, the panel will “be sending letters to companies referenced in the statute to make sure records are preserved.”

The FCIC was given a $5 million budget as well as 22 separate financial issues and products to investigate as possible causes of the economic meltdown. (A list of all 22 is available after the jump.) Angelides said the panel soon would “boil those [22] down” and give the public a sense of in what order they would tackle.

As it moves forward — potentially striking fear in the hearts of any bank executive who’s considered turning on the shredder — the FCIC plans to open a full-time Washington office and hire more staff members. The panel’s senior aide has already started work: Thomas Greene, a 25-year veteran of the California attorney general’s office and leader of the civil prosecution team that took on Enron.

The FCIC’s 22 areas of focus cover the horizon of financial practices that have come under fire for helping to encourage unsustainable risk, subprime mortgage lending, and the securitization of just about everything under the sun. Indeed, its biggest obstacle in leaving no stone unturned may not be the political ties of its members or Congress’ uncertain regulatory reform effort, but rather the rules for issuing subpoenas.

The law that created the FCIC, which is split 6 to 4 in favor of Democratic-named members, specifies that subpoenas must be approved by at least one GOP-appointed member in order to be valid. Thus, Republicans could theoretically stave off a summons to a former Bush administration official by withholding their votes and pressing for private discussions rather than public testimony.

The bipartisan 9/11 Commission, which was evenly matched between Democrats and Republicans, accepted private, time-constrained interviews with former President George W. Bush and Vice President Dick Cheney, while former President Clinton and Vice President Al Gore agreed to take questions in public without a time limit.

The FCIC’s mission, according to the statute that created it, is “to examine the causes of the current financial and economic crisis in the United States, specifically the role of”:

(A) fraud and abuse in the financial sector, including fraud and abuse towards consumers in the mortgage sector;
(B) Federal and State financial regulators, including the extent to which they enforced, or failed to enforce statutory, regulatory, or supervisory requirements;
(C) the global imbalance of savings, international capital flows, and fiscal imbalances of various governments;
(D) monetary policy and the availability and terms of credit;
(E) accounting practices, including, mark-to-market and fair value rules, and treatment of off-balance sheet vehicles;
(F) tax treatment of financial products and investments;
(G) capital requirements and regulations on leverage and liquidity, including the capital structures of regulated and non-regulated financial entities;
(H) credit rating agencies in the financial system, including, reliance on credit ratings by financial institutions and Federal financial regulators, the use of credit ratings in financial regulation, and the use of credit ratings in the securitization markets;
(I) lending practices and securitization, including the originate-to-distribute model for extending credit and transferring risk;
(J) affiliations between insured depository institutions and securities, insurance, and other types of nonbanking companies;
(K) the concept that certain institutions are `too-big-to-fail’ and its impact on market expectations;
(L) corporate governance, including the impact of company conversions from partnerships to corporations;
(M) compensation structures;
(N) changes in compensation for employees of financial companies, as compared to compensation for others with similar skill sets in the labor market;
(O) the legal and regulatory structure of the United States housing market;
(P) derivatives and unregulated financial products and practices, including credit default swaps;
(Q) short-selling;
(R) financial institution reliance on numerical models, including risk models and credit ratings;
(S) the legal and regulatory structure governing financial institutions, including the extent to which the structure creates the opportunity for financial institutions to engage in regulatory arbitrage;
(T) the legal and regulatory structure governing investor and mortgagor protection;
(U) financial institutions and government-sponsored enterprises; and
(V) the quality of due diligence undertaken by financial institutions

Brooksley Born, who fought unsuccessfully to regulate derivatives during her years at the helm of the Commodity Futures Trading Commission (CFTC), singled out “the failure of government to oversee the financial markets” as a central cause of the meltdown that began last year. “Experience has now clearly shown that financial markets cannot self-regulate,” Born said, urging her colleagues on the panel to “identify and examine regulatory gaps and failures so that they may be eliminated.”

But while Born urged Congress and the Obama administration to press ahead with strong new rules of the road for Wall Street, fellow commissioner Keith Hennessey declared that reform legislation has a slim chance of passing this year.

Still, Hennessey added, the panel’s deadline of December 2010 to release its final report risks making its conclusions irrelevant.

“We cannot predict when Congress will act, but we’ve been given a job to do and part of that job is to be as useful to lawmakers as possible,” said Phil Angelides, the panel’s Democratic-appointed chairman. Members of the Financial Crisis Inquiry Commission, as the panel is formally known, will “structure our work with knowledge of the congressional calendar,” Angelides added.

Lawmakers originally hoped that the House would act on regulatory reform before the fall, but the House Financial Services Committee postponed its vote on the White House’s proposed Consumer Financial Protection Agency, likely until next month. The decision of Senate Banking Committee Chairman Chris Dodd (D-Conn.) to retain his gavel has been seen as a boost for financial reform’s prospects in the upper chamber, but FCIC members stressed the importance of keeping their work connected to — and independent from — the action on Capitol Hill.

“There’s no question that this commission had a political birth,” quipped former House Ways and Means Committee Chairman Bill Thomas (R-Calif.), now the FCIC vice chairman. But, he noted, one can stay defined by one’s birth or “get on with your life.”

Speaking to reporters after the FCIC’s first meeting, Thomas offered his own prediction that Congress would ultimately come down harder on a financial industry that is still weighing how much systemic risk to embrace. “It isn’t whether there will be regulation or not,” Thomas said. “It’s whether it’ll be regulation for the sake of regulation.”

Illustration by: Matt Mahurin

The time may be ripe for a shift in strategy as the foreclosure machine grinds on, and new foreclosure notices reach the troubling milestone of 10,000 per day.

A weak economy has added job losses and falling home values to the mix of toxic loans that prompted the crisis two years ago, making an already difficult situation even more severe. Government measures from foreclosure freezes to loan modifications have only served, so far, to stall the inevitable – and to create an ominous backlog of millions of pending foreclosures. Plus, more than one in five homeowners now owe more on their mortgages than their homes are worth, according to the real estate website Zillow.com. No one can predict with assurance whether those underwater homeowners will keep paying on their loans, or take a walk.

Illustration by: Matt Mahurin

And as bad as things may seem now, there’s still a long period of pain to come: A steady drumbeat of foreclosures, and a stagnant housing market, for the next several years ahead, at a minimum. Some experts see an even more dire picture: Five to 10 years, in California alone, of record high foreclosures. No significant home prices increases nationwide on the horizon in the next year. Or the year after. Or for as long as the next five years. Some 9 million foreclosures are expected by 2012.

While economists search for signs of green shoots, “no one’s really saying anything about this,” noted Guy Cecala, publisher of Inside Mortgage Finance, a Bethesda, Md. publication that covers the lending industry. “There’s really no good news out there, other than we can’t possibly get in much worse shape than we already are.”

Given this bleak scenario, some say it’s finally time for more forceful action. Congress and the Obama administration need to move boldly to stop foreclosures, requiring lenders to go beyond what Calculated Risk dubs “extend and pretend” repayment plans, and actually write down loan balances. And the Obama administration should move quickly to bring more players to the table to pick up the pace of those loan modifications – including the Internal Revenue Service. Servicers might be more aggressive about writing down loans if they’re sure it won’t create tax liabilities for trusts they represent, an impediment that currently stands in the way of getting more mortgages modified, said Kathleen Engel, a Cleveland State University law professor who studies mortgage securitizations.

There’s more to be done, Engel said: Expand the benefits of the homebuyer tax credit up the income ladder, offering it to move up buyers with existing homes as well as first time purchasers. Even direct government loans to borrowers, to keep them in their homes, shouldn’t be dismissed.

“Now is the time to do something,” Engel said. “There are a lot of things to be very concerned about right now. There are people underwater who aren’t making good on their home equity loans. With job losses increasing, more people aren’t able to make their mortgage payments at all. And REOs (Real Estate Owned properties) are driving down home prices. We really need to be trying some new things.”

Engel’s view was echoed by the Obama administration, which recently chastised lenders for their lack in progress in modifying loans. “We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share,” Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan said in the letter, which was sent to to 25 mortgage-servicing firms.
Only about 270,000 borrowers have been offered loan modifications under Obama’s Making Home Affordable program, the Treasury Department says — a far cry from its much more ambitious goal of helping 4 to 5 million homeowners rework their loans.

Geither and Donovan weren’t the only ones speaking out. As TWI reported, a small band of House Democrats last week urged for more action beyond voluntary loan foreclosures. Senate Finance Committee Chairman Chris Dodd (D-Conn.) and 19 other Senators also petitioned Geithner to adopt a more aggressive strategy for loan modifications specifically for homeowners with option adjustable rate mortgages scheduled to reset to higher payments over the next four years. In addition, the Washington Post reported the Treasury Department also is putting together a “Plan C” – a new strategy – to head off defaults in commercial real estate and to tackle delinquencies tied to job losses.

It seems like a full frontal assault. But it may not be enough.

SLOWING DOWN THE INEVITABLE

In reality, there’s little political will to force lenders to write down loan balances. Congress defeated mortgage “cramdown” legislation, which would have allowed bankruptcy judges to cramdown, or reduce, the terms of a mortgage to keep a borrower in his home. The Obama administration stood by as the measure failed. Only that small group of House Democrats still wants to revive it. Bailing out homeowners still runs smack into the wall of moral hazard, in the public’s mind, and even the worsening crisis hasn’t changed that. “I don’t know why this is still true, but people are willing to roll over and give billions of dollars to banks, and they get pissed off about the idea of their next door neighbor getting a break,” said Sean O’Toole, president and founder of ForeclosureRadar.com,which compiles foreclosure data for the California market.

Instead of pressing for more loan modifications, it may be time to conclude that all the programs thrown at the mortgage problem haven’t done much to fix it. The most infamous, Hope for Homeowners, intended to help 400,000 borrowers, resulted in just 25 loan closings. Various state and voluntary foreclosure freezes only gave a pause to foreclosures. And most foreclosure prevention programs were created two years ago, when subprime loans were the major cause of foreclosures, not unemployment and a faltering economy.

These days, if you can’t afford your mortgage payment because you just lost your job, it really doesn’t matter whether you have a toxic Option ARM or a standard 30-year fixed loan. You’re still in default.

“The bad economy is what’s driving foreclosures right now,” Cecala said. “Even if there were no Pay Option ARMs out there, many homeowners would still be in deep trouble.”

Foreclosure prevention efforts, at this point, are “just slowing down the inevitable,” he added. “You can take a look at any one of these programs and you won’t find a lot of value in it.”

The Obama Administration, for example, recently expanded the refinancing options available under Making Home Affordable, to include borrowers who are more deeply underwater on their loans. It sounds good -  but it’s unlikely to pan out, Cecala said. Borrowers may not qualify for refinancings, under new underwriting guidelines from Fannie Mae or Freddie Mac that are far stricter than when they originally applied for their loans. Or borrowers may have to pay such high fees or rates that it won’t make the refinancing worthwhile. In places like California and Florida, some homeowners are so far underwater they still won’t qualify.

THE NUCLEAR OPTION

The big question, as Cecala notes, is whether foreclosures can be stopped at all. Which brings up the nuclear option: Unleash the pent up foreclosures and get the pain over with. Consider the backlog in California alone. More than 3 million households are expected to end up underwater eventually, according to O’Toole. As of now, some 851,000 households are delinquent on their mortgages. Of those, 264,977 already have received a foreclosure notice – but their properties have yet to be sold at auction. Only 22,245 foreclosures were completed in June, Foreclosure.com said.

Given that possibility that half of the the 3 million underwater homeowners or more also will eventually lose their homes, that means that working through the entire backlog could involve between five to 10 years of record high foreclosure levels, O’Toole said.
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Nationwide, the picture isn’t much better. After hitting a high point of about 900,000 in November 2008, REO inventory, or bank-owned foreclosures, slowly decreased over the last six months, down to about 770,000 in May, according to RealtyTrac, an online foreclosure database.

But don’t get your hopes up just yet.

“We believe the reason for that decline is largely due to the various foreclosure moratoria and state laws extending the foreclosure process that have been in effect in recent months,” said Daren Blomquist, a RealtyTrac spokesman. “As some of those moratoria were lifted in March and April we saw a substantial spike in initial foreclosure notices and we believe that will translate into a spike in REOs as well over the next several months.”

The bad news continues:  “In addition, we believe there is still a pent-up supply of delinquent loans that have not even hit the foreclosure process yet because banks are taking longer to start the foreclosure process after a loan goes delinquent – probably partly because they are overwhelmed with the volume of delinquent loans and partly because they are more aggressively trying to modify or refinance loans rather than foreclose.”

Blomquist added that the “twin threats” of risky loans and high unemployment will ensure a steady drumbeat of high foreclosure activity, for at least the remainder of this year.

The radical approach would be to stop staving all this off, take the pain, push the foreclosures through the system without delay, and get to the bottom. In California, at least, that could clear out the foreclosure backlog in about two years, O’Toole estimated.

“I’m not necessarily advocating that we should simply dump all the foreclosures at once – I actually think that could be disastrous,” he said. “But I think dragging them out over the next 5 to 10 years is an equally bad choice.”

But if there’s little political will to bail out homeowners, there’s even less stomach for announcing a strategy to bail on them entirely. It’s not the sort of thing that can be said in pubic. Even if there’s some logic to it.

AN ENTIRELY NEW DIRECTION

And that opens the door for a third way.

Alan Mallach, a senior fellow at the National Housing Institute and the Brookings Institution, took a close look at the housing market in Phoenix, where prices have declined by as much as 60 percent in the past few years.  Houses that sold for a quarter-million dollars now go for $90,000 or so in the booming REO market. Buyers – both investors and individuals – are realizing that at those prices, they have options, if they are willing to be patient. They can hold on to those homes for six or eight years, rent them out until they earn their money back, and wait until they can possibly sell them at a profit.

Most importantly, the new owners often are more than willing to rent back the homes to their former owners, a situation that benefits both sides. Borrowers can stay in their homes, with rent payments they can afford. The homes don’t sit vacant, abandoned, or vulnerable to vandalism, which can drive down surrounding property values. “You don’t kick the person out,” Mallach said. “And many of the investors say it’s an advantage not to have to look for a new tenant.” The situation, he said, provides evidence of “the beginning of some sort of leveling off that’s going on” in neighborhoods hit with foreclosures, at least in Phoenix.

Based in that experience, Mallach these days reminds local governments and neighborhood development groups not all investors are enemies, despite their reputations. Communities can both encourage investors as partners in buying and fixing up bank-owned houses – and warn them they’ll come down hard if they sink too far into speculation. And there are more encouraging signs at the local level. As Philadelphia, and some other cities have found, mandatory face-to-face foreclosure mediation between borrowers and servicers has proven to help avoid foreclosures, without dragging out the process.

A combination of these kinds of ideas – smaller scale, targeted to the needs of particular markets – may a quicker and more effective blueprint for tackling the crisis, especially in the absence of an aggressive government approach.

“Maybe we’re coming to the realization that we can’t loan mod our way out of this,” Mallach said. “There’s no magic solution. There’s no government riding in on a white horse to buy up all the bad assets.”

THE WILD CARD

Congress and the administration, in fact, haven’t exactly come up with anything “radical and bold” yet to tackle the crisis – and it’s unlikely they will turn around and do so now. Instead, Mallach noted, Realtors, the real estate industry, and some economists are spending unnecessary time and energy trying to declare a bottom to the crisis and look for any evidence of good news. It’s a great time to buy a house, they insist.

But there are still 9 million foreclosures expected by 2012, according to the Center for Responsible Lending. Goldman Sachs estimates 13 million foreclosures on all types of loans by 2014. And a continuing decline in home prices for the majority of housing markets is predicted for at least the next two years, says a report by mortgage insurer PMI.

As Malllach noted, policies to encourage renting are one option to counter all this. Even with all their limitations, loan modifications could be another. It’s “a really crucial time” to jumpstart them right now, said Cleveland State’s Kathleen Engel. Servicers finally have gotten fully staffed and up to speed, after a slow start. Clearing away potential tax liabilities for trusts due to aggressive loan modifications could help, she said. So could ratcheting up the pressure on lenders and servicers alike to complete more of them.

But challenges remain. REOs are driving away other sales, keeping downward pressure on home prices, Mallach noted. Stronger markets that have been immune so far to plunging home prices, such as New York City, New Jersey, and the Philadelphia suburbs, still remain at high risk for a downward spiral. Frustration keeps growing over a lack of progress in anything being done to stem foreclosures, creating anger in neighborhoods, and even a movement to put squatters in vacant homes.

Beyond that, underwater homeowners remain a huge wild card, with the chance that a significant number of them will stop paying their mortgages in the near future clouding any hope for a quick recovery.

When it comes to the foreclosure machine, things are probably even worse than they seem. That’s a starting point for any strategy to challenge a housing crisis isn’t ending anytime soon.

Now Gallup has a new poll that confirms this trend and, for the first time in 25 years of polling, shows that most Americans would prioritize the economy at the expense of the environment.

Gallup (click to enlarge)

Since 1985, Gallup has asked people annually if they would prioritize the environment “even at the risk of curbing economic growth” or the economy “even if the environment suffers to some extent.” Last year, people selected the environment by a margin of 49 percent to 42 percent. This year, the numbers essentially flipped: 51 percent chose the economy and 42 percent chose the environment.

Never before had the majority of respondents prioritized the economy, though the numbers were close at the end of George W. Bush’s first term as president.

While last week’s poll showed a significant decrease in environmental concerns, the shift in this poll is far more dramatic, with a clear reversal of previous trends.

Not surprisingly, responses differed sharply with party identification. Noteworthy are the data among independents, 50 percent of whom choose the economy, to just 42 percent for the environment:

Gallup (click to enlarge)

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In another clear reversal of previous trends, record numbers of people are following our Twitter feed. You can join them here.

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As the Obama administration moves forward with its green agenda, climate change concerns have been elevated to a top priority. Yet in the midst of the deepening economic crisis, public opinion appears to be moving in the opposite direction.

Illustration by: Matt Mahurin

A Gallup poll released last Wednesday found a six percent drop from last year in the number of people who are worried a “great deal” or a “fair amount” about global warming, after that number had been increasing for the previous five years. It also showed that after a similar five-year climb, the percentage of respondents who believe that the effects of global warming have already begun had decreased by eight points over the past year. A record-high 16 percent of Americans now believe that global warming will never occur; in more than ten years of polling, no more than 11 percent of respondents had ever expressed this opinion.

The day after the poll was released, Sen. James Inhofe (R-Okla.), the ranking Republican on the Senate Environment and Public Works Committee and a leading climate change skeptic, took to the Senate floor and celebrated the results as a triumph of information. “You should never underestimate the intelligence of the American people,” he proclaimed. “Sadly, that is exactly what the promoters of man-made climate fears have been consistently doing, and the American people have consistently rejected climate alarm.”

Inhofe attributed the shift in public opinion to new studies from prominent scientists that he said contradicted the prevailing climate change arguments embraced by former Vice President Al Gore and the Intergovernmental Panel on Climate Change. “A steady stream of peer-reviewed studies, analyses, real world data and inconvenient developments have further refuted the claims of man-made global warming fear activists,” he said.

Gallup (click to enlarge)

On the other side of the climate debate, the Center for American Progress’ Joseph Romm, an acting assistant secretary of energy under Bill Clinton and an influential environmental activist, also chalked the changing attitudes up to a change in propaganda, albeit with a different slant.

“Objectively, in the last two years, the science makes painfully clear that climate risk has grown sharply,” he wrote on his blog, Climate Progress. “That means if the public has come to the reverse view, it must be due to the messaging and the media and the misinformers.” While “the vast majority of scientists are consistently bad at messaging,” he explained, global warming skeptics have “never stopped their single-minded disinformation campaign.”

Yet public opinion experts have a different explanation for the poll results.

Michael Dimock, associate director of the Pew Research Center, argues that the economic downturn has trumped all other concerns. “In a time of economic crisis, people are less willing to focus on an issue like global warming because they see other, more pressing issues,” he said.

A similar phenomenon took place after the Sept. 11 terrorist attacks, Dimock explained. “In January 2002, a few months after 9/11, the public’s sense of priority on a whole host of important issues just fell through the floor,” he said. “They expected the government, almost to the exclusion of other important things, to focus on this issue.”

Karlyn Bowman, who studies public opinion at the American Enterprise Institute, published a comprehensive report in April 2008 that tracked polls on the environment and global warming over the past several decades. Her data showed that in the three years following the 9/11 attacks, fewer people said they were worried about global warming than in any other year in the past decade.

Similarly, she argues, the economic crisis has now pushed environmental considerations aside. “The economy is just swamping all other issues right now,” she said. “Nothing else comes close.”

According to Paul Mohai, a professor of environmental policy and public opinion at the University of Michigan, this trend fits into historical patterns. “It’s not unusual at all that when there are economic problems in the country, concerns about the environment drop off,” he said.

Pew Research Center (click to enlarge)

The current economic crisis, of course, is the most severe in decades, and the Gallup poll is not the first to show its effects on public attitudes toward climate change. Every January, Pew conducts a poll to assess people’s “top priorities” for the government to address. This year, global warming came out on the very bottom of the list.

“Out of the 19 things that we ask people to rank as priorities, it’s number 19,” said Dimock. Only 30 percent of respondents considered global warming a “top priority,” down from 38 percent in 2007 and 35 percent in 2008. Other non-economic concerns likewise tumbled down people’s list of priorities, including crime, immigration and “protecting the environment” generally.

While the economy is likely the leading cause of reduced concern about global warming, these experts also posit a number of other possible explanations. Bowman and Mohai argue that Americans tend to feel less worried about a problem when they believe that the government is addressing it. In this case, confidence in President Obama and the Democratic congressional leadership to tackle global warming has led people to feel less personally worried about the issue. “During Republican administrations, people’s concerns about the environment go up, and during Democratic administrations they go down,” said Mohai.

Bowman’s 2008 study backs up this claim. In every poll she recorded since 1971, people have had greater confidence in the Democratic Party to protect the environment. In the latest poll included in her study, a February 2008 Pew poll, 65 percent of respondents expressed greater confidence in Democrats on this issue, compared to just 21 percent for Republicans.

Dimock, on the other hand, points to Al Gore’s Oscar-winning 2006 documentary “An Inconvenient Truth” as a possible complement to the economic causes of the change in public opinion. He hypothesizes that as a highly polarizing figure, Gore may have solidified Democratic support for his environmental agenda while turning off some Republicans and independents. “You can imagine how, with people feeling like Al Gore was lecturing them on global warming, so to speak, they might have some sort of backlash, because it was no longer coming from a neutral source. It was coming from a political source.”

Nonetheless, Dimock believes that the struggling economy is far and away the primary cause of the shift in public opinion. “The 800-pound gorilla is this economic crisis,” he said.

Inhofe’s claim that the change stems from the propagation of new scientific studies that cast doubt on man-made global warming theories garnered little support from these experts. “If that is indeed happening, I haven’t seen it on the news, and I follow it pretty closely,” said Mohai.

So what might cause Americans to renew their global warming concerns? In the lingo of Bill Clinton’s 1992 campaign, it’s the economy, stupid.

“If and when people feel more comfortable about the economy turning around, their focus can turn to other issues,” said Dimock.

Just as President Obama has tied his economic agenda to an environmental one, it appears that Americans’ global warming concerns will rise and fall with their 401(k)s.

And here’s another reason to worry: The component of the plan that expands the refinancing option for struggling, but not delinquent, homeowners excludes those whose outstanding mortgages exceed 105 percent of their homes’ value.

Here’s a longer explanation. Currently, homeowners with mortgages valued below 80 percent of the home’s worth can — if the loans are backed by Fannie Mae and Freddie Mac — refinance those loans to take advantage of currently low interest rates. But there’s a ban on refinancing if the mortgage exceeds the 80 percent debt-to-value threshold. The Obama housing plan doesn’t remove that ban, it just bumps the ceiling up to 105-percent.

So if you owe $340,000 on your $500,000 home that’s now worth $380,000, you’re newly eligible for refinancing. (Debt-to-value = 90 percent). But if you owe $340,000 on your $500,000 home that’s now worth $320,000, you’re not eligible for refinancing. (Debt-to-value = 106 percent.)

The New York Times today translates the 105 percent ceiling into practical terms:

That means many homeowners in areas like Florida, Arizona and Nevada, where home prices have plunged the most, will not be eligible.

Put another way, the hardest hit areas will get the least help. Can someone explain that, please?

The parade, which began in 1901 and has been held every year since then, was nearly canceled this time around because the city cut its funding due to a $1 billion budget shortfall. Private donors came up with enough funds at the last minute to continue the tradition, which is as much a part of Philadelphia as cheese steaks and the Liberty Bell.

But while the parade goes on this year, the city has made it clear its budget woes mean it won’t be able to contribute much next year either, leaving organizers to scramble for money once again.

From Bloomberg:

“A damn disgrace” is how Rose Marie Cola, a 67-year-old grandmother from South Philadelphia, describes the city’s abandonment of the Mummers. The event, known for its string bands decked out in sequins and ostrich plumes, has been staged every year since 1901, ranking it with the Liberty Bell, cheese steaks and Benjamin Franklin as a Philadelphia icon. “The Mummers parade is a family tradition,” Cola said in a telephone interview. “It’s one of the last true Philadelphia things. Everybody in South Philadelphia has a connection to the Mummers in one way or another.”Philadelphia, the U.S.’s sixth-largest city, announced the budget cuts in November. A shortfall in tax revenue and a decline in the value of stocks held by the city’s pension funds swelled the gap in Mayor Michael Nutter’s five-year spending plan to more than $1 billion.“These are unprecedented financial times,” said Doug Oliver, a spokesman for the city. “We simply could not afford to provide financial support at the same level we did last year and we won’t be able to provide support moving forward.”

The threat to the Mummers is another sign of how much everyday life is changing because of the economic crisis. The message here is: Don’t take anything for granted. It might not be around tomorrow.

From Bloomberg:

After 28 years of growth, Atlantic City’s gambling proceeds are down for the second time in a row. In the first 11 months of 2008, revenue from casino games fell 6.7 percent to $4.2 billion, regulators reported Dec. 10. Last year’s 5.7 percent decline was the first ever, as the number of visitors slipped to 33.3 million from 34.5 million.

You might think this is no big deal. Most of the people who gamble probably shouldn’t, so if the economy forces them to quit the habit, so much the better. The only problem is that New Jersey and many other states need that gambling revenue, and its loss will add to already difficult budget problems.

Again, from Bloomberg:

The slowdown comes as Governor Jon Corzine has warned that the state faces a revenue shortfall of $1.2 billion for the year ending June 30 and $5 billion in fiscal 2010. Through November, the state collected $338 million in Atlantic City tax revenue, down from $364 million and $384 million, respectively, in the first 11 months of 2007 and 2006. Casino employment fell to 39,137 in November from more than 42,000 as recently as August and a peak of 51,560 in July 1997. James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, said the casino industry is vital for the economy of southern New Jersey and for the tax revenue it generates.“It’s possible Atlantic City is past its peak,” said Hughes, who predicted the situation may worsen next year. “It could never go back to its past glory. It’s a much tougher game now.”

That’s true everywhere these days, and now it’s hit the blackjack table as well.

attorneygeneral.utah.gov

Just as troubled borrowers are poised to become the next likely recipients of government help, bailout fatigue seems to have set in.

Since the government began inching toward offering homeowners more help — calling for a holiday foreclosure suspension and launching a plan to streamline mortgage-loan modifications — the anger over bailing out borrowers has been growing. Taxpayers are expressing their frustrations in the blogosphere and in casual conversations.

Illustration by: Matt Mahurin

“Many people are upset,” said Alex Pollock, a former banking industry executive and resident fellow at the pro-business American Enterprise Institute. “They’re saying, ‘I didn’t buy a house I couldn’t afford. I didn’t take out a home equity loan to go on a vacation. Not only am I supposed to struggle to keep paying my mortgage, I’m also expected to pay other people’s mortgages too.’”

Pollock frequently hears such sentiments, despite the record number of homeowners losing their homes because they can’t pay the bills. After The Washington Independent ran a story last week on the eviction of Manassas resident Julio Angulo, whose home had been foreclosed on, a comment on the site complained that Angulo effectively got five and half months of free rent because he refused to move after receiving the eviction notice in July. Why did he buy a house in the first place, the commentator asked. And could he read?

That sort of anger will likely rise as President-elect Barack Obama and some lawmakers push more aggressively to help distressed homeowners.

On “Meet the Press” on Sunday, Obama went further than he has in the past to push for government help, criticizing what he called a lack of urgency by the administration.

“I’m disappointed that we haven’t seen quicker movement on this issue by the administration,” Obama said. “We have said publicly and privately that we want to see a package that helps homeowners not just because it’s good for that particular homeowner; it’s good for the community.”

But that doesn’t necessarily mean such assistance would going over well among most taxpayers. As Pollock noted, polls show taxpayers oppose government bailouts in general, whether for the banking sector or the auto industry. The taxpayers question whether government should take on that kind of responsibility. They’re not likely to feel much differently about homeowners.

That means the Obama administration will need to sell any new assistance plan by emphasizing how rescuing troubled borrowers will help everyone whose retirement packages are shrinking and whose home values are falling.

That won’t be easy. The influential mortgage blog Housing Wire has been swamped by taxpayer resentment toward helping borrowers who aren’t always perceived as deserving of the aid. When Fannie Mae and Freddie Mac announced their foreclosure halt in November, Housing Wire said, emotions bubbled over:

The decision to halt foreclosures also isn’t silencing a growing number of critics who say they’re angry at all of the resources and attention being given to troubled borrowers. At [Housing Wire] in the past few days, we’ve been buried under feedback from lenders and servicers — and even employees at both GSEs [government-sponsored enterprises] too — that have largely expressed frustration at what they see as a bailout of irresponsible borrowers at the expense of responsible ones.

The anger goes beyond industry insiders. Some people who pay their mortgages on time are wondering if they should continue to do so. In the Washington Post, real estate writer Kenneth Harney quoted Rob Chrisman, senior vice president and director of capital markets for Residential Pacific Mortgage in Walnut Creek. Chrisman said he talked with one loan agent who commented that, “All I have to do is stop making mortgage payments, and I can get a 3 percent rate? Sweet! Who needs a mortgage broker?”

The emotion was summed up perfectly by San Francisco columnist Kathleen Pender, who asked, “Are You an Idiot to Keep Paying Your Mortgage?”

As the Obama administration works to put together a package to stem foreclosures and help troubled homeowners, the kind of resentment pinpointed by Pender might fester into the kind of anger that was directed at the Big Three auto industry executives who flew into Washington on private jets to beg for bailout money. No one wants to help out someone who seems to have gamed the system. On Monday, the nation’s top bank regulator, Comptroller of the Currency John Dugan, said new data show that more than half of all recent loan modifications have fallen delinquent again, raising more questions about the wisdom of bailing out borrowers.

Dugan, however, also acknowledged he couldn’t judge the quality of the loan modifications — whether they substantially reduced loan amounts or just strung borrowers out on repayment plans.

Housing advocates have argued that loan modifications can work if they reduce the borrower’s overall debt and bring monthly payments to more affordable levels.

Despite all the obstacles, the public still could get behind a rescue package, housing advocates insist. It all depends on how it’s sold.

On its website, the Center for Responsible Lending measured the spillover effect from foreclosures: An additional 41 million families in surrounding neighborhoods would see ee home prices fall an average of $8,667, for a total loss of $352 billion.

And even that figure “doesn’t count the decreased buying power that [number] represents, and the suppressing impact that has on consumer demand,” said senior policy counsel Kathleen Keest.

She noted that Credit Suisse on Monday predicted a surprisingly high 8.1 million foreclosures by the end of 2012, or 16 percent of all households with mortgages. Increasingly, Credit Suisse said, those mortgage failures are moving beyond subprime loans to prime and more upscale borrowers.

Mark Zandi, chief economist at Moody’s Economy.com, told a housing industry forum Monday that he thinks the public will be more sympathetic to the idea of helping homeowners than it might have been in the past, because the link between foreclosures and wider economic pain is becoming more evident. In addition, banks that were bailed out by the government but still refuse to lend have added to public anger.

Angulo’s case serves as an example. He tried to talk to his lender, he said, but he got nowhere. He said he called the lender after he learned his loan payment would rise from $1,400 to $2,600 a month, which he couldn’t afford. The lender told him it couldn’t help, because he wasn’t behind in his mortgage payments. So, Angulo said, he stopped paying them.

Angulo’s lender was Aurora Loan Services, which also serviced the loan. Aurora is a subsidiary of a financial institution with a familiar name: Lehman Bros. The failure of Lehman ignited the Wall Street meltdown that led to the $700 billion rescue package.

The Village Voice last month published a long expose on Aurora, which specialized in selling Alt-A and interest-only mortgages to people with decent credit. The loans usually required no income documentation or downpayment. The Voice characterized Aurora as “the sleazy Lehman Brothers subsidiary” and noted that bad loans originated by Aurora partly led to Lehman’s downfall.

From the Voice:

Thomas Martin, the head of a Washington, D.C.–based company that does investment analysis and has been monitoring Lehman and Aurora over the past three years, says he has received more than 400 consumer complaints from around the country about the two firms.

“To us, it may have been a criminal enterprise from the get-go,” says Martin, whose group is called America’s Watchdog. “They collect fees from the pension funds, which buy these mortgage-backed securities, and then gouge the consumer on the back end. I think Aurora should be put out of business, and they weren’t the only loan servicer doing this stuff.”

Martin says Aurora does a series of questionable things, which result in unfair payments and push consumers toward foreclosure.

The reason a white-shoe firm like Lehman worked with Aurora was simple: Profit.

Again, from the Voice:

Loan companies — especially the shadier ones — were issuing home loans to people who really couldn’t afford them, or under terms that basically guaranteed the buyer would default once the interest rates soared.

Like most streetwise dealers, Lehman took a cut of just about every piece of the transaction all the way down the line. It [and other Wall Street firms] ended up pushing its loan companies to stretch even their flimsy standards and issue weak loans.

But going after lenders won’t be enough. To get the public behind a rescue package, the government needs to put together a loan modification program that heads off the problem before a homeowner falls behind, and doesn’t offer a perverse incentive to stop paying on a mortgage. Any rescue package or loan modification attempt must aim at keeping people in their homes for the long term — not just something that kicks the problem down the road. It’s also well worth exploring ways to offer more rental assistance and housing to people who won’t be able to afford their homes even with a break on their mortgage.

To win wider support, advocates will have to acknowledge the unfairness inherent in any rescue plan. Obama moved in this direction Sunday, explaining that “If my neighbor’s house is on fire, even if they were smoking in the bedroom or leaving the stove on, right now my main incentive is to put out that fire so that it doesn’t spread to my house.”

Everyone pays for foreclosures. The path from the front steps of Angulo’s former townhouse in the working-class complex of Georgetown South in suburban Virginia winds up leading directly to a diminishing 401 (k) plan. A foreclosed house in a neighborhood becomes the cause of that community’s collapsing home values.

There’s plenty of reason for resentment in any rescue plan. Some people who don’t deserve help will get it. People who paid their mortgages on time might feel punished for it. But, as the argument goes, we’re not really bailing out people like Angulo. We’re saving ourselves.