A Note From DCCC Chairman Steve Israel: "Top Race In The Country"

I shuddered to think which corrupt conservative shill he had decided was the "top race in the country." Since Israel was a member of the reactionary Blue Dog caucus himself before making a play for House leadership, I figured it would be one of the broken down, struggling, remaining Blue Dogs who are facing defeat next year: Barrow (GA), McIntyre (NC) or Matheson (UT). Those 3 vote far more frequently in concert with Boehner and Cantor than they do with Democrats. But when I opened the e-mail, I realized that Israel too had moved on from the wretched Blue Dogs in favor of the revitalized-- albeit basically the same ideologically-- New Dems. His pick, the worst New Dem of all: Patrick Murphy of Florida, a lifelong conservative Republican and opportunist who switched parties so he could run against Allen West. His rich daddy did the rest. Apparently daddy doesn't want to pay for junior's career anymore and Murphy sends out more campaign spam than any other member of Congress. And now he has Israel signing one for him:

TOP RACE IN THE COUNTRY

Howard --

As chairman of the committee charged with electing House Democrats, I want to tell you about one of the top races to watch in the entire country: Patrick Murphy in Florida's 18th district.

Republicans and outside groups have named Patrick as a top target and circled this district as a race they must win.

And I’ve seen what Karl Rove and the Koch Brothers are capable of: spending over a million dollars on deceitful ads in a single House race.

If we want to be successful in 2014, we have to make sure Patrick hits his grassroots goal. Here’s why: as soon as the fundraising numbers are released, the pundits will scour over reports and make a determination on whether or not Patrick's campaign has what it takes to win.

Please donate to Patrick's campaign before Sunday’s midnight deadline. Remember, every last dollar counts for his grassroots campaign.

I hope you’ll do your part.

Thanks,

Steve

OK, Steve, here's my part. Aside from founding a caucus to bring a horde of far right Republican freshmen like domestic terrorist Steve Stockman (R-TX), militia nut Kerry Bentovolio (R-MI) and hate Talk Radio host Trey Radel (R-FL) together with a tiny handful of the weakest-minded, cowardly and most naive Democratic freshmen-- people like Ann Kirkpatrick (AZ), Eric Swalwell (CA), Kyrsten Sinema (AZ), and Scott Peters (CA)-- Murphy has one of the most reactionary voting records of any Democratic freshman... or, for that matter, of any Democrat, period. His overall ProgressivePunch score is a dismal 43.64 (out of 100). Only 10 Democrats have worse scores, rotgut Blue Dogs like John Barrow, Jim Matheson, Collin Peterson, Henry Cuellar, Mike McIntyre... the real dreck of the caucus. But let's get specific.

Hoyer and Israel, sensing that Murphy is among the most corrupt freshmen, immediately put him on the House Financial Services Committee, one of Congress's top corridors of bribery from Wall Street. And on that committee, Murphy has been a reliable vote for the Republicans as they voted to dismantle the Dodd-Frank Wall Street reforms. Here's an example; "Mr. Murphy" is Patrick Murphy and this committee vote was nicely explained by Too Much Online:

This particular piece of legislation speaks to an ongoing frustration in America's body politic: the supersized paychecks that go to America’s top corporate executives. Average Americans, in overwhelming numbers, want something done to bring some common-sense back to CEO pay.

But the House Financial Services Committee, this past Wednesday, opted to do the exact reverse. By a 36-21 margin, committee members voted to repeal the only statutory provision now on the books that puts real heat on overpaid CEOs. The full House, observers expect, will shortly endorse this repeal.

The specific provision 31 Republicans and five Democrats voted to repeal-- section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act-- imposes a new disclosure mandate on America’s major corporations. Under Dodd-Frank, corporations must annually reveal the ratio between what they pay their CEO and what they pay their median-- most typical-- workers.

Corporations have had to disclose what they pay their CEOs ever since the Great Depression. But they’ve never had to disclose, until Dodd-Frank became law in 2010, their CEO pay as a multiple of what their average workers are earning.

Executive pay reformers consider this ratio information crucial to the struggle against executive excess. If Americans could see-- and compare-- the exact CEO-worker pay ratio from one corporation to another, the resulting negative publicity on those corporations with the widest pay gaps might help discourage excessive executive compensation in the future.

And if corporations should choose to ignore this negative publicity-- and charge ahead with lavish executive compensation-- the Dodd-Frank pay ratio disclosure mandate could serve as a stepping stone to tougher reform action.

Lawmakers could, for instance, set a specific CEO-worker pay multiple as the nation’s preferred corporate compensation standard and deny government contracts, tax breaks, and subsidies to any corporations that pay their execs over and above that standard.

The Dodd-Frank pay ratio disclosure mandate has the potential, in other words, to help extinguish what Forbes magazine recently dubbed “the out of control wildfire” that executive pay has become. But the mandate hasn’t extinguished anything yet because the mandate hasn’t yet gone into effect.

Corporate lobbyists have seen to that. They've been pressuring the Securities and Exchange Commission, the top federal watchdog over Corporate America, to gut the Dodd-Frank pay ratio provision.

This lobbying blitz has paid off. The SEC has to issue regulations before any newly legislated mandate over corporate behavior can be enforced. The agency has so far issued no regulations on CEO-worker pay disclosure-- and nearly three years have gone by since Dodd-Frank initially worked its way into law.

But America’s corporate leaders don’t want to have to rely solely on their ability to intimidate the SEC. They’ve also orchestrated a congressional drive to simply repeal the Dodd-Frank pay disclosure mandate outright.

How can lawmakers who carry Corporate America's water possibly defend repealing a measure as publicly popular as pay ratio disclosure? Easy. They simply paint corporations as the victims of overzealous government bureaucrats who want to drown them in burdensome-- and meaningless-- paperwork.

So... of course a crook like Steve Israel is excited about Murphy. Some of Patrick Murphy's greatest hits on the House floor, aside from voting against all the Democratic alternatives to the Ryan budget:

• Voted with the Republicans for the Keystone XL Pipeline

• Voted with Republicans for CISPA

• Voted with Republicans to penalize workers who get overtime pay

• Voted for GOP Farm bill that took billions from food stamp program

• Voted with the GOP to make sure there are no limits to the amount of subsidies wealthy farmers get

• Only Democrat voting to undermine America's Farmers Markets

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Steve Israel And The Gatsby Curve-- If The Music Industry Is A Microcosm Of What's Happening In The U.S. Economy, Move To Another Country... Fast

Last weekend, when I started drawing the connection between Steve Israel and his constituents, The Princesses: Long Island, a number of people suggested I should have taken a more highbrow approach and drawn the comparison to another, somewhat less culturally repulsive fictional figure, The Great Gatsby. West Egg, a fictional North Shore town invented by F. Scott Fitzgerald, is certainly part of Israel's district, albeit in a pre-Israel era. Fitzgerald's novel, set in the 1920s, explores themes like resistance to social change on the one hand and social upheaval on the other-- not to mention decadence, the position of women in society, and socio-economic excess.

Somehow I don't think anyone at the White House had Steve Israel in mind when outgoing Council of Economic Advisers chairman Alan Krueger released the "Great Gatsby Curve" chart Wednesday evening at a lecture of the Rock and Roll Hall of Fame Museum, Land of Hope and Dreams: Rock and Roll, Economics and Rebuilding the Middle Class. From Krueger's prepared remarks:

The music industry is a microcosm of what is happening in the U.S. economy at large. We are increasingly becoming a “winner-take-all economy,” a phenomenon that the music industry has long experienced. Over recent decades, technological change, globalization and an erosion of the institutions and practices that support shared prosperity in the U.S. have put the middle class under increasing stress. The lucky and the talented – and it is often hard to tell the difference-- have been doing better and better, while the vast majority has struggled to keep up.

These same forces are affecting the music industry. Indeed, the music industry is an extreme example of a “super star economy,” in which a small number of artists take home the lion’s share of income.

The music industry has undergone a profound shift over the last 30 years. The price of the average concert ticket increased by nearly 400% from 1981 to 2012, much faster than the 150% rise in overall consumer price inflation.

And prices for the best seats for the best performers have increased even faster.

At the same time, the share of concert revenue taken home by the top 1% of performers has more than doubled, rising from 26 percent in 1982 to 56 percent in 2003.

The top 5 percent take home almost 90 percent of all concert revenues.

This is an extreme version of what has happened to the U.S. income distribution as a whole. The top 1% of families doubled their share of income from 1979 to 2011.

In 1979, the top 1% took home 10 percent of national income, and in 2011 they took home 20%. By this measure, incomes in the entire U.S. economy today are almost as skewed as they were in the rock ‘n roll industry when Bruce Springsteen cut “Born in the U.S.A.”

In my talk, I will focus on why these dramatic changes are taking place and explore their consequences. I will also describe President Obama’s vision for providing more opportunities for middle class families and those struggling to get into the middle class.

I should be clear about my overall theme: while the U.S. economy is recovering from the worst financial and economic crisis since the Great Depression, we must also take steps to strengthen the middle class and provide more opportunities for those born to less fortunate circumstances. If we don’t, we will fail to live up to our promise as a Nation and be susceptible to the kinds of forces that created economic instability in the past. To rebuild the economy from the middle out, the private sector will have to step up and reinvigorate the norms and institutions that have supported inclusive growth in the past. The government has an important role to play as well, but with severe budget constraints and limited political will, the government can only set the conditions for the private sector to grow, and provide more jobs and opportunities for middle class families. It is, to a considerable extent, up to private sector businesses, organizations and communities to ensure that economic growth leads to widely shared prosperity and a decent living for the vast majority of our people.

Let me start with the economics of the music industry, and then turn to the economy at large.

I want to highlight four factors that are important in generating a superstar economy. These are technology, scale, luck and an erosion of social norms that compress prices and incomes. All of these factors are affecting the music industry.

The idea of a “super star economy” is very old. It goes back to Alfred Marshall, the father of modern microeconomics. In the late 1800s, Marshall was trying to explain why some exceptional businessmen amassed great fortunes while the incomes of ordinary artisans and others fell. He concluded that changes in communications technology allowed “a man exceptionally favored by genius and good luck” to command “undertakings vaster, and extending over a wider area, than ever before.”

Ironically, his example of a profession where the best performers were unable to achieve such super star status was music. Marshall wrote, “so long as the number of persons who can be reached by a human voice is strictly limited, it is not very likely that any singer will make an advance on the £10,000 said to have been earned in a season by Mrs. Billington at the beginning of the last century, nearly as great [an increase] as that which the business leaders of the present generation have made on those of the last.”

Elizabeth Billington reputedly was a great soprano with a strong voice, but she did not have access to a microphone or amplifier in 1798, let alone to MTV, CDs, iTunes, and Pandora. She could only reach a small audience. This limited her ability to dominate the market.

Modern economists have elaborated on Alfred Marshall’s insights. The economist Sherwin Rosen developed a theoretical model in which super star effects are driven by “imperfect substitution” and “scale” in production. Simply put, imperfect substitution means that you would rather listen to one song by your favorite singer than a song and a half by someone else. Or, in another context, it means that if you need to have heart surgery, you would rather have the best surgeon in Cleveland perform it rather than the second and third best together.

Scale means that one performer can reach a large audience.

Technological changes through the centuries have long made the music industry a super star industry. Advances over time including amplification, radio, records, 8-tracks, music videos, CDs, iPods, etc., have made it possible for the best performers to reach an ever wider audience with high fidelity.

And the increasing globalization of the world economy has vastly increased the reach and notoriety of the most popular performers. They literally can be heard on a worldwide stage.

But advances in technology have also had an unexpected effect. Recorded music has become cheap to replicate and distribute, and it is difficult to police unauthorized reproductions. This has cut into the revenue stream of the best performers, and caused them to raise their prices for live performances.

My research suggests that this is the primary reason why concert prices have risen so much since the late 1990s. In this spirit, David Bowie once predicted that “music itself is going to become like running water or electricity,” and, that as a result, artists should “be prepared for doing a lot of touring because that’s really the only unique situation that’s going to be left.” While concerts used to be a loss leader to sell albums, today concerts are a profit center.

But there are limits to how much artists can charge their fans for concert tickets because of social pressures. Most people do not want to think of their favorite singer as greedy. There are a lot of great singers to choose from. Would you rather listen to a singer who is committed to social causes you identify with, or one who is only in it for the money? Part of what you are buying when you buy a recording or concert ticket is the image of the performers. The image and the music are intrinsically linked.

Some of our greatest artists have also been great champions of important social and economic causes, including George Harrison, Joan Baez and Bono.

If artists charge too much for their tickets, they risk losing their appeal. In this sense, the market for rock ‘n roll music is different from the market for commodities, or stocks and bonds. Considerations of fair treatment exert pressure on how much musicians can charge, even superstars.

Along these lines, one of my favorite performers, Tom Petty, once said, “I don’t see how carving out the best seats and charging a lot more for them has anything to do with rock & roll.”

And artists like Garth Brooks and, more recently, Kid Rock have made a point of charging a low price for all of the seats in the house when they perform.

In fact, the best seats for the hottest concerts have historically been underpriced. This is a major reason why there is a market for scalped tickets.

But many artists have been reluctant to raise prices to what the market will bear for fear of garnering a reputation of gouging their fans.

They also protest when tickets sell for a higher price on the secondary market, and often try to prevent the secondary market entirely. And it is considered scandalous when performers sell tickets on the secondary market themselves.

This behavior can only be explained in light of fairness considerations. Singers want to be viewed as treating their fans fairly, rather than charging them what supply and demand dictate. Indeed, you can think of market demand as depending on the perception of fairness.

In many respects, concerts could be thought of as a giant block party instead of a traditional market. While it is socially appropriate to charge neighbors some fee for coming to a block party to pay for the provisions, it is inappropriate to charge them enough to make a hefty profit. There is a compact that fans come and bring their enthusiasm and support for the band, and the band charges a reasonable price and puts on a good show.

Now, as inequality has increased in society in general, norms of fairness have been under pressure and have evolved.

Prices have risen for the best seats at the hottest shows-- and made it possible for the best artists to make over $100 million for one tour-- but this has come with a backlash from many fans who feel that rock ‘n roll is straying from its roots. And this is a risk to the entire industry.

Let me next turn to the role of luck. I said “best artists,” but I also could have added luckiest artists. Luck plays a major role in the rock ‘n roll industry. Success is hard to judge ahead of time, and definitely not guaranteed, even for the best performers. Tastes are fickle, and herd behavior often takes over.

Even the experts, with much at stake, have difficulty picking winners. Columbia Records turned down Elvis Presley in 1955 and the Beatles in 1963. They turned down Bob Dylan in 1963, and almost rejected “Like a Rolling Stone” in 1965, which was later named the greatest rock ‘n roll song ever by Rolling Stone magazine.

Or consider Sixto Rodriguez, the subject of the documentary movie Searching for Sugar Man. Rodriguez recorded two-and-a-half albums from 1970 to 1975, which were commercial flops. But he was a huge success in South Africa, and his music became the battle hymn of the anti-Apartheid movement. And-- amazingly-- he was unaware of his fame and influence.

Both good and bad luck play a huge role in the rock ‘n roll industry. And the impact of luck is amplified in a superstar economy.

...Let me next turn to the economy more generally. The same forces of technology, scale, luck and the erosion of social pressures for fairness that are making rock ‘n roll more of a superstar industry also are causing the U.S. economy to become more of a winner-take-all affair.

The effects of technological change and globalization on inequality have been well documented in the past.

It is abundantly clear that computer and information technology has revolutionized the way work is done in the U.S. In 1984, less than a quarter of workers directly used a computer on their job. Today, nearly two thirds of workers directly touch a keyboard at work, and millions of others have had their jobs altered by embedded computers and information technology. Computer and information technology has reduced the demand for jobs that can be routinized, and increased the demand for highly educated workers who can use the technology to increase their productivity.

The U.S. economy has also become much more integrated with the world economy in recent decades. While exports and imports made up only 11 percent of GDP in 1970, they made up 31 percent last year. You see signs of globalization everywhere: for example, American bands tour much more internationally today than they used to. A more globally connected economy increases the reach of successful entrepreneurs and artists, but also brings many more low-wage workers into competition with our workforce.

These developments have contributed to some of the momentous changes we have seen in the U.S. economy. This chart shows the share of total income going to the top 1% of families starting in 1920.

During the Roaring ‘20s inequality was very high, with the top 1% taking in nearly 20% of total income. This remained the case until World War II. Price and wage controls and the patriotic spirit that “we’re all in it together” during World War II caused inequality to fall. Interestingly, the compression in income gaps brought about by World War II persisted through the 1950s, 1960s and 1970s. Beginning in the 1980s, however, inequality rose significantly in the U.S., with the share of income accruing to the top 1% rising to heights last seen in the Roaring ‘20s.

After World War II, a social compact ensured that workers received a fair share of the gains of economic growth. This was enforced by labor unions, progressive taxation, a minimum wage that increased in value, anti-discrimination legislation and expanding educational opportunities.

This social compact was good for business and good for the economy. But the social compact began to fray in the 1980s. You can see from the following chart that wages of production and nonsupervisory workers moved pretty much in lockstep with productivity until the late 1970s.

Since the 1980s, however, labor compensation has failed to keep pace with productivity growth, and this has put stress on middle class workers.

...An astonishing 84 percent of total income growth from 1979 to 2011 went to the top 1 percent of families, and more than 100 percent of it from 2000 to 2007 went to the top 1 percent.

These trends are driven by a pulling apart of wages, with much faster wage growth for the highest income earners over the last three decades, and wages barely keeping pace with inflation or falling behind for everyone else.

...Next, let me consider the role that fairness plays in the economy. We already saw that social pressures for fairness affect the concert industry.

Workers, like music fans, expect to be treated fairly, and if they perceive they are paid unfairly their morale and productivity suffer.

To examine the role of fairness at the workplace, in a recent experiment Ernst Fehr and coauthors randomly varied the pay of members of pairs of workers who were hired to sell membership cards to discotheques in Germany. Obviously, it is not fair if, by luck of the draw, your pay is lower than that of your co-worker who was hired to do the exact same job. They found that increasing the disparity in pay between pairs of workers decreased the productivity of the two workers combined. Their findings suggest that a more equal distribution of wages would be good for business because it would raise morale and productivity.

This conclusion is reinforced by fascinating new research by Alex Edmans of Wharton. Edmans finds that when a company makes the list of the “100 Best Companies to Work for in America” its stock market value subsequently rises by 2 to 4 percent per year. Because employee morale suggests that treating workers fairly is in shareholders’ interests. Unfortunately, too many executives have strayed from this ethic, to the detriment of their shareholders and the economy.

The notion that profitable companies should share some of their success with their workforce used to be ingrained in U.S. companies. Earlier studies have found that companies and industries that are profitable tend to pay all of their workers relatively well, the managers as well as the janitors. In economics we call this “rent sharing.” While this is still the case, the practice has been eroded.

...It is not hard to find reasons why the institutions and practices that long enforced norms of fairness in the labor market have been eroded. At a time when market forces were pushing an increasing share of before-tax income toward the wealthiest Americans, the previous administration cut taxes disproportionately for the well off.

Even earlier, in the 1980s when inequality was starting to take off, the nominal value of the minimum wage was left unchanged from 1981 to 1989, causing it to decline in the value by 27 percent after accounting for inflation. The minimum wage serves as an important anchor for other wages, and the whole wage scale was brought down by the decline in the minimum wage.

A lower minimum wage and regressive tax changes sent a clear signal that maintaining fairness was not a priority.

And policies and tactics that undermined the ability of workers’ to join unions and exercise their right to collectively bargain weakened a critical institution that has long fought for fairness in the labor market, and served to strengthen the middle class, both for union members and nonmembers.

While we rightly celebrate the achievements of those who have been able to scale new heights of success in our economy, the shift toward becoming more of a winner-take-all economy has also had a number of adverse consequences for the U.S. economy that merit great concern.

I’ll highlight three.

First, the three-decades’ long stagnation in real income for the bottom half of families threatens our long cherished goal of equality of opportunity. In a winner-take-all society, children born to disadvantaged circumstances have much longer odds of climbing the economic ladder of success. Indeed, research has found that countries that have a high degree of inequality also tend to have less economic mobility across generations.

This is shown in the next chart, which displays a plot of the degree of income mobility across generations in a country on the Y-axis (the intergenerational income elasticity) against a measure of the extent of inequality in that country in the mid-1980s (the Gini coefficient for after-tax income) on the X-axis.

A little over a year ago, I called this relationship “the Great Gatsby curve,” because F. Scott Fitzgerald’s novel highlighted the inequality of the Roaring ‘20s and class distinctions-- I had no idea they would remake the movie as a result!

Each point in the graph represents a country. Higher values along the X-axis reflect greater inequality in family resources roughly around the time that the children were growing up. Higher values on the Y-axis indicate a lower degree of economic mobility across generations. The points cluster around an upward sloping line, indicating that countries that had more inequality across households also had more persistence in income from one generation to the next. Note that the U.S. is on the upper right of the line, indicating that we have both high inequality and low mobility.

The rise in inequality since the 1980s is likely to move us further out on the Great Gatsby Curve.

Quantitatively, the persistence in the advantages and disadvantages of income passed from parents to children is predicted to rise by about one quarter for the next generation as a result of the rise in inequality that the U.S. has experienced over the last 25 years.

We are already seeing a growing gap in the enrichment activities provided to children born to higher and lower income families.

[S]ince the 1970s expenditures on educated-related activities-- including music and art lessons, books and tutoring-- have been growing for children in families in the top 20 percent of income earners, but stagnant for children in the bottom 20 percent.

...Children of wealthy parents already have much more access to opportunities to succeed than do children of poor parents, and this is likely to be increasingly the case in the future unless we ensure that all children have access to quality education, health care, a safe environment and other opportunities that are necessary to have a fair shot at economic success.

There is a significant cost to the economy and society if children from low-income families do not have anything close to the opportunities to develop and apply their talents as their more fortunate counterparts from better-off families, who can attend better schools, receive college prep tutoring, and draw on a network of family connections in the job market.

Diverse observers from Raghuram Rajan of the University of Chicago to Robert Reich of Berkeley have suggested a second way in which rising inequality and slow income growth for the vast middle class have harmed the U.S. economy – namely, by encouraging families to borrow to try to maintain consumption, a practice which cannot go on forever, and by reducing aggregate consumption. As a result of the rise in inequality, the amount of income going to the top 1 percent of American families has increased by about $1 trillion on an annual basis. Because the middle class has a higher propensity to spend their income than the top 1 percent, this curbs consumption. An increasingly top-heavy distribution of income is a drag on aggregate demand and economic growth, and a contributing factor to credit bubbles.

President Obama made this point very clearly in a speech in Osawatomie, Kansas: “When middle class families can no longer afford to buy the goods and services that businesses are selling, it drags down the entire economy, from top to bottom.”

Third, an active line of research examines the connection between inequality and longer term economic growth. In a seminal study, Torsten Persson and Guido Tabellini found that in a society where income inequality is greater, political decisions are likely to result in policies that lead to less growth.

...In this year’s State of the Union Address, President Obama said, “We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by, or we can restore an economy where everyone gets a fair shot, and everyone does their fair share, and everyone plays by the same set of rules.”

He went on to outline a robust set of proposals to grow the economy from the middle out, by creating more middle class jobs and opportunities for those who are struggling to make it to the middle class.

...One of my predecessors as Chairman of the Council of Economic Advisers, Arthur Okun, wrote an influential book called, Equality and Efficiency: The Big Tradeoff. Okun argued that policies that increase equality often reduce efficiency.

But given the dramatic rise in inequality in the U.S. over the past three decades, we have reached the point where inequality is hurting the economy. Today, a reduction in inequality would be good for efficiency, economic growth and stability.

Growing the economy from the middle out is not only an economic necessity; it is also a national imperative. Our system of government as well as our economy work better when we have a rising, thriving middle class, with broad common interests.

The expanding middle class in the post-war period was a defining experience for our country. Just like music, this shared growth and prosperity helped bring the nation together.

President Obama captured the changes sweeping our economy well when he said, “The world is faster and the playing field is larger and the challenges are more complex. But what hasn’t changed-- what can never change-- are the values that got us this far. We still have a stake in each other’s success. We still believe that this should be a place where you can make it if you try. And we still believe, in the words of … [Theodore Roosevelt that] ‘The fundamental rule of our national life, the rule which underlies all others-- is that, on the whole, and in the long run, we shall go up or down together.’” And I agree with the President that America is still on the way up.

Thursday morning, President Obama was in Miami singing the praises of corrupt members of his own party, self-serving careerists like DNC Chair Debbie Wasserman Schultz. F. Scott Fitzgerlad could have set Gatsby along Collins Avenue in Miami Beach in Wasserman Schultz's district instead of on the North Shore of Long Island in Steve Israel's. Neither of these putative "Democrats," each a high-ranking leader inside the party establishment has the slightest connection to the problems of the struggling working class Americans Krueger talked about in his lecture. As we saw last week, in fact, Israel was bragging how he had the access to Obama needed to persuade him to keep the Bush tax cuts in place for his wealthy North Shore constituents and campaign donors. Similarly, Wasserman Schultz has made a career for herself by kissing up to the wealthy interests-- like the crooked Fanjul brothers who run the American sugar business-- while faking solidarity with working families. I spent much of my life in the music business and I ran into plenty of shady, greedy untrustworthy characters like Steve Israel and Debbie Wasserman Schultz. It has a lot to do with why the industry is in the toilet today-- just like the American economy. Believe me... it's not all the Republicans' fault.

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Can "Ex"-Blue Dog Steve Israel Be Beaten... Preferably In A Primary?

When making an excuse for reappointing Israel chairman of the DCCC, despite his dismal failure in 2012, the nicest thing Nancy Pelosi could muster to say about his abilities was that he's "reptilian." Although he claims he performed so horrifically in 2012 because his wife was divorcing him, he doesn't seem to have learned a thing and is leading the Democrats to doom again-- forcing vulnerable freshmen far to the right of their Democratic bases which is likely to lead to the Great New Dem Apocalypse of 2014 for almost identical reasons the DCCC brought on the Great Blue Dog Apocalypse of 2010.

Though I was born in Brooklyn, a good part of my childhood-- as well as all of my college years-- was spent on Long Island. I know Steve Israel's district better than the back of my hand. And don't be surprised if voters there oust him. All it would take is a plausible opponent-- either in a primary or in a general election. And while I'd rather see a progressive Democrat take him down, I'd be almost as happy to see a Republican beat him if the Democrats can't get it together to clean up their own mess.

Obama won all three Long Island districts, though not by much-- and underperformed his 2008 totals in all 3. He did better in Peter King's NY-02 than in Israel's NY-03.

• NY-01- Obama- 49.6- 49.1%
• NY-02- Obama- 51.6- 47.2%
• NY-03- Obama- 50.8- 48.2%

While Patty Murray was leading the DSCC from one jaw-dropping victory to another in state after state, cleaning up against the Republicans last November, Israel was losing, losing and losing-- losing everywhere as all his ill-conceived strategies-- starting with pathetic recruitment and even worse targeting--- failed dismally (albeit predictably). And while this was going down, he was occupied fighting with his wife over the spoils of personal corruption... and working with his donors at JPMorgan Chase on a short sale of his Dix Hills home that included a convenient $93,000 bribe from one of the worst bankster outfits on Wall Street.

The original mortgage lenders to Congressman Steve Israel made over $50,000 in campaign contributions to Steve Israel for Congress and more to the Democratic Congressional Campaign Committee he chairs.

Of two original loans to the Congressman and his ex-wife for the Dix Hills home they recently sold in a short sale, one was from Homebridge Mortgage Bankers Corp. The company went bankrupt in 2008 and is currently the subject of numerous lawsuits. Two of the loans they got to refinance the home a year later were both from Homebridge.

Records show Homebridge Chairman and President, Nicholas A. Bratsafolis and his wife Michelle, gave $21,000 to the Steve Israel for Congress Committee and his New York Jobs PAC between 2003 and 2007.

Another listed President of Homebridge Mortgage, David Pankin, from Plainview, contributed $3,500 to the Steve Israel for Congress Committee between 2003 and 2005.

Together, Bratsafolis and Pankin also contributed more than $35,000 dollars to the Democratic National Committee and the Democratic Congressional Campaign Committee, chaired by Israel.

According to Stephen Labate, Congressman Israel’s GOP challenger in the November election for the newly drawn 3rd Congressional District, “The donations tied to the loans raise serious questions of insider sweetheart deals.”

In July of 2004, Congressman Israel and his wife, Suffolk County Family Court Judge, Marlene Budd, purchased the Dix Hills home with two mortgages: one from Homebridge for $464,000 dollars and another from National City Bank for $57,950 dollars. Congressman Israel paid a down payment of $58,050 dollars or roughly 10% on the original purchase.

In August of 2005, Congressman Israel and his wife, refinanced with Homebridge, getting two loans from them, one for $508,000 and one for $63,500 dollars totaling $571,500 for the house they bought for $580,000 dollars in 2004. They satisfied the original loans when they refinanced.

“It is more than curious that just a year after purchasing the home, the congressman refinanced the home at 98.5% of the original purchase price from a mortgage lender whose principle owners just happen to be major donors to the congressman and his party.” according to Chris Thompson, Mr. Labate’s campaign manager. The Israel camp did not respond when asked how much, if any, down payment was part of the refinance deal in 2005.

In October of 2006, Congressman Israel and his wife got another mortgage on the same property for $105,000 dollars from JP Morgan Chase. That brought the total in 2006 to $675,500 dollars for the three mortgages on the Long Island home. In 2006, they also purchased an apartment in Washington, D.C. for approximately $416,000 dollars.

The house in Dix Hills sold recently for $460,000 dollars. In early October, the New York Post ran a story revealing JP Morgan Chase forgave $93,000 dollars on Israel’s “underwater mortgage.” The Israel campaign does not deny the amount and the fact of the JP Morgan Chase loan forgiveness.

Congressman Israel voted in 2008 to bailout JP Morgan Chase with $25 billion, through the Troubled Asset Relief Program (TARP).  JP Morgan paid back the loan with interest.  GOP strategists argue they may have paid back Congressman Israel by forgiving the $93,000 debt he still owed on his “underwater loan” to them.  The Israel camp denies any special treatment and insists that all transactions were above board and by the book.

Ed Cox, the New York State GOP Chairman, released a statement after the New York Post  article responding to the loan forgiveness.  

“On the surface it would appear that he would not qualify for such a reduction, so we asked the House Ethics Committee to investigate the circumstances that surround what looks to be a highly questionable transaction and a potential abuse of power.”

...“Short sale listings on Long Island per MLS (for the period 1/1/12-10/10/12) were 3,348 out of 30,526 total listings. That calculates to 10.9% not the 14.5% offered by the Israel campaign,” according to Mr. Thompson [campaign manager for his 2012 Republican opponent]. “Looking only at homes over $450,000 the number falls to less than 1% and Mr. Israel’s home was 1 of only 246 homes in that price range” he added.

Congressman Israel will not have to pay taxes on the cancellation of debt, because the Mortgage Debt Relief Act, (HR 3648,110th Congress), was extended through 2012 by the Economic Stabilization Act of 2008, Steve Israel voted for.

Before the Mortgage Debt Relief Act, anytime a lender, would write down (or forgive) the borrower’s debt to accommodate a settlement, they were required to report the amount of the write-down to the IRS and it could be considered income to the borrower. Treated as income the written-down amount becomes taxable and would need to be reported on the 1040 tax return. Normally, if a person gets debt forgiveness on an unsecured debt like a credit card, he must pay taxes on it. A temporary measure, The Mortgage Debt Relief Act was to expire, but thanks to the extension of the act through 2012, something Congressman Israel voted for, he will not have to pay taxes on the $93,000 JP Morgan Chase forgave.

Family Court Judge Marlene Budd and Congressman Israel have a combined income of over $300,000. Records show they purchased a 2nd home in Washington D.C. in February 2006.  Two mortgages were taken out on the D.C. apartment from Wachovia Bank: one for $56,667 and another for $302,228 for a total of $358,895. This apartment is not currently listed for sale as reported in Newday recently.

The total mortgage debt on their two homes in October of 2006 was about one million dollars.  Without including any credit card debt they might have had, their debt equity would be greater than the norms allowed for a conventional mortgage at their pay grade, according to the Labate campaign.

Democratic New York State Senator Kirsten Gillibrand, has a televised campaign ad touting the new “Stock Act” she recently passed-- banning insider trading in the stock market by members of Congress based on information they get as members of influential committees. “Members of Congress should play by the exact same rules as families like yours.”

Some Republican’s are questioning whether Mr. Israel who has represented the 2nd Congressional District since 2001 and is now running for the 3rd CD, is playing by the same rules as his own constituents when it comes to his mortgage.

According to Stephen Labate,  “Since the story of the Congressman’s short sale broke, voters all across our district have been expressing their outrage, both to me and to our campaign volunteers.  Many have relayed their personal stories of financial duress and being turned away by their mortgage lenders when they sought relief. Voters are tired of the insider deals our elected officials cut for themselves and I believe they will voice their discontent at the polls on Election Day.”

Election Day came and went and Labate wasn't deemed a plausible candidate by the voters. Israel has portions of three counties. He won them all, although underperformed in the parts of the district, Nassau and Suffolk, where they knew him best.

• Nassau- 62,180 (56%)
• Suffolk- 51,903 (57%)
• Queens- 22,604 (65%)

The new 3rd District includes the Queens neighborhoods of Whitestone, Beechhurst, Little Neck, Douglaston, Fort Totten, Bay Terrace and (a portion of Bayside). On Long Island, Israel's new district lost the towns of Babylon and Islip from his old district. He retains the Town of Huntington and a small western portion of the Town of Smithtown from the previous district. In Nassau County, the district now includes Oyster Bay, Great Neck, Manhasset, Port Washington, Roslyn, Williston Park, Floral Park and New Hyde Park.

Previously a D+8 district, Israel's is now one of only 9 in the whole country rated exactly EVEN, not an R+1 like Peter King's to the south and not a D+1 like Frank LoBiondo's in New Jersey. So Israel had to actually campaign for himself last year. His first instinct, of course, was to throw President Obama under the bus.

“I’ve had disagreements with President (Barack) Obama over certain things,” Israel said. “I have agreements with him on other things, but on the disagreements I’m able to talk to him face to face because I’m in leadership and say ‘we need to do better on this.’”

A source of debate with Obama has been the “Bush tax cuts.”

Obama wants to eliminate the cuts for people earning more than $250,000 each year. Israel said he believes the cut off should be higher in areas of the country that are more expensive to live in.

“Well, $250,000 may make you rich in Hastings, Nebraska, but it does not make you rich in Huntington, Long Island,” Israel said. “I’ve had an argument with (Obama) that we ought to adjust the tax code to reflect the local cost of living.”

Although many Long Island residents are annually among the nation’s highest earners, Israel said the elevated cost of utility bills, property taxes and a high cost of living can make for difficult financial situations for residents of his district.

“Being chairman of the DCCC... puts me in the Oval Office where I can say to the president ‘Rich is relative, Mr. President and I wish you would understand that,’” Israel said.

He won but this cycle the NRCC has said they will target him and spend money trying to defeat him if they can recruit a credible candidate. I wish them all the luck in the world.

How could anyone vote for Steve Israel? He represents the wealthy people of his district-- and only the wealthy people of his disrict. Meet his constituents:

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Can The Democrats Retake The House Next Year?

Steve Israel's talking point is "problem solvers." He repeats it like a mantra. But there's something else interesting that he said in his interview with USA Today, in response to a question about what it means that the DCCC spent so lavishly in South Carolina a few weeks ago, only to lose-- and by a wide margin-- to one of the most flawed Republican candidates ever, Mark Sanford. Israel pointed out the SC-01 "is one of the 100 most Republican districts in the country (which isn't exactly true. The PVI is R+11 and it's ranked the 118th most Republican): "I made a decision that we're not going to give up on any district and we're not going to give up on any candidate... It would have been easy for me to walk away, but we'll fight wherever we have a chance." Almost sounds less reptilian... and more like Churchill.

As we mentioned before a few times, last year Israel very much did walk away from Jim Graves in his race against Michele Bachmann. After putting him on the Red to Blue list, Israel decided not to spend any money at all in the district. Bachmann spent $11,946,232 to Graves' $2,279,384 but he came a lot closer to beating her than many of Israel's handpicked candidates where the DCCC spent millions. The 4,197 votes by which Bachmann beat Graves would certainly have been made up had the DCCC spent the kind of money in MN-06 that they spent bolstering losing candidates like Blue Dog Gary McDowell (1,282,979), Blue Dog Brendan Mullen ($483,721), New Dem Julian Schreibman ($2,037,612), Joe Oceguera ($2,649,541) or Pat Kreitlow ($2,069,595) to name a few.

And Graves wasn't the only viable Democratic candidate Israel gave the cold shoulder-- and a cold shoulder often comes with an explicit message to big donors to NOT give contributions. Had Israel been even vaguely competent last go-round, among the Republicans who wouldn't be serving in Congress this session are right-wingers in MUCH bluer districts than Bachmann's. These are Republicans who could have been defeated had Steve Israel just done his job. None comes from an R+11 district like SC-01. In fact none comes from a district above R+4-- and all are powerful GOP House leaders who were actively protected by Steve Israel:

• Darrell Issa (CA)
• John Mica (FL)
• Joe Pitts (PA)
• Scott Garrett (NJ)
• Paul Ryan (WI)
• Buck McKeon (CA)
• Frank Wolf (VA)
• Mike Rogers (MI)
• John Kline (MN)
• Ileana Ros-Lehtinen (FL)
• Fred Upton (MI)
• Peter King (NY)

And this dozen only includes committee chairs and powerful Members that Israel put off the table, despite their political vulnerabilities and despite, in some cases, excellent Democratic candidates. The good news is that Israel may be lightening up on his protection racket a little and allowing DCCC staffers some leeway in going after vulnerable big shot Republicans. As you can see in the video above, he's very enthusiastic about Jim Graves this time around. There are reasons to believe he is equally enthusiastic about targeting Kline, McKeon and Garrett... at least a small step in the right direction.

There's a new national poll out that shows registered voters prefer to have a Democrat win their district than a Republican. And the margin is significant-- 48% of respondents picked the generic Democrat and 40% picked the generic Republican. But voters don't usually chose between generic candidates. That's why recruitment this year will determine what happens in November 2014.

One of the easiest districts for a Democrat to win would be FL-27, the seat now held by Ileana Ros-Lehtinen. But there is no recruitment; there is anti-recruitment. DNC chair Debbie Wasserman Schultz has made it abundantly clear to Florida Democrats that she will not tolerate anyone credible running against Ileana, who, like her, is owned by the sugar baron Fanjul brothers. Last year Obama's 7 point margin in FL-27 was one of the highest margins of victory in any district held by a Republican Member of Congress. But Wasserman Schultz had the DCCC make sure there would be no viable candidate. The "Democrat" who ran, Manny Yevancey, still hasn't filed an FEC financial disclosure report, which means he raised and spent less than $5,000. His petitions-- which were commercially collected by a firm in Tampa that was paid by "someone else"-- is almost totally signed by folks in Tampa, not in Miami, Coral Gables, Hialeah, Miami Springs, South Miami, Westchester or anywhere else in Ros-Lehtinen's district. The total signatures on his petitions from Miami-Dade- 12. The total from Tampa- 1,147. And the other counties with significant petition numbers were also on the other side of the state, Hillsborough with 656 and Pasco with 502. Very convenient for Wasserman Schultz and Ros-Lehtinen to have a candidate with no income, no roots and no chance-- and old dirty trick that anti-democracy hacks employee.

That all said, there were still 84,899 (37%) voters willing to cast their ballots against Ros-Lehtinen and for an unknown "Democrat" who didn't campaign. Imagine if Steve Israel had ignored Wasserman Schultz' demand that Ros-Lehtinen's seat be off limits and had instead recruited a good candidate and gone after her. So far this year, Wasserman Schultz is guarding the process like a mad dog again and despite several DCCC staffers who would like to target Ros-Lehtinen, there is no movement whatsoever on recruiting a Democrat with a reasonable chance to win. There is no way for the DCCC to win back the House with this kind of leadership. Israel and Wasserman Schultz are the worst examples of why grassroots Democrats hate Inside-the-Beltway Democrats and why so many refuse to even turn up at the polls on election day. When Nancy Pelosi re-appointed Steve Israel to chair the DCCC again this year, she sealed the fate of her party to be in the minority again for the 114th Congress.

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Swing Districts-- The Utter Failure Of Steve Israel's Chairmanship At The DCCC

Being reptilian isn't always the answer

There are 21 congressional districts, almost all of them in the Old Confederacy, of course, where Obama failed to score even 30% last November. Seven of them-- a third-- are in Texas. When people are talking about "Texas turning blue," these aren't the parts of Texas they're talking about. Nor are these congressional districts where a Democrat is going to beat a Republican incumbent, and, yes, each one of them has a Republican incumbent. These are the 21 districts (from bad to worse in terms of PVI):

TX-13- Mac Thornberry R+32
TX-11- Mike Conaway R+31
GA-09- Doug Collins R+30
TX-08- Kevin Brady R+29
AL-06- Spencer Bachus R+28
AL-04- Robert Aderholt R+28
UT-03- Jason Chaffetz R+28
UT-01- Rob Bishop R+27
OK-03- Frank Lucas R+26
LA-01- Steve Scalise R+26
TX-19- Randy Neugebauer R+26
GA-14- Tom Graves R+26
TX-04- Ralph Hall R+25
TN-01- Dave Roe R+25
KY-05- Hal Rogers R+25
TX-26- Steve Stockman R+25
TX-01- Louie Gohmert R+24
KS-01- Tim Huelskamp R+23
NE-03- Adrian Smith R+23
WY-AL- Cynthia Lummis R+22
UT-02- Chris Stewart R+18

The 5 reddest districts that re-elected Democrats-- not really actual Democrats, hard-core, right-wing Blue Dog types who vote with the Republicans on virtually every important issue are:

UT-04- Jim Matheson R+16
WV-03- Nick Rahall R+14
NC-07- Mike McIntyre R+12
GA-12- John Barrow R+9
MN-07- Collin Peterson R+6

The best Obama did in any of these districts was 44% (in both GA-12 and MN-07). This isn't the most fertile territory to invest money in electing Democrats, especially if you want Democrats who will support a progressive agenda. Let's take a look at the districts with Republican incumbents where Obama either won or held Romney to a margin of 5 points or less. There are a lot more of them than you may think, and a lot more than the DCCC bothers to contest. These are the keys to a Democratic take over in the House next year (Bolded means the DCCC did not contest the district in 2012):

• FL-25- Mario Diaz-Balart (Romney- 51/Obama- 49)
• CA-39- Ed Royce (51/47)
• FL-07- John Mica (52/47)
• NJ-05- Scott Garrett (52/49)
• OH-14- David Joyce (51/48)
• MI-11- Kerry Ventivolio (52/47)
• VA-04- Randy Forbes (50/49)
• OH-10- Michael Turner (50/48)
• WI-01- Paul Ryan (52/47)
• CA-25- Buck McKeon (50/48)
• NY-22- Richard Hanna (49/49)
• NY-23- Tom Reed (50/48)
• MI-07- Tim Walberg (51-48)
• VA-10- Frank Wolf (50/49)
• NY-11- Michael Grimm (47/52)
• WA-03- Jaime Herrera Beutler (50/48)
• MI-08- Mike Rogers (51/48)
• PA-15- Charlie Dent (51/48)
• MN-02- John Kline (49/49)
• VA-02- Scott Rigell (49/50)
• PA-07- Pat Meehan (50/49)
• MN-03- Erik Paulsen (49/50)
• PA-06- Jim Gerlach (51/48)
• WI-07- Sean Duffy (51/48)
• WI-08- Reid Ribble (51/48)
• FL-07- Ileana Ros-Lehtinen (47-53)
• FL-13- Bill Young (49/50)
• WA-08- Dave Reichert (48/50)
• CA-10- Jeff Denham (47/51)
• MI-06- Fred Upton (50/49)
• PA-08- Michael Fitzpatrick (49/49)
• NY-02- Peter King (47/52)
• NJ-03- Jon Runyan (48/52)
• NV-03- Joe Heck (49/49
• IA-03- Tom Latham (47/51)
• IL-13- Rodney Davis (49/49)
• CO-06- Mike Coffman (47/52)
• NY-19- Chris Gibson (46/52)
• NJ-02- Frank LoBiondo (46-54)
• CA-21- David Valadao (44/55)
• CA-31- Gary Miller (41/57)

Italics signifies that Obama won the district. Notice how many districts Obama won where Steve Israel didn't even bother to fight. That's why the Democrats will never take back the House as long as Israel chairs the DCCC, which he is doing again this cycle. Thursday he wrote to the Democrats in Congress boasting about their edge in recruitment and fundraising for 2014. “We are ahead-of-schedule on recruitment, ahead-of-expectations on fundraising, and ahead-of-the-curve on defining the Republican Congress."

“House Democrats have begun 2013 ahead by every measure-- money, polling, candidate recruitment-- and are poised for gains next November,” Israel concluded.

Such diction is an example of how Israel has shied away this cycle from predicting that Democrats would win control of the House.

In a section analyzing Cook Political Report data, Israel wrote, “To retake the majority, Democrats need 17 seats, which is the exact number of Republicans currently sitting in seats that President Obama won in 2012.”

There are 28 Republicans bolded in the list above, seats Israel ignored in 2012 and of them, 10 are in districts Obama won (italics). There are very few indications, based on the rate at which Israel is handing out free re-election passes to his Republican pals and the lack of serious recruiting efforts against vulnerable Republicans, that Israel learned any lessons from his catastrophic performance in 2012, from his predecessor's even more catastrophic performance in 2010-- or that he has any more chance of leading the Democrats to victory in 2014 with his failed strategy than he did last time.

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