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Eugene Weekly : Coverstory : 11.06.2008

 

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DeFazio on the exciting hope of change under Obama

By Alan Pittman

Congressman Peter DeFazio spoke to Eugene Weekly on the eve of Barack Obama’s sweeping victory. 

The populist and popular local Congressman was widely quoted in the national media for his leadership in opposing the $700 billion federal bailout of Wall Street. DeFazio will also write a new multi-billion-dollar transportation bill as chair of a key House subcommittee.  

DeFazio spoke of running for governor, county payments, the financial crisis, gas prices and the exciting change that Democratic control of the White House and Congress may bring.

News reports have you ‘thinking out loud’ about running for governor in 2010. Is that true?

This is not the time. I’m totally focused on getting Obama as president and looking forward to dramatic changes in the direction for the country.

I’m looking forward to writing the first 21st century transportation bill. Everything we have done so far has just basically been an iteration on the Eisenhower era of a national highway system, and it is time to move beyond that to a system that is both more environmentally friendly and more fuel efficient and less congested. I hope to take what I call a least cost transportation approach which would include a whole bunch of factors such as fuel and carbon, in addition to monetary cost. I got to get this transportation bill done, and then that would give me an opportunity to think about other things.

Will it be an exciting time to be on Capitol Hill with the new Democratic majority?

If they can get close to 60 [votes in the Senate], they should be able to close off debate and get some work done. 

We’ve been talking about some sort of system of national health insurance for a hundred years. With Obama as president, I think we got a good shot at it. We’re going to be bringing an end to the war in Iraq. We’re going to be looking at a more energy efficient, 21st century transportation system. The list is really long. It could be incredibly exciting to actually be able to get some of these things done.

Is this the last county payments extension?

I think Senator Wyden says [after this extension], that’s it. I have not gone there yet. I would like to pair a continuation of county payments if possible at the four year level, which would be a reduced level [since] it phases down over the next four years, with my plan to enhance forest health with a thinning program which just happens to deliver more timber. I would increase the county’s share for the revenues of that timber. A combination of those two would fill about two-thirds of the hole. But if I was a county commissioner, I would be extraordinarily conservative with these funds as they come in, and I would put as much of it as I could away. Bush doubled the debt in four years. There is going to be tremendous pressure to rein in spending any way possible.

One of the premises of county payments is a payment in lieu of taxes. But there aren’t a lot of local taxes on private timber lands anyway. Do we need an increase?

I would not say that is an argument that transfers to the federal government not having an obligation to provide revenues to counties that are substantially federally owned. It’s not an argument that anyone raised [in Congress]. There was no one saying, well gee, those states could do more.

Can Obama pass his tax increase on the wealthy?

The beauty of the tax reform he is talking about is that most of it requires inaction. Congress is very good at inaction. 

With the Bush tax cuts they played a trick. Since they were going to bankrupt the country with these tax cuts, they pretended [the cuts] were going to expire. So all Congress has to do is modify. The deal that can be cut here, since it will require action by Congress to continue the middle class tax cuts, is there will be a modification of the inheritance tax. So I think there’s a very good chance we can get [Obama’s] tax program.

What about the health care program?

I support the Obama approach, which is to build on the existing system but make it more fair and extend it to the rest of America. The one thing is the insurance industry hardly every loses a battle in Washington. But today health care is out of reach of more and more Americans, close to 50 million. I think it is doable.

Obama has also talked about increasing student aid. Do you think that would fly?

We’ve just got to find where the money is going to come from. I could find it in a flash. I think maybe people who invest for a living should pay the same rate of taxes as people that work for a living. That would raise a whole heck of a lot of money. 

Is there a risk with the Democrats being in total power that there’s no one else to blame if something goes wrong?

Absolutely. If we don’t deliver, we could be out on our fannies very quickly. We need to make clear that this all can’t be done very quickly, but we’re going to set a path.

It’s imperative that we revisit the bailout. People are so angry and growing more cynical day by day as they read about the way Hank, [Treasury Secretary] Henry Paulson, has applied it. We’ve got to show a definitive difference between Democrats and Republicans.  We’ve got to deliver and reform the bailout and start to invest in the real economy, trickle up economics instead of trickle down, extend health care coverage to all Americans, increase education opportunity, bring some fiscal responsibility, end the war. 

When should we get out of Iraq?

I’m not going to set a hard date. Obama has been very definitive about wanting to do it honorably and as quickly and prudently as possible. For several years I have been advocating a negotiated timeline, and if Bush doesn’t negotiate the timeline with the Iraqis, then Obama will. 

Do you think we’ll get more wilderness with Obama?

There’s still a hope [this year] that we’ll get an omnibus wilderness bill that will include Copper Salmon, it’ll include Mount Hood, it will possibly include an expansion of the Oregon Caves. It could possibly include my proposal for wild and scenic status for a whole bunch of tributaries to the Rogue. It all depends on the Senate. There’s some rumor that this one recalcitrant, somewhat nutty Senator [Tom] Coburn is going to let the bill go. 

Then there’s more to do. I just went out two weeks ago and hiked into Wassen Creek, and I would put that very high on the list for new wilderness areas. 

Why did you oppose the $700 billion bailout? 

It was a false premise. What Secretary Paulson said was we will buy up worthless securities from banks, which will then free them up to lend money to viable businesses. That never made any sense unless the taxpayers were going to volunteer to take a huge loss. It was a cockamamie idea from day one. 

Unfortunately Congress got stampeded just like it did six years ago to go to war. The month before the election, they got stampeded into accepting an unnecessarily huge bailout without any adequate conditions to protect taxpayers. Paulson is lending money to banks who are saying they are going to use it for dividends. Paulson is lending money to banks who say they don’t need it, but they will think of something to do with it like maybe buy other banks, but they’re not going to lend it. He’s lending money to banks that are saying they are going to give their execs bonuses as big as last year despite the near collapse of the world economy.

What do you think of the bonuses?

I think those guys should go to jail instead of getting bonuses. We need to dedicate some of the funds to the FBI who has been asking for a thousand agents to both investigate what has happened and oversee the bailout. 

We need to curtail his [Paulson’s] ability to spend any additional funds. Just think what this guy is going to do on his way out the door on the way back to Wall Street on Jan. 19th. His buddies on Wall Street, they won’t know what to do with all the money he’ll be showering on them.

The bill does not restrict in any meaningful way corporate executive salaries or golden parachutes. It didn’t even meet the laugh test. I’m still angry about this. 

When I started hearing about mergers, I said why would you want to encourage banks to get bigger because then you end up with what you call too big to fail. Isn’t that how we got into this? 

I’ve got a well-documented letter from the steelworkers that says that Warren Buffet is guaranteed a minimal rate of return of 19 percent. Under the deal that the Fed got for the same amount of money with Morgan Stanley, we’re guaranteed a return of negative 50 percent for taxpayers. 

What if a stimulus bill builds more freeways and increases global warming?

That’s why I’m talking about a 21st century transportation system with the whole principle of least-cost transportation planning, and one of the factors that goes into cost is fuel, carbon emissions in addition to physical costs, i.e., dollars. 

We’re not about to begin a major new initiative of building a whole bunch of new freeways in this country, but we do need to maintain the system that we have while we’re providing for more fuel efficient ways of moving goods and people. We’re going to need a lot of investment in rail and we’re going to need investment in transit. 

Is this an opportunity for Eugene to ask for some major big transit system? 

We’re going to definitely build a lot more street cars under an Obama administration. Whether Eugene could show that it has the density and demand for street cars, I don’t know. At the moment we’re focusing on EmX, which is at least establishing right of way.

My condition with EmX from day one is you’ve got to get the support of the jurisdictions involved. The Eugene City Council has to figure out how could you serve the west side with EmX and get consensus on that.  

Should people be held accountable for the financial crisis? 

It’s a result of radical deregulation, and there was individual fraud. You were following the [former Federal Reserve Chairman Alan] Greenspan doctrine which was no bank, no entity, no individual — under his radical Ayn Rand philosophy — would ever do anything against their interests or the public’s interest or the company’s interest, and, of course, that just doesn’t work. 

We’ve allowed these things to be constructed which can threaten the entire world economy. It’s hard to believe. How can you have $50 trillion worth of credit default swaps on a market that in total is worth less than $5 trillion? No one can quite explain that. It’s basically gambling at some level. Some of them did it very recklessly and very knowingly, and I would love to give those people federal hospitality for a while.

It’s time for Congress to say we’re going to unleash them [the FBI] on this and where there was overt fraud, were going to find them and put them in jail. Where it was just stupidity and deregulation, we’re going to fix it by having a good robust system of regulation in place in the future.  

Is this the tip of the iceberg? Is this going to happen with credit cards, with student loans?

What’s happening in student lending is good. Private companies are getting out of the business. We should do the whole thing through the national direct student loan system where we can give them lower interest rates and better terms. 

Credit cards could be a big problem. They’ve turned credit cards into another collateralized debt obligation. No one fully understands it.

Gas prices have gone way up and down in a matter of months. Why?

There has been a tremendous amount of manipulation and speculation. There were credible analysts who testified last summer that between 40 and 50 percent of the price of a gallon of gas was speculative. It was just a mania. We need to regulate the commodities markets.

If you look at Exxon Mobil’s profits this quarter, guess what, the largest corporate profit in the history of the world. I have supported windfall profit taxes. 

Do we need another stimulus bill?

We need to extend unemployment insurance. We need to give the states more money to help them extend their Medicaid programs and their food stamp programs. The demand is just phenomenal for those programs right now and the states just don’t have the money to meet the need. Then we need to focus on money on real investment and putting people back to work. You can really justify borrowing money to invest in things that are going to provide clean water or efficient transportation for the next hundred years. 

I’m not particularly supportive of the idea of having another series of tax breaks that Bush is pushing for. They are saying 75 to 80 percent of the last stimulus did not go to stimulus. Where it was spent in the economy, it was spent in good part to buy goods from China. Building a transit system with streetcars made in Portland, Oregon, is going to put tens of thousands of Americans to work. Buying more flat screen televisions from China is going to put tens of thousands of Chinese to work.

Could we get high speed rail in Oregon?

If we could borrow $700 billion to bailout Wall Street, maybe we could borrow $350 billion to build a high speed rail network [for the nation]. It would be an expenditure over the next 30 to 50 years.  We need a vision, we need a plan and we need to make a commitment.

Some have called for changing mark-to-market accounting rules. But consumer advocates have said that assets should be valued based on their real market value rather than “mark-to-myth.” What do you think?

You’ve got to be careful, because you don’t want to go too far in either direction. If you take an asset that’s actually performing and say we’re going to count that as zero, then they’ve got a liquidity problem, even though they’ve maybe got cash flow coming in. But if you allow them to just set their own value on it, then maybe it’s all blue sky. So what you need is an impartial way. The way they did it during the savings and loan [crisis], is you send in independent bank examiners working for the Federal Deposit Insurance Corporation.

Are housing prices severely inflated and do they need to come down drastically? 

There are markets that are just way over inflated, but those markets have already seen substantial corrections. Oregon did not have, with the exception of perhaps the Bend area, that kind of hysteria. Although some reports still have Portland substantially high. 

What we need right now is a targeted program to help people, who through no fault of their own, people who weren’t buying liars’ loans and weren’t flippers and speculators, to help them try and stay in their homes, like something we did in the great depression with the homeowners lending corporation. It would be case by case. We could say were going to make the lender take a bit of a haircut, and you’re going to work out the loan over a longer period of time.

The national debt is approaching $10 trillion. Is it OK to have deficits during a recession to spend our way out of it?

It’s OK to have a deficit in the time of a recession, but you need to be investing the money in a meaningful way. 

To borrow money to give tax breaks? To borrow money to fight a war that shouldn’t be fought? Uh-uh. We’re borrowing money for things that are not beneficial and are not investments in the long term interests of society.





Listen to the complete interview: