Representative Mel Watt (D-NC) is out to protect the independence of the Fed from the risk of an intrusive audit from the Government Accountability Office (GAO). The risk comes in the form of a bill initiated by Ron Paul and Alan Grayson that calls for an audit of the Fed. The bill, which now has more than 300 co-sponsors, would allow Congress to find out who the Fed lent more than $2 trillion to through its special lending facilities, and under what terms. Congress would also be able to find out which countries were allowed to take advantage of dollar swaps at the peak of the financial crisis last fall.

Allowing our elected representatives to know what our central bank (the Fed) is doing with our money might seem reasonable, but not to Mr. Watt. He has proposed an alternative which would keep this information secret. According to Mr. Watt, the prospect of a full GAO audit poses a huge risk to the Fed's independent conduct of monetary policy.

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Goldman Sachs is making yet another great contribution to society. It announced that it would contribute almost 4 percent of the money that it got from taxpayers in the AIG bailout ($500 million) to a new program to help small businesses recover from the recession. This is a nice gesture -- I suppose it's Goldman's way of saying "thank you" for all the help that we gave them in its time of need. (The help also included a $28 billion loan guarantee from the FDIC, $10 billion in TARP loans, and an amount of short-term loans from the Fed which Ben Bernanke will not disclose).

It's always good to see charity, but if Goldman really wants to help small businesses how about financing research on the implementation of financial transactions taxes. This could free up tens of billions of dollars that are drained off by the financial sector each year and possibly reduce the volatility of prices in many markets. That would be a great boost to small businesses.

Remember way back in 2008 when the three leading contenders for the Democratic presidential nomination all argued in favor of renegotiating NAFTA? We don't hear much talk about renegotiating NAFTA these days, even though one of the three leading contenders now sits in the White House.

NAFTA is not very popular, so coming out against it sells well with the electorate, especially among people who vote in Democratic primaries. However, the people who vote in Democratic primaries are not deciding trade policy, so it does not look like NAFTA is going to be renegotiated. There is a similar feel to the discussion of new banking rules where everyone is committed to dismantling "too big to fail" institutions.

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The deficit hawk crew, famous for missing the $8tn housing bubble that wrecked the economy, is now on the warpath, pressing the case for a big, new, national sales tax (a.k.a. "value-added tax"). They claim that the United States badly needs additional revenue to address projected budget shortfalls.

While we may need additional revenue at some point, it makes far more sense to impose a financial transactions tax, which would primarily hit the Wall Street banks that gave us this disaster, than to tax the consumption of ordinary working families. We can raise large amounts of money by taxing the speculation of the Wall Street high-flyers while barely affecting the sort of financial dealings that most of us do in our daily lives.

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The Senate just voted unanimously for extending unemployment compensation. The bill also included an $8,000 handout of taxpayer dollars to some people who buy homes (first time buyers and long-time homeowners). This $8,000 credit is not chump change. It is more than twice what it costs to pay for health care for a child for a year on the State Children's Health Insurance Program. It is about 50 percent higher than the average cash grant to a family on the much-maligned Temporary Assistance for Needy Families program (i.e. welfare).

The tax credit is noteworthy not only because it is an incredibly bad use of tax dollars. It is a great example of how so-called free market, anti-government conservatives are perfectly happy to use tax dollars to help people they like, specifically realtors, builders, bankers and the relatively affluent people who will be the primary beneficiaries of this tax credit.

This is not free market fundamentalism; it is crony capitalism. It is redistribution. It is "spreading the wealth around." However, the direction is upward. This should be obvious, but yet many progressives insist on denouncing free market fundamentalists. They should get paid by conservatives for these denunciations.

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The Obama administration came out with its first set of numbers on the jobs impact of its stimulus package. It's pretty much along the lines of what was predicted. To date, the package has created close to one million jobs. That is good news, but in an economy with more than 15 million unemployed workers, it is not nearly good enough. We need to do more, much more.

Fortunately, there is an easy and quick way to begin to get these unemployed workers back to work. It involves paying workers to work shorter hours. The mechanism can take the form of a tax credit to employers. The government can give them a tax credit of up to $3,000 in order to shorten their workers' hours while leaving their pay unchanged. The reduction in hours can take the form of paid sick days, paid family leave, shorter workweeks or longer vacations. The employer can choose the method that is best for her workers and the workplace.

If take-home pay is left unchanged as a result of the credit, then demand should be left unchanged. If workers are on average putting in fewer hours and demand is unchanged, then employers will need to hire more workers.

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It doesn't seem as though the news has gotten to the folks working on regulatory reform in Congress. If it had, they would try to think how their proposals would have worked during the years leading up to the crisis and during the crisis itself.

For example, the proposed council of regulators to assess systemic risk would have been a pointless source of greenhouse gas emissions. Alan Greenspan would have insisted that the housing market is just fine and that there is no risk of a nationwide fall in house prices. Given Washington ways, everyone would have deferred to the Maestro, and seen nothing wrong with AIG's trillions of dollars of credit default swaps. After all, if AIG gave life insurance to 50 million people, no one would get on their case because they would not be able to pay off if everyone died at the same time.

The plan to have large banks cover the cost of bailouts of their brethren would not have been made by anyone who remembered the financial collapse last fall. When AIG went down and the world was in full-fledged financial crisis does anyone think that the Fed/FDIC would have insisted that Citigroup, Bank of America and the rest cough up additional funds to cover AIG's bad debts? Are these people serious?

In spite of the best efforts of the insurance industry and their followers in Congress and the media, it is still very possible that the health reform bill passed by Congress will include a robust public plan. This is a case where the simple facts and persistent grassroots pressure may overcome the political power of a major industry.

If the bill passes with a serious public plan, it could make an enormous difference for the future of health care in the United States. However, the fact that the public option is even on the table at this point, after all the political experts had counted it out, shows the enormous potential for popular pressure to influence policy debates in this country.

The basic story is that President Obama and the Democratic leadership in Congress had always been lukewarm in their support of a public plan. President Obama had included it in his original proposal, but has made it clear on numerous occasions that he did not view it as an essential part of his health care plan.

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Kenneth Feinberg, President Obama's compensation czar for bailed out banks, appears to have taken some genuine steps to rein in excessive executive compensation at the basket case banks that received the most TARP money. He cut cash salaries by 90 percent in some cases and reduced overall compensation for the top executives at the seven institutions that received the most government money.

This is a good first step, but it is only a first step. The pay caps involve only a relatively small number of people in an industry where hugely bloated salaries are the norm. Even in these cases it is too early to know that the pay caps will actually prove to be binding. After all, Wall Street's main craft is evading regulations and taxes. It is entirely possible that those clever Wall Street boys will find a way to get around whatever pay restrictions Mr. Feinberg puts in place.

Whatever happens to the pay of this small group of executives the real problem goes much deeper. The Wall Street folks view the wreckage from last year as a minor distraction and are eager to get back to business as usual. This attitude was best expressed by "a person close to A.I.G.'s board," who said of plans to restrict pay at the AIG division that wrecked the company to $200,000: "that's insulting ... why wouldn't anybody quit?"

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Most of the economists and pundits who could not see an $8 trillion housing bubble are telling us that the United States desperately needs for the Chinese government to keep buying its debt. This crew of failed analysts argues that without the support of the Chinese government, interest rates in the United States will rise, choking off the recovery. In reality, the decision by China to stop buying U.S. government debt may not harm the economy's recovery, but it could be devastating to the recovery efforts at Citigroup and other basket case banks.

The basic logic is simple. China's central bank has been buying up huge amounts of dollar-based assets for the last decade. Their purchases include short and long-term government debt, mortgage backed securities and to a lesser extent private assets.

The Chinese central bank's purchases have two effects. First, they help to keep interest rates low. This supports economic growth by keeping down the interest rate on mortgages, car loans and other borrowing that boosts demand.

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To liven up the fall debates, Congress decided to have a contest for the silliest way to stimulate the economy. It doesn't look to be much of a contest. The homebuyers tax credit looks sure to be a big winner.

In the most extreme version of this boondoggle, the government will give a $15,000 handout to anyone who buys a home. That one really runs right to the top of the silliness meter. It's not cleat why we want people to buy homes. If the intent is to boost the housing market, this one falls short, since the vast majority of homebuyers will also be sellers, so their purchase does not on net boost demand.

The tax credit does create wonderful opportunities for gaming. I can "sell" my house to my brother and vice-versa, and we both get to pocket $15,000 (enough to buy health insurance for 5 kids for a year) at the taxpayers' expense.

But Congress may not be persuaded to get this silly even on Halloween, so they may settle for extending the first-time buyers tax credit. The current credit expires at the end of November.

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The elites hate to acknowledge it, but when large numbers of ordinary people are moved to action, it changes the narrow political world where the elites call the shots. Inside accounts reveal the extent to which Johnson and Nixon's conduct of the Vietnam War was constrained by the huge anti-war movement. It was the civil rights movement, not compelling arguments, that convinced members of Congress to end legal racial discrimination. More recently, the townhall meetings, dominated by people opposed to health care reform, have been a serious roadblock for those pushing reform.

Those disgusted by the bank bailouts, and the bankers who brought us this recession, will have a chance to make their views known when the American Bankers Association has its annual meeting in Chicago, October 25-27. A large coalition of labor, community, and consumer organizations are organizing a protest at this "Showdown in Chicago"

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Last Friday's job report showed that most of the US is experiencing enormous economic pain, even if America's economy is now in a recovery. Overall unemployment rose to 9.8%, with the unemployment rate for men hitting a new post-depression high. The economy shed another 260,000 jobs in September and the previous figure for jobs lost in the recession was revised up by more than 800,000. The average workweek continues to shorten. With real wages falling, this ensures that most workers will be taking home shrinking wages.

For the vast majority of people in the country, who derive the vast majority of their income from working, the economy looks really awful. But the economy is not looking bad for everyone.

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The budget situation today looks hugely worse than it did two years ago. The reason for the deterioration is not that the country has suddenly embarked on a massive new round of social spending, undertaken another major military adventure or even emptied the coffers through tax breaks. The reason that the deficit situation looks hugely worse than it did two years ago is that the $8 trillion housing bubble that had been driving the economy finally collapsed and threw the country into the worst downturn since the Great Depression.

The tragedy in this story is that the collapse of the bubble and its devastating consequences were entirely predictable. Had policymakers recognized the housing bubble and its dangers, they could have easily taken measures to avert this disaster, preventing the surge in unemployment, the flood of foreclosures and the huge budget deficits that characterize this downturn.

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The large number of people who protested against Barack Obama's healthcare plan in Washington last week drew an enormous amount of media attention. Clearly some of the leaders are certifiably crazy, questioning whether Obama is an American and likening him to Hitler. But many of the protesters had reasonable concerns about how the plan would affect the quality of care that they and their loved ones receive.

It was also striking how often the protesters complained about a government that was out of control and not responsive to ordinary people. One of the items that often came up in the interviews reported in the media was the bank bailout. Clearly this is an enduring and deeply felt cause of resentment.

It would be very hard to tell these people that their concerns on this topic are misplaced.

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