Homeland Insecurity (full text)

"Homeland Insecurity"

By Barack Obama

The Wall Street Journal


America is in a defining moment. This is the wealthiest nation in history. Yet many Americans feel that the dream so many generations fought for is slowly slipping away.

I've spoken with folks across this country who have worked all their lives to put their children through college, but now can't afford the rising tuition. I've spoken with many others who've done everything right, but fell into bankruptcy once they became sick, because they couldn't afford their skyrocketing medical bills. And since working Americans have to pay these rising costs with incomes that remain stagnant, many are falling deep into debt, unable to set anything aside for savings.

So at a time when many Americans have no margin for error, it's no surprise that the downturn in the housing market has done enormous harm. In the coming years, over two million Americans could face foreclosure.

The larger risk, however, is that what is happening in housing could spill over elsewhere. A number of firms borrowed huge sums to make investments tied to the housing market. They are now suffering big losses that could trigger a slowdown of the entire economy. We're already seeing some troubling signs. Consumer confidence is the lowest it's been in years. Pension funds are losing money, threatening retirement security. And banks are also losing money, resulting in a credit crunch. That means businesses have less money to invest and people can't get loans, which could lead to significant job losses in the months ahead.

This is a moment of challenge. But it's also a moment of opportunity which we must seize, to make sure our economic future is secure. That starts with addressing the source of our economic woes -- the crisis in the housing market. For most Americans, a home is not just a place to live; it's their most valuable possession -- so preventing a larger crisis in the housing market means providing greater economic security for middle-class families.


This week, President Bush outlined a limited agreement with lenders to ensure that some families don't face higher mortgage payments they can't afford. It is a start. But we need to do more. That's why, several months ago, I proposed tax breaks to help millions of homeowners make their payments, direct relief for the victims of mortgage fraud, and counseling so homeowners know what options are available to avoid foreclosure and refinance. And I have outlined a program to help make it easier for middle-class families, not speculators, to renegotiate or refinance their mortgages.

To prevent the current problems in the housing market from spreading, shaking confidence in other sectors of the economy, we need to put money in the pockets of middle-class Americans. In September, I proposed a middle-class tax cut that would offset the payroll tax that working Americans are already paying. It would give every working family a tax cut worth up to $1,000. It would also make retirement more secure by eliminating income taxes for any senior making less than $50,000 per year. And over the long term, I've called for an automatic workplace pension enrollment policy, which would include a federal government match for part of the savings of middle-class families so they can count on more savings when they retire.

But the test of judgment and leadership isn't just how you respond to problems; it's what you do to prevent them. That's why, last spring, I called for a summit on housing with representatives from the government and private sector similar to the one that Treasury Secretary Henry Paulson attended earlier this week. I also introduced a bill that would treat those who commit mortgage fraud like the criminals they are -- a measure that might have prevented the current crisis from escalating. Three months ago, I asked lenders to show flexibility to Americans trying to sell or refinance their houses.

In the last several months, I've also proposed a number of steps to prevent another economic crisis. These include restoring market transparency by making sure there's adequate government oversight over the rating agencies, so we can avoid practices that can mislead investors. We also need to stop credit-card companies from engaging in deceptive practices that push middle-class Americans further into debt. In addition, we need to update our regulatory system to reflect a 21st-century marketplace where so much credit comes from nonbank lenders, rather than traditionally regulated banks. And as we reform our regulatory rules, let's do so with an eye toward the global economy in which we're operating.

It's going to take a new kind of leadership to strengthen our middle class and make sure America's economic future is secure -- leadership that can challenge the special interests, bring Republicans and Democrats together, and rally this nation around a common purpose. And that is exactly the kind of leadership I intend to offer as president of the United States.