Thursday, July 31, 2008

America heading for two class society 20% rich 80% poor

Here is a lecture by Elizabeth Warren from Harvard University presenting the results of her research into American families. It's entitled "The Coming Collapse of the Middle Class."

It's the Latin American model of society, and it is the direct result of the Reagan Revolution and the conservative movement.

Federal Judge appointed by Bush 43 denies claims of immunity to subpoenas

Glenn Greenwald discusses the slap-down that Federal District Judge, John D. Bates of the District of Columbia District Court gave to the Bush administration's clearly illegal assertion that Presidential aides have absolute immunity to Congressional subpoenas. That's a rare win for the Constitution and the Rule of Law.

In the Judge's 93 page ruling (.pdf) the claims of immunity to subpoena claimed by the Bush administration for Harriet Miers and Josh Bolton were declared to be totally without foundation in either law or case law. Apparently King Bush and his court jester Dick Cheney can't reliably control the lawyers they appoint as federal judges.

As Glenn Greenwald writes:
As part of its investigation, the Judiciary Committee issued Subpoenas to Miers and Bolten in an effort to find out, among other things, who actually made the decision for those U.S. attorneys to be fired. The subpoenas ordered Miers to appear before the Committee in order to testify, and ordered both to produce documents to the Committee. Both Miers and Bolten refused to comply with the Subpoenas. Miers simply failed to show up for her hearing, while Bolten refused to produce the demanded documents. They did so in reliance on the Bush administration‘s claim that both of them, as top-level aides to the President, enjoyed absolute immunity from Congressional subpoenas. It was that extremist theory which the court today rejected -- and rejected decisively and unequivocally.

In unusually strong language, the court pointed out that the President's claim that his aides enjoyed absolute immunity from Congressional investigations was "unprecedented" and "without any support in case law" (p. 3).
Karl Rove's refusal to appear before Congress and answer questions about his role in the railroading of Democratic Governor Don Siegelman is an identical situation to that of Miers and Bolton.

Wednesday, July 30, 2008

Desperate Army now promoting unqualified soldiers

Salon presents an article that describes the hollowed-out Army that Bush is passing on to the next President. Go read Strained by war, U.S. Army promotes unqualified soldiers.

The Army did the same thing in Vietnam. Solders entered Basic Training as Privates (E-1) and were automatically promoted to Private (E-2) upon graduation from Basic. The top 10% coming out of Basic were sent to Leadership Academy where most were promoted to PFC (E-3), and then to corporal (E-4) upon graduation. Except that the top 10% of Leadership Academy were promoted to Sergeant (E-5) upon graduation. The first time this new Sergeants were ever assigned to a company they were already wearing the three stripes of a sergeant.

At the same time they lowered the time for Second Lieutenants to be promoted to First Lieutenant from 18 months in the Army to 12 months, and shortly thereafter they lowered the time in grade as First Lieutenant to Captain from two years to one year. That means entry level Second Lieutenants were being promoted to Captain with two years total service. We called Captain's bars the second year attendance bars.

Previously promotion from entry as Second Lieutenant to Captain had taken about seven years. Since most people take at least three years in a job to become adequately proficient at it, these were people who were being thrown into combat without adequate training to keep themselves or their men alive and functioning.

Our local National Guard Artillery Battalion was reorganized as an Infantry Battalion three years ago and sent to Iraq. They became a marginal Infantry unit with no experienced Infantry leaders, while losing all the highly technical skills that had made them a very good Artillery Battalion.

This an Army that is losing effectiveness and flexibility rapidly. It's what is meant by a "hollowed out Army." The untrained and inexperienced personnel working at jobs that are over their heads are problems that are even more important than equipment shortages.

Are we currently in a recession? If so, for how long?

Mark Davis of the Kansas City Star offers this answer:
Is this a recession?

"The answer is yes," said Dave Anderson, a money manager at Financial Counselors Inc. in Kansas City.

Anderson cited slowing measures of industrial production and personal income as evidence of decline.

Those measures along with employment and retail sales reports will ultimately drive the official answer, which is dictated by an elite group of economists charged with making recession calls.

Many observers say those who doubt we're in recession simply need to be patient.

"We haven't seen the end of layoffs," Anderson said.

Many job hunters are struggling to find work. [Snip]

Some recession believers suggest these troubling times may prove to be more persistent than the mild recessions in the 1990s and early 2000s.

One key difference is debt, which has exploded in recent years as we tapped credit cards and home equity to sustain our lifestyle.

"The reason this one will be … at least longer lasting is because of all the leverage built into the economy," said Owen McPherson, president of CFW Capital Management Inc. in Prairie Village.

And it's not just the credit cards, subprime mortgages or the ballooning federal deficit. It’s also the nation’s appetite to consume more than it makes.

By importing so much oil, America is transferring its wealth overseas. Essentially, we're spending the national nest egg to keep our cars running.

Higher oil prices along with rising prices for other raw materials also threaten to rekindle the sort of inflation that racked the economy of the 1970s and early 1980s.

In at least one way, economist Peter Morici contends we may be heading toward something akin to the Great Depression.

Morici is not predicting the sort of massive unemployment and deflation that marked the 1930s. But he does believe this sluggish economy won't improve much for a long time.

"The thing about the depression was that no matter what Roosevelt did he couldn't get us out," Morici said. "A series of policy mistakes made it very deep, and then once you were in the funk you couldn't reverse it."
So unemployment is increasing and retail sales are dropping.

Add to this the series of mistakes ( described in
Until America admits that conservative economics has failed, the economy will continue to be bad.
) that brought America to this point. The current and increasing economic problems are a direct result of a lot of bad political management and financial including
  • the politically inspired diversion of the profits of higher productivity to the very wealthy instead of sharing it with labor in the last three decades,

  • The sharply increasing the price of higher education combined with making the higher priced dependent almost entirely on loans which cannot be discharged in bankruptcy,

  • Alan Greenspan's Federal Reserve lowering interest rates so low that savings was discouraged and the Housing Bubble was created in order to allow Bush to be reelected in 2004, then sharply increasing the interest rate right after the election,

  • Bush's tax cuts for the wealthy combined with out of control spending and an unnecessary and badly managed war in Iraq,

  • America's banks pushing for financial deregulation, then upon getting it building a massive financial house of cards based on highly leveraged financial instruments that required constant increases in continuously increasing revenue and profits to avoid failure,

  • The financialization of America's economy in which banking and insurance replace industrial production jobs that build a healthy middle class. The industrial jobs are still being exported by bankers and investors who are searching cheaper labor rather than training and supporting more productive American workers.,

  • The Bush administration replacement of trained and experienced government workers with political cronies who have the right ideological anti-government attitudes, along with the outsourcing of as much of the government as can be done rapidly,

  • The negative leverage caused by increasing debt, especially credit card debt, and

  • All of this combined with increasing demand for foreign oil as the supply ceases to expand - a shortage caused in part because of the refusal of automotive companies to develop higher gas mileage vehicles and the refusal of conservative politicians - both Republican and Democratic - to take actions to prepare for the well-anticipated shortage of oil supply.

  • Add to all this the conservative "No New Taxes" movement which has left us with roads and economic infrastructure that are literally falling apart like the bridge in Minnesota did, and which will require more money over a long period of time before it can be rebuilt. It has also left America with a patchwork health system that increasingly provides inadequate service for those with insurance and leaves nearly 50,000 people of our 330 million people without health insurance, depending at best on the overstressed and shrinking American emergency medicine system.
This is a series of bad management decisions almost all of which came out of the Reagan Revolution and the conservative movement.

The toxic results of the Reagan Revolution took nearly three decades to bring America to this current economic crisis. They won't be reversed soon, even if the obstructionist Republican Senators lose their ability to filibuster any effort solve America's problems by losing their 40 + Senate minority.

Rumsfeld's poorly managed Department of Defense

Any student of management in large organizations will be shocked at this. Here is a portion of Gen. Shinseki's letter to Donald Rumsfeld, sent just before Shinseki retired:
[On the workings of the Office of the Secretary of Defense, or OSD, under Rumsfeld:] I am greatly concerned that OSD processes have often become ad hoc and long established conventional processes are atrophying. Specifically, there are areas that need your attention as the ad hoc processes often do not adequately consider professional military judgment and advice. . . . . Second, there is a lack of strategic review to frame our day-to-day issues . . . . Third, there has been a lack of explicit discussion on risk in most decisions. . . . Finally, I find it unhelpful to participate in senior level decision-making meetings without structured agendas, objectives, pending decisions and other traditional means of time management.
No large organization with numerous responsibilities can be expected to operate efficiently if the Commander/CEO tries to manage it in an ad hoc manner. Too much is overlooked - like possibly planning for the post-war occupation.

Donald Rumsfeld was a naval aviator. His job - like that of all combat pilots - was to fly a complex machine, with managing people a secondary mission. Management of a large organization is a very different set of skills, one that most of the members of the Bush administration seem to consider unimportant along side knowledge of conservative ideology. Still, that Rumsfeld did not know how to run effective meetings that used the skills of those attending surprises me.

The rest of Gen. Shinseki's letter to Donald Rumsfeld is also very much worth reading.

Until America admits that conservative economics has failed, the economy will continue to be bad.

What's happening to the economy now?

The multitude of bad mortgages that were wrapped into collateral debt Obligations (CDO's) and sold to investors have caused severe erosion of bank and financial company capital. This has led to several large bank failures as banks like IndyMac (who specialized in so-called "Liar Loans") owe more in debt than they can pay back. Bear Stearnes failed after having to take two large failed Hedge Funds back onto their balance sheet when they went bankrupt last Fall, then finding their own capital so impaired that other banks and finance companies would no longer lend to them to keep their operations going.

Losses on the mortgage-backed CDO's has also caused other large banks (like Bank of America and Wachovia Bank as well as Citibank and J.P. MOrgan) and financial companies (such as Merrill Lynch) to have to sell additional stock to increase their capital and avoid bankruptcy.

This sale of stock at fire sale prices after their stock prices have declined 50% and more is seriously diluting the value of the shares owned by previous investors who bought their stock. That means that previous owners of the stock take all of the price decline, but the new stockholders will share in any later stock appreciation.

In addition to selling stock that dilutes the value previously issued stock, the banks are also selling CDO's at huge discounts to use the money to build up their capital - which they have to do to avoid bankruptcy. Merrill sold CDO's originally on their books at $30.8 billion for .22 cents on the dollar. The fire sale of discounted assets is only part of what the banks and financial institutions have to do to avoid going bankrupt. They are also laying off workers and seriously cutting back on lending money for any reason, even to long-time good customers.

The refusal to lend to previous long time customers has put other businesses into trouble. They have difficulty financing maintenance, repair and upgrading of their existing businesses, so they are also having to lay off workers.

Most of this was at first primarily in the financial economy, but when loans start drying up businesses in the real economy find it difficult to sell their goods and services on credit. After a decade when the Federal Reserve held interest rates inordinately low to pump up the economy and reelect George Bush in 2004, no one has bothered to save money. The low return on savings, essentially the same as or lower than inflation, meant that it was more rational to buy on credit than to save up for something the consumers wanted. The result is that now there a few consumers with savings to buy when they can't get loans.

Then Companies that produce the goods and services can't get loans to maintain their plant and equipment, so their production falls off. The layoffs of workers in both the financial and the real sectors reduces demand for goods and services, especially since the American economy has been operating on borrowed money instead of a well-paid middle class since the late 70's. The current recession is a direct result of a lack of consumer demand, caused by consumers who cannot afford to buy consumption goods and services. Expect more stories like this one about Bennigans and Steak-and-Ale in Florida suddenly going into Chapter 7 liquidation. Similar casual dining chains are also in trouble.

The key is that consumers are tapped out. Until recently they bet that things would turn around later. They would have increased debt, betting that their income would later increase to allow them to continue spending.

No more. Now a great many consumers are recognizing that any future turnaround is unforeseeable. They are reducing the us of credit cards and paying them off instead of increasing debt.

If anyone tells you that the American economy is fundamentally strong and that we are near the bottom, laugh at them. Because the economy is so weak the Fed can't raise interest rates to keep the dollar from declining. This has been a major cause of the increase in the price of oil and sets the picture for oncoming inflation. And no, the recent decline in the price of oil is not a result of it having been overpriced. It is a result of the decline in the economies of industrial nations so that there is less driving, along with the rational reaction of drivers to reduce the amount of driving because of the very high price of fuel. Any turnaround in the economy is going to be met by further increase in the price of oil as demand goes back up, which will dampen the turnaround for a long time.

Besides, the last of the Adjustable Rate Mortgages haven't reset upwards yet. When they do, the new prices will take into account the oncoming inflation and reset to their highest possible rate. That will cause even more foreclosures and shaky banks, which will mean further credit restrictions. Those credit restrictions mean that the free market economy will not be able to drag itself out of the recession.

The solution? In the short run, we all suffer. But to make the recovery, such as it is, happen sooner, the consumers have to get more jobs and more money to rebuild the economy. We are going to have to listen to Robert Reich:
The only way to keep the economy going over the long run is to increase the real earnings of middle and lower-middle class Americans. The answer is not to protect jobs through trade protection. That would only drive up the prices of everything purchased from abroad. Most routine jobs are being automated anyway. Nor is the answer to give tax breaks to the very wealthy and to giant corporations in the hope they will trickle down to everyone else. We've tried that and it hasn't worked. Nothing has trickled down.

Rather, the long-term answer is for us to invest in the productivity of our working people -- enabling families to afford health insurance and have access to good schools and higher education, while also rebuilding our infrastructure and investing in the clean energy technologies of the future. We must also adopt progressive taxes at the federal, state, and local levels. In other words, we must rebuild the American economy from the bottom up. It cannot be rebuilt from the top down.
The only institution in the economy that can borrow in a bad economy is the government. It can borrow today based on future revenue anticipated from taxes, but if that money is spent in rebuilding the economy from the bottom up, future tax revenue will increase to cover the borrowing.

Banks and financial institutions can't borrow when their current capital position is negative, as most banks are today. And since the problems are getting worse, not better, an unregulated financial economy will not be of any use until after the recession is over. And after that, the financial economy will have to be regulated to keep it from creating another and larger financial bubble.

Consumption keeps the economy working, not investment. When there is economic demand (the desire for goods and services, combined with the money to pay for them) then investment will occur to meet that demand. Until that demand is there, no sensible investor is going to throw his money at a declining economy. So we need the government to step in and place its priority on supporting the middle class again instead of handing off all the profit from increased productivity to the wealthy who do not keep the economy afloat.

In short, we are looking at continuing economic hard times which are the direct result of conservative mismanagement of the American economy. Only rational government action can reduce the length of time of those hard times. That's going to require destroying the conservative movement as an effective political force and replacing most Republican and many Democratic politicians in office.

The recession is going to last at least until those people are out of power. After that there will have to be a long period of rebuilding what conservatives have destroyed. That rebuilding will require a combination of intelligent government and a lot of private enterprise working together.

Monday, July 28, 2008

Robert Novak diagosed with brain tumor

The Chicago Sun-Times, Robert Novak's home newspaper, published Novak's statement today that he has been hospitalized with a brain tumor.
“On Sunday, July 27, I was diagnosed with a brain tumor. I have been admitted to Brigham and Women’s Hospital in Boston, where doctors will soon begin appropriate treatment. “I will be suspending my journalistic work for an indefinite but, God willing, not too lengthy period."

Novak is alert and talking — he wrote the statement announcing his illness — but in intensive care, where the hospital does not allow phone calls or flowers, according to his assistant, Kathleen Connolly.

"He's talking,'' Connolly said. "He seemed fine."

The diagnosis was sudden. Novak became ill Sunday during a family outing near Cape Cod, Mass. A family member called 911, and he was brought by ambulance to Brigham and Women's Hospital, where the diagnosis was made.

It’s too early to know whether the tumor is malignant or benign, his assistant said.[Snip]

Novak, 77, struck a pedestrian last Wednesday
[July 23] while driving his Chevrolet Corvette in Washington, D.C. The man he struck suffered minor injuries, according to the Associated Press. Novak was issued a $50 citation.

Asked whether the accident might have been linked to the columnist's medical condition, Novak's reporter, Charlie Spiering, said today, "It's really too early to tell."

Novak said he didn't realize what happened and continued driving until a bicyclist stopped him, the Associated Press reported. David Bono, the bicyclist, said the pedestrian was hit in a crosswalk and was splayed across Novak's windshield.
The report last week that Novak had struck a pedestrian in a cross-walk and appeared unaware that he had done so was strange at the time. This appears likely to provide an explanation for that event.

As much as I dislike Novak's politics, I really hope this is not cancerous. No one deserves that. It is hard not to compare Novak's condition to that of Senator Ted Kennedy who was diagnosed with malignant brain cancer and has been getting treatment at Massachusetts General Hospital, also located in Boston.

We should all wish Bob Novak the best possible outcome.

Another conservative murderer, this time just shooting "Liberals."

The shooting at the Tennessee Valley Unitarian Universalist Church in Tennessee has been all over the news, but look at why Jim D. Adkisson did it. From MSNBC:
Adkisson is being held in lieu of $1 million bail while local police, with the assistance of FBI agents, gather evidence and search his home in a neighboring town. Police say they found a letter in Adkisson’s car which said that he planned the attack, that he couldn’t find a job, and “stated his hatred for the liberal movement.” The church has been active in seeking equal rights for women, minorities and gays, and founded a local chapter of the ACLU.
We all know that being Gay makes a person a target for murderous homophobic conservatives, and those they consider abortionists, but now they are going after members of "Liberal" Churches. The link is conservatism and murderous methods.

More details on the shooting and on Adkisson can be found here. Apparently he was an angry man who couldn't find a job, for which he blamed "Liberals." As a speculation, he would never recognized that it was probably his anger and his own personality that prevented him from finding work.

No doubt the National Rifle Association will be proud of Adkisson for using his Second Amendment gun rights to defend himself against "Liberalism." And any idiot who claims that the congregants should have been carrying guns in church while watching their children put on a play is a fool who is blaming the victims. Adkisson committed this crime and should be blamed for it. According to the second report above,he did not expect to survive the attack, so it is clear that no threat of punishment would have deterred him from his murderous conservative actions. Adkisson killed two and wounded seven others. I wonder if he just couldn't find a mosque close enough to home to go after. Isn't conservative religion and conservatism in general wonderful?

By the way, this is modern American conservatism, not directly related to traditional Burkean conservatism.

Addendum July 30, 2008 7:10 am CDT
According to,
KPD Chief Sterling Owen said officials are not ready to release the suspect's name or age, but he did say that mental illness is not believed to be a factor in the suspect's actions.
The Knoxville Police Chief is not likely to have been made without consultation with experts. That makes the murders purely political.

The post Rule of Law America

Glenn Greenwald provides a succinct description of the depths that America has sunk to under the Bush administration and where it will remain if McCain is elected to extend Bush's presidency to a third term.
What we've done over the last seven years -- at least much of it -- isn't a secret. It's worthwhile to state frequently in clear, dispassionate terms what our country has done. Our Government has kidnapped people off the street and from their homes and sent them to places like Syria to be tortured for months (including completely innocent people) and then invoked National Security claims to bar them from holding our Government accountable in a court of law. We've disappeared others into secret prisons beyond even the reach of the Red Cross, or encaged them in a lawless black hole on a Cuban island. We've tortured them, sometimes to death, even with the knowledge that many were innocent. We attacked and completely demolished another country that couldn't attack us even if it wanted to. And our President openly declared that he has the power to break our laws, spy on U.S. citizens with no warrants, and indefinitely imprison even our own citizens with no process of any kind. Those are all just facts that aren't really subject to dispute or debate.

Worst of all, having done all of that -- not for weeks or months following the 9/11 attacks, but for years, still -- we've collectively decided, without much turmoil or debate, that it should all be forgiven, that none of it should be punished or even investigated, that it's best just to keep these crimes concealed and, when accidentally disclosed, to immunize the criminals. And all of that is being done right out in the open, so that our formal human rights reports are self-evident, almost laughable, farces, and even countries like Zimbabwe, when their governments want to engage in tyrannical acts, can and do rationally point to the U.S. as the leading example which they're following.
It's difficult to reconcile what teachers say is America's Constitutional Democracy with this shocking new America, this product of the century of war (also known as the twentieth century.) This new America has taken its form from the Reagan Revolution and the conservative movement.

The nation, looking back at the "glory" of WW II, began to try to solve every social problem with some form of war and military or police government discipline. As it has done so, the American Constitution has been shredded like a flag in a hurricane.

Is it too late to try to resurrect the America of the Founding Fathers who felt that the American Revolution had created a nation based on the sovereignty of the people instead of the sovereignty of tyrants and offered the American ideal to the world as a demonstration of how a great nation should be run? Has the spark from 1776 died away in a new tyranny? Is Liberty dead?

Because that is what is really meant when people say that "America has moved to the right."

Sunday, July 27, 2008

Presidential election 2008 - about the past, present and future

Frank Rich understands the current political zeitgeist. The past and the present are really bad news. McCain lives there. Obama offers a view of a different and sharply improved future, one that McCain cannot achieve with his conservative views. From Frank Rich at the New York Times:
to dismiss Barack Obama’s magical mystery tour through old Europe and two war zones as a media-made fairy tale would be to underestimate the ingenious politics of the moment. History was on the march well before Mr. Obama boarded his plane, and his trip was perfectly timed to reap the whirlwind.

He never would have been treated as a president-in-waiting by heads of state or network talking heads if all he offered were charisma, slick rhetoric and stunning visuals. What drew them instead was the raw power Mr. Obama has amassed: the power to start shaping events and the power to move markets, including TV ratings. (Even “Access Hollywood” mustered a 20 percent audience jump by hosting the Obama family.) Power begets more power, absolutely.

The growing Obama clout derives not from national polls, where his lead is modest. Nor is it a gift from the press, which still gives free passes to its old bus mate John McCain. It was laughable to watch journalists stamp their feet last week to try to push Mr. Obama into saying he was “wrong” about the surge. More than five years and 4,100 American fatalities later, they’re still not demanding that Mr. McCain admit he was wrong when he assured us that our adventure in Iraq would be fast, produce little American “bloodletting” and “be paid for by the Iraqis.”

Never mind. This election remains about the present and the future, where Iraq’s $10 billion a month drain on American pocketbooks and military readiness is just one moving part in a matrix of national crises stretching from the gas pump to Pakistan. That’s the high-rolling political casino where Mr. Obama amassed the chips he cashed in last week. The “change” that he can at times wield like a glib marketing gimmick is increasingly becoming a substantive reality — sometimes through Mr. Obama’s instigation, sometimes by luck. Obama-branded change is snowballing, whether it’s change you happen to believe in or not.
The article by Frank Rich lays out the collapse of the Bush strategy for dealing with the Middle east, together with the very untimely collapse of the McCain strategy that depended on being the continuation of that Bush strategy.

Frank Rich states
Looking back now, we can see that the fortnight preceding the candidate’s flight to Kuwait was like a sequence in an old movie where wind blows away calendar pages to announce an epochal plot turn. First, on July 7, the Iraqi prime minister, Nuri al-Maliki, dissed Bush dogma by raising the prospect of a withdrawal timetable for our troops. Then, on July 15, Mr. McCain suddenly noticed that more Americans are dying in Afghanistan than Iraq and called for more American forces to be sent there. It was a long-overdue recognition of the obvious that he could no longer avoid: both Robert Gates, the defense secretary, and Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, had already called for more American troops to battle the resurgent Taliban, echoing the policy proposed by Mr. Obama a year ago.

On July 17 we learned that President Bush, who had labeled direct talks with Iran “appeasement,” would send the No. 3 official in the State Department to multilateral nuclear talks with Iran. Lest anyone doubt that the White House had moved away from the rigid stand endorsed by Mr. McCain and toward Mr. Obama’s, a former Rumsfeld apparatchik weighed in on The Wall Street Journal’s op-ed page: “Now Bush Is Appeasing Iran.”

Within 24 hours, the White House did another U-turn, endorsing an Iraq withdrawal timetable as long as it was labeled a “general time horizon.” In a flash, as Mr. Obama touched down in Kuwait, Mr. Maliki approvingly cited the Democratic candidate by name while laying out a troop-withdrawal calendar of his own that, like Mr. Obama’s, would wind down in 2010. On Tuesday, the British prime minister, Gordon Brown, announced a major drawdown of his nation’s troops by early 2009.

But it’s not merely the foreign policy consensus that is shifting Obama-ward. The Texas oilman T. Boone Pickens has now joined another high-profile McCain supporter, Arnold Schwarzenegger, in knocking the McCain nostrum that America can drill its way out of its energy crisis. Mr. Pickens, who financed the Swift-boat campaign smearing John Kerry in 2004, was thought to be a sugar daddy for similar assaults against the Democrats this year. Instead, he is underwriting nonpartisan ads promoting wind power and speaks of how he would welcome Al Gore as energy czar if there’s an Obama administration.

The Obama stampede is forcing Mr. McCain to surrender on other domestic fronts. After the Democrat ran ads in 14 states berating chief executives who are “making more in 10 minutes” than many workers do in a year, a newly populist Mr. McCain began railing against “corporate greed” — much as he also followed Mr. Obama’s example and belatedly endorsed a homeowners’ bailout he had at first opposed. Given that Mr. McCain has already used a refitted, hand-me-down Obama campaign slogan (“A Leader You Can Believe In”), it can’t be long before he takes up fist bumps. They’ve become the rage among young (nonterrorist) American businessmen, according to USA Today.

Elections clearly matter.

Bush has refused to react to complaints about his failed policies - until John McCain, running for the third Bush tern - has found that the Bush positions are not sufficient popular to get McCain elected. The result is that Bush is modifying his policies as fast as possible and McCain is running away from the Bush/Cheney positions.

Unfortunately for the Republicans, Barrack Obams is running on a platform of changing the Bush policies while McCain runs as a continuation of those clearly failed policies.

Although McCain is running as a Not-Bush, he cannot separate himself from the Bush/Cheney policies and keep the conservative Republican base of voters who previously committed themselves to Bush and the Republicans. Anyone who opposed the failed Bush/Cheney positions will have to vote for Obama, throw away their vote on a third party (Green or Libertarian) or sit out the November 4 election.

Frank Rich's last paragragraph is especially important:
The election remains Mr. Obama’s to lose, and he could lose it, whether through unexpected events, his own vanity or a vice-presidential misfire. But what we’ve learned this month is that America, our allies and most likely the next Congress are moving toward Mr. Obama’s post-Iraq vision of the future, whether he reaches the White House or not. That’s some small comfort as we contemplate the strange alternative offered by the Republicans: a candidate so oblivious to our nation’s big challenges ahead that he is doubling down in his campaign against both Mr. Maliki and Mr. Obama to be elected commander in chief of the surge.
The real question for the Presidential election is whether the American electorate in the swing states have come to grips with the problems of reality, either today or in the future.

Barack is looking at the future - the Conservatives who support McCain are not. They simply don't want things to change from how they work now. In times of great change, conservatives are a severe social liability.

That's what this election is all about. America cannot afford a third conservative Bush term as represented by McCain. That disaster is worse than any mistakes Obama might make after being elected.

What if public schools were divided between schools for jocks and schools for nerds?

Why do the urban public school students who want to learn about science, math, history and literature have to go to school with jocks and cheerleaders? What to the nerds get besides being put down for being "unpopular"?

What would happen if public schools were separated by those who wanted to actually learn and those who wanted to play sports and be popular? One thing hat would happen is that the nerd schools could pay for computers and math and history instructors instead of high-priced football coaches (who in Texas get paid more than the Principle) and the money wasted on football stadiums and equipment would instead be spent on computers and math, history and literature instructors.

Not that physical ed instruction should be not given to nerds. Instead, the Phys ed instructors at nerd schools would focus on actually training nerds in how to deal with their physical needs instead of being forced to compete with sports enthusiasts. I was a nerd, and found the coaches ignored me because I was not going to win the next sports prize. I lucked out because I also threw newspapers from a bicycle, morning and evening, on a route that was over seven miles long. But we had no bicycle competitions so the coaches didn't give a damn about my physical condition. What if the physical ed department was focused on training intellectuals about how to deal with their physical needs?

How many minority families would send their children to schools focused on sports instead of academics?

Students who failed in the schools for nerds could be transferred to the schools for jocks. Then given a chance to switch back the next semester.

This would focus the physical ed departments on training students how to deal with their bodies, instead of how to compete in games. It would also, more importantly, give parents a chance to express to their children what really matters ion life - education or sports.

But would this make the sports oriented schools into second rate schools for losers?

I should hope so. When was the last time the American schools systems were castigated for turning out too few world class athletes and too many math, science and history nerds? While sports are important, they are secondary to academics!

A similar approach could be taken to arts and music.

Have high schools specialize in either sports, math science history and literature, or arts and music. Each school would have to offer all subjects, of course, but specialize in one of the three. Students and their parents would be given their choice regarding which the students would attend, and support for transportation would be provided.

Most important, each school would focus the majority of their awards on their preferred students. Students in each school would know what they were there to do. The students themselves would be coopted into supporting each other to achieve success.

Rural and smaller community schools don't have the resources available to specialize entire schools in this manner, but they could set up specific tracks in each school to match the specialized urban schools.

That would be an approach to getting the best education possible from public schools. The drawback is that the schools in high concentrations of poverty and racial minority districts would still have problems offering high quality education to students unable to accept it. But this approach would isolate those schools and make it clear what their essential problems were, so that those key problems could be addressed - assuming that public school boards would permit the diversion of funds needed by the lowest performing schools, something they currently prevent.

Religious schools, of course, would continue to offer their religious education without government subsidy.

The sports pages of local newspapers might become confused, as they find themselves relegated to reporting on less than a third of the high schools since the rest would be either sharing stadiums or closing them down as funds were redirected to more important educational goals. But maybe the newspapers would start reporting on academics and the arts and music.

God only knows what the local TV news people would do. Report on Nerds? Could retired jocks actually be induced to do that? And how much time could they actually be forced to give to the local math, history, literature or chess champion? They only have at most about 12 minutes every night anyway. And what kind of visually interesting videos can you get - every night at 5:15 PM or 10:15 PM - from a math, history, Literature or science wonks?

But who really matters in the next generation? The nerds, artists or the jocks?

In my opinion, the ranking by importance is nerds, artists, and a long way below them, the jocks.

So why don't our public schools recognize and encourage this ranking? Probably because of elected school boards. Educator professionalism is something that simply is ignored. That seems to be a very typical and widespread American attitude.

But that's a subject for a later post.

Saturday, July 26, 2008

McCain's desperation shows as he descends into dishonorable lies and stupid gaffes over three months before the election

The 2008 Presidential election is already shaping up to be the nastiest, dirtiest Presidential election in living memory. The desperation of the Republicans and the McCain Presidential campaign leave them no other choice. The roughly six weeks remaining before the conventions is going to be a descent into the political pits. Then, after the conventions, it will get worse. McCain has no other hope and he will dispense with his supposed "honor" to try to win.

Back in April, Joe Klein wrote that even thought the extreme right wingers wanted a scorched earth Presidential campaign (George Will - "Obama is an effete snob like Adlai Stevenson "representing the effete strand of liberalism that corrupted F.D.R.'s party of the working people"; Bill Krystol - "positing Obama as a direct descendant of — yes — Karl Marx")The candidate John McCain expressed real doubts about that method of campaigning. Instead, according to Klein "...when asked directly by Chris Matthews if élitism would be an issue in the general election, McCain said no. This may well be strategy: the candidate takes the high road while Schmidt lands the body blows. But McCain has laid down some pretty clear markers that he sees this election in much the same way that Obama (and Hillary Clinton) does. He wants to have a substantive debate about the war, he believes that climate change is a major issue, and he has begun to acknowledge the economic pain visited upon manufacturing workers in places like Michigan and Ohio."

Joe Klein concluded "It's McCain's way. He sees the tawdry ceremonies of politics — the spin and hucksterism — as unworthy. He's not one to put on silly hats; his physical disabilities limit his capacity to engage in bowling photo ops. His shtick is substance, the endless access granted to reporters on his bus. The problem for McCain, and the opportunity for Democrats, is that his positions are either unpopular or sketchy. The problem for Democrats is that McCain has the potential to steal, or take the edge off, some of their favorite issues by offering more moderate-seeming, if sometimes totally inadequate, answers."

Joe's conclusion: "If McCain is as good as his word, we could have a great debate [on war and taxes] this fall. If he isn't as good as his word — and the temptations will be mighty to play the élitism card — McCain will have to live with the knowledge that in the most important business of his life, he chose expediency over honor. That's probably not the way he wants to be remembered."

So Joe - three months ago - expected John McCain to place his personal view of honor up front in the manner in which he ran his campaign for President.

Unfortunately for McCain, since then the al Maliki government has come out strongly in favor of Obama's idea of rapid American withdrawal. In addition, the economy has clearly worsened, showing that the tax cuts McCain proposes will not work. (What would they have done to prevent the collapse of First Heritage Bank Newport Beach, CA and First National Bank, Reno, NV yesterday and IndyMac Bank last Friday? The bailout of Fannie Mae and Freddy Mac by putting unlimited amounts of taxpayer money behind them makes any claim that reduced taxes will improve the economy ludicrous.

The McCain campaign has clearly also drawn the conclusion that the reporters from Rasmussen have - Rasmussen on the myth of the close Presidential election: this is going to be a blow-out year for Obama. So what is the result? John McCain's "honorable campaign" has been jettisoned. A measure of their desperation is that is was jettisoned three and a half months before the actual election and more than a month before the Republican convention.

Examples: Mike Allen and Jim Vandehei of Politico review and criticize McCain's many gaffes and raise the question that should occur to all of us - Are McCain's repeated screw-ups a result of his age?

McCain's age is part of the problem. Not anything like Alzheimer's, but he has gotten set in his previous opinions and spends little or no time to learn new things. John McCain is now in the business of justifying his life to himself and his previous career for posterity rather than learning about the new problems that America faces today. His failure to have already learned how to use email and the Internet on his own gives this away. His election to the Presidency will, in his opinion, show that he is as good as his father and grandfather who were both four-star Admirals were. But it will be a major failure for America.

Part of the McCain misunderstanding is that McCain believes that he is a leader, capable of leading large organizations. Unfortunately, he has no experience in management at any level above being a mid-level manager either as a squadron commander on board of an aircraft carrier or running his own Senate office.McCain has never been an executive of a really large and diverse organization where he was responsible for strategy of his organization, but he believes that he can do it. So, like snake-oil salesmen from time immemorial have done, he claims he can do it. The disaster of disorganization that his campaign displays clearly shows that he cannot. His inclusion of the failed stragtegic manager of Hewlit Packard, Carly Fiorina is a clear demonstration of his inability to understand strategy. She belongs to his campaign because of her previous status in spite of her failure as an HP strategic manager. The same was true of ex-Senator Phil Gramm. His status as n ex- Senator is more important to McCain than is totally failed policies. McCain's judgment is that poor.

As of right now America has a Presidential election that is clouded by a Republican President - Bush - who lied his way into a voluntary war in Iraq that clearly has no valid purpose in providing security for America but has now cost as much financially a Vietnam. Bush's financial mismanagement of the American economy - driven also by the conservative controlled Republican Party in Congress - through tax cuts and financial deregulation (based on conservative principles out of the Reagan Revolution) has led directly to the current credit crisis that has brought the American economy to a low level not previously seen since the Great Depression of the 1930's. McCain represents and approved of all of these disastrous decisions.

McCain claims he is not running for Bush's third term, but his only possible voter base is the one that elected Bush and he is catering to them at every turn If he is elected President, is it really reasonable to believe he will abandon Bush's electoral base? No. He is Bush's third term, selling all of bush's and Cheney's worst disasters and hoping to add to them.

All of this is obvious to the general electorate, if not to the mainstream media pundits.

This is a description of a Presidential campaign that is without hope. They have no proposals to offer and no willingness to even recognize the may problems America faces (most of which are the direct result of the conservative movement and the Reagan Revolution.

McCain and the conservatives have nothing left to run on this year except spreading fear of Obama as President. Nothing.

And Obama is running on a vision of hope. Hope wins over fear in the long run.

Count on it. The Republicans are America's masters of negative and crooked politics and have been since the crimes of Nixon. This election will be the nastiest in living memory.

Still, Obama is going to win.

The Israelis seem to be destroying all hope of Peace with Palestinians.

Steve Clemons offers a report from Palestine. He spoke briefly with Mustafa Barghouti
...a former doctor turned political leader who previously ran for the presidency of Palestine. He now heads the Palestinian National Initiative and is an advocate of non-violent resistance against Israeli occupation of the Palestinian territories.
The information is not good.
...particularly disturbing was his comment that road blocks and barriers to movement before the Annapolis process started number 521. Today, there are 607. Settlements are growing at a faster pace after Annapolis than before. This is wrong.

These trends are destroying the possibilities of peace in the Middle East -- and they are undermining America's national interests as well as Israel's own security situation.
The settlement movement appears to be a group of Israeli religious extremists who want to do their best to prevent any resolution of the Israeli - Palestinian conflict and are trying to take control of all of the Palestinian lands they can prior to any negotiations.

That's not to say that there are not equally committed extremists on the Palestinian side who still want to destroy all of Israel. But neither side is going to dislodge or destroy the other. As long as the extremists on both sides set the agenda, there will be war between them. Most people on both sides really just want what all sane humans want - a decent life and the opportunity to raise their families. That isn't going to happen until both sides get serious about negotiations. More settlements are a large step away from that.

Rasmussen on the myth of the close Presidential election

I've been wonder about this. Why has so much of the media been reporting the Presidential election as a potential nail-biter? As of right now, Rasmussen doesn't consider that accurate.
While no election outcome is guaranteed and McCain's prospects could improve over the next three and a half months, virtually all of the evidence that we have reviewed--historical patterns, structural features of this election cycle, and national and state polls conducted over the last several months--point to a comfortable Obama/Democratic party victory in November. Trumpeting this race as a toss-up, almost certain to produce another nail-biter finish, distorts the evidence and does a disservice to readers and viewers who rely upon such punditry. Again, maybe conditions will change in McCain's favor, and if they do, they should also be accurately described by the media. But current data do not justify calling this election a toss-up.

Consider the following.

Except for a few days when the Gallup and Rasmussen tracking polls showed a tie, Barack Obama has led John McCain in every national poll in the past two months. Obama's average margin has consistently been in the 4-6 point range during this time. By contrast, the polls in 2000 and 2004 showed much more variation over time. State polling results have also consistently given Obama the advantage. According to, Obama is currently leading in 26 states and the District of Columbia with a total of 322 electoral votes; McCain is currently leading in 24 states with a total of 216 electoral votes. Obama is leading in every state carried by John Kerry in 2004 along with six states carried by George Bush: Iowa, New Mexico, Ohio, Indiana, Nevada and Colorado. A seventh Bush state, Virginia, is tied.

Obama is leading in 11 of the 12 swing states that were decided by a margin of five points or less in 2004 including five of the six that were carried by George Bush. And while Obama has a comfortable lead in every state that John Kerry won by a margin of more than five points in 2004, McCain is in a difficult battle in a number of states that Bush carried by a margin of more than five points including such solidly red states as Indiana, Montana, North Dakota, Virginia, and North Carolina.

And remember these June and July polls may well understate Obama's eventual margin. Ronald Reagan did not capitalize on the huge structural advantage Republicans enjoyed in 1980 until after the party conventions and presidential debate. It took a while and a sufficient level of comfort with the challenger for anti-Carter votes to translate into support for Reagan. If Obama's performance over the last eighteen months is any guide, a similar pattern could unfold in 2008.
Is the political reporting that seems to consider this to be a close election actually a result of a politicized political media trying to swing the election? Or is it just a bunch of historical illiterates who react to each piece of current news as thought it were a brand new event with no historical context? Or is it really true that the media needs to push the myth of a potentially close Presidential race or risk losing viewers/readers and thus losing advertising revenues?

Or is it something else even? Because unless something totally unexpected really shakes up the election seriously between now and November 4th, this looks like it's going to be a Democratic blow-out.

Friday, July 25, 2008

Obama winning Hillary's Hispanic voters

During the Democratic primaries, Hillary was carrying the majority of Hispanic voters over Obama. This was supposed to indicate a major weakness for Obama in the general election. Now we get the news that the breakdown of voters who decided between Obama and Hillary simply does not carry over to a contest between Obama and McCain. From McClatchy News:
By Lesley Clark | McClatchy Newspapers

WASHINGTON — Barack Obama has picked up support from nearly all the Hispanic voters who voted for rival Hillary Clinton in the Democratic primaries, giving him a nearly three-to-one lead over Republican John McCain among Hispanics, a poll released Thursday shows.

The Pew Hispanic Center survey found Obama with 66 percent of the Hispanic vote to McCain's 23 percent.

The results represent a "sharp reversal" in Obama's fortunes from the primaries, when he lost the Latino vote to Clinton by nearly two-to-one, prompting speculation that Hispanics were leery of voting for a black candidate, said Susan Minushkin, the center's deputy director.

Instead, the survey found that three times as many respondents said that being black would help Obama with Latino voters. A majority — 53 percent — said his race would make no difference to Latino voters.

More than 76 percent of Hispanics who said they voted for Clinton now say they're leaning toward voting for Obama, while just 8 percent said they were leaning toward McCain.

The poll by the nonpartisan research organization is based on a telephone survey of 2,015 Hispanics, 892 of whom were registered voters. Interviews in either English or Spanish were conducted June 9 through July 13. The survey carries a margin of error of 4.4 percentage points.
The poll results and voting outcomes from the Democratic primaries simply don't carry over to the general election campaign when the choice is between Obama and McCain.

Tuesday, July 22, 2008

Wachovia Bank annouces it's problems

The credit crisis has claimed another victim - Wachovia Bank, America's fourth largest bank. The new CEO, hired two weeks ago, is planning to shrink the bank and get out of the mortgage business. This report si from the Charlotte Observer:
Wachovia Corp. announced a whopping second quarter loss of $8.9 billion this morning, with plans to shake up its mortgage unit, slash its dividend payout to shareholders, and cut thousands of jobs. [Snip]

As reported in today’s Observer, Wachovia announced this morning that it plans to cease making mortgages through third-party brokers. At the end of the first quarter, about 30 percent of the bank’s mortgage loans were made through third-party brokers. As recently as last month, the bank said it remained committed to using those brokers, especially in areas where it doesn’t have brokers.

But in a memo to employees yesterday, Tim Wilson, the head of loan origination for Wachovia Mortgage, wrote: “Going forward, we will primarily focus on customers who have relationships with the bank, and who are located in geographies where Wachovia branches are located.”

The change in strategy is part of a larger plan to rein in mortgage losses, which have been on the rise since Wachovia’s $24 billion purchase of Golden West Financial Corp., a troubled California mortgage lender, in 2006. The so-called Pick-a-Payment loans, which Wachovia inherited from Golden West, have proved a headache for the bank and a lightning rod for shareholders, defaulting at higher rates than other mortgages.

In April, the bank tightened underwriting standards, and last month, it stopped offering the “negative amortization” option for Pick-a-Pay loans, which let the borrower pay less than the interest owed. Those loans are criticized by consumer advocates because their balance can increase instead of decrease. Wachovia has also said that it will help customers with Pick-a-Pay mortgages refinance into traditional mortgages.
Compare this report from The UK Guardian about the other major bank with headquarters in Charlotte, NC.
NEW YORK, July 21 (Reuters) - Bank of America Corp reported quarterly profit on Monday that fell less than expected on record revenue, boosting shares of the largest U.S. retail bank and mortgage lender despite a surge in bad loans.

The bank became the fourth of the nation's five largest to top quarterly earnings forecasts, joining Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co.

Profit at Bank of America fell 41 percent, the fourth straight quarterly decline, as the bank more than tripled its reserve for loan losses because of falling home prices and a weak economy.
Offsetting this was a higher lending margin, near-record investment banking income and a $357 million trading profit, following $8.55 billion of trading losses in the prior three quarters.
"It suggests the credit crisis isn't as bad as people thought" for lenders, said Steve Roukis, managing director at Matrix Asset Advisors Inc in New York, which invests $1.4 billion. "A week ago there was tremendous fear about systematic risk to the system. There's definitely a floor here."

Second-quarter net income for Charlotte, North Carolina- based Bank of America fell to $3.41 billion, or 72 cents per share, from $5.76 billion, or $1.28 per share, a year earlier.

Excluding merger costs, profit was 75 cents per share. On that basis, analysts had expected 48 cents per share, according to Reuters Estimates. Revenue increased 4 percent to $20.32 billion, topping the average $18.26 billion forecast.

Bank of America also said its July 1 purchase of Countrywide Financial Corp, once the largest mortgage lender, will add to profit in 2008, sooner than expected, and result in $900 million of cost savings, $230 million more than expected.

Countrywide lost $2.33 billion in the quarter, including about $3.7 billion of credit-related write-downs and losses, Bank of America said. About 7,500 jobs, or 3 percent, will be eliminated from the combined companies, the bank has said.

Bank of America set aside $5.83 billion for bad loans, up from $1.81 billion a year earlier, largely for home equity, residential mortgage and homebuilding exposure.

The provision was nearly as large as the first quarter's $6.01 billion. Net charge-offs more than doubled from a year earlier to $3.62 billion from $1.5 billion.
Each bank, Wachovia and Bank of America, recently merged with a major mortgage broker. Each has suffered severe losses as a result, which is going to come straight out of bank capital. Losses from bank capital limit the ability of a bank to continue lending. Wachovia is shrinking as a result and getting out of the business of providing loans to independent mortgage brokers. That will at least give Wachovia more control over the quality of the loans they accept going forward.

Since Wachovia bought Golden West Financial a while back, before the mortgage crisis had blown up into the utter disaster it has recently become, they probably paid a great deal more for it than BoA did for CountryWide. In fact, BoA got CountryWide by issuing stock instead of paying for it. It was a fire sale of a company that could not survive otherwise.

In either case, though, mortgage lending is going to be quite restricted for the foreseeable future. Since both banks have lost capital all kinds of lending is going to be constrained. I'd bet the lending particularly to consumers is going to be reduced.

The current financial problems are not going to be fixed this year. That's the "bottom line" from this news.

I wonder what we will learn tomorrow?

Jewish voters like Obama a lot more than they do Joe Lieberman

This from the Huffington Post today:
Among the most high-profile Jews in Congress, Lieberman is viewed far more unfavorably than the presumptive Democratic nominee, according to a new poll. Only 37 percent of Jews view the Connecticut Independent in a favorable light compared to 48 percent who have a negative perception. As for Obama, 60 percent of Jews view him favorably while 34 percent view him unfavorably.

The findings were released as part of a recent survey of American Jews by the new progressive pro-Israel group J Street. They seem to upturn some of this year's conventional political wisdom.

Obama, who is set to travel to Israel this week, is often described in the press as facing significant obstacles to winning Jewish support, in part because of false claims that he is a Muslim. Lieberman, meanwhile, is regularly quoted disparaging Obama's credentials on topics considered dear to the Jewish voter's heart: toughness on Iran and support for the Jewish state. Asked recently whether he should be questioning Obama's commitment to Israel, the 2000 Democratic vice presidential nominee responded, "why wouldn't I do that?"

Lieberman does score better among the 900 Jewish voters polled than other major political and religious figures. President Bush is viewed unfavorably by 74 percent of Jews, compared to 22 percent who see him in a positive light. McCain, meanwhile, is viewed favorably by just 34 percent of Jews, while 57 said they had a negative perception. On the lowest end of the spectrum stood Obama's former pastor, Rev. Jeremiah Wright, who was viewed favorably by just five percent of Jews and unfavorably by 68 percent.

For Lieberman, however, the findings present another piece of dreary news in a month filled with controversy. In early July, Quinnipiac University found that the Connecticut Senator's approval rating among his constituents had dropped to 45 percent, with 43 percent expressing disapproval. One week later, the Senator watched as a petition, signed by 43,000 individuals, was sent to members of the Senate's steering committee urging them to boot him from the party.
When the Senate Democrats strip Lieberman of his Senate committee assignments, I wonder if the Republicans will even want to accept him? If they do, it will only accentuate the dislike and disdain the public already has for Republicans and conservatives this year.

Monday, July 21, 2008

So what does "Pretty" and "Ugly" really mean?

The answer to that question is unknowable. Worse, it is concealed from us by Photoshop and makeup. "Beauty" is a fantasy. So is "Ugly." Maybe "Attraction" is knowable, but I wouldn't count on it. Here's a good article on the subject.

And if you wonder why a blog that normally focuses on politics and economics is referring you to this, I also try to understand psychology. This subject is a biggie. Consideration of this subject is one of the major things that makes us human. Economically it drives a almost all advertising and a lot of sales. Politically? It matters a lot. Personally? Well, the consideration of our own beauty or lack thereof drives a lot of what we do with our lives. How much of race prejudice is driven by concepts of beauty? And where do those concepts come from?

The article addresses unrealistic concepts of Beauty. As for the other questions, I really have no answers, just more questions. But for damned sure, "beauty" and "ugliness" is central to being human.

Saturday, July 19, 2008

Tax cuts do not improve the economy; nor do they ever increase government revenues

When conservative claim that tax cuts improve the economy and increase tax revenues they are either 1) fantasizing or 2) lying. The difference between the two positions depend on how economically educated the person making the claim is.

The Center on Budget and Policy Priorities released Its report, EVIDENCE SHOWS THAT TAX CUTS LOSE REVENUE. (.pdf file)
The claim that tax cuts “pay for themselves” — i.e., cause so much economic growth that revenues rise faster than they would have without the tax cut — has been made repeatedly in recent years and is one of the many tax policy issues that is likely to receive renewed attention in light of the upcoming election. As explained briefly below, this claim is false. The evidence shows clearly that tax cuts lose revenue.1

The 2001 and 2003 tax cuts have not paid for themselves. There is no evidence that the tax cuts caused any increase in economic growth, let alone growth sufficient to offset their cost. In fact, the 2001-2007 economic expansion was among the weakest since World War II with regard to overall economic growth. 2 Moreover, revenue growth was very poor during 2001-2007. Real percapita revenues fell deeply in 2001, 2002, and 2003 and have since risen to barely 2 percent above their 2001 level. Over the course of other postwar economic expansions, they grew by an average of 12 percent.3

Previous tax cuts didn’t pay for themselves either. In 1981, when Congress substantially lowered marginal income tax rates on the well-off, supporters claimed the cuts would boost economic growth. In 1990 and 1993, when Congress raised marginal income tax rates on the welloff, opponents claimed the increases would harm the economy.

In fact, the economy grew at about the same rate in the 1990s, following tax increases, as in the 1980s, following a large tax cut.4 And revenues grew twice as fast in the in the 1990s (3.5 percent in real per-capita terms) as in the 1980s (1.5 percent).5

Capital gains rate cuts, like other tax cuts, lower revenue in the long run. Especially when a capital gains cut is temporary, like the 2003 cut, investors have a strong incentive to realize their capital gains before the old, higher rate returns. This can cause a short-term increase in revenues, as happened after 2003. (Capital gains realizations also went up after 2003 because of the increase in the U.S. stock market. The capital gains tax cut cannot take credit for the stock market recovery, though, since European stocks performed just as well as U.S. stocks during this period.6)

Over the long run, however, there is virtually no evidence that cutting capital gains taxes spurs nearly enough economic growth to pay for itself. As the Congressional Budget Office recently stated, the “best estimates of taxpayers’ response to changes in the capital gains tax rates do not suggest a large revenue increase from additional realizations of capital gains — and certainly not an increase large enough to offset the losses from lower rates.”7

Deficit-financed tax cuts carry significant costs that are likely to outweigh any short-term boost in economic growth. Deficit-financed tax cuts can stimulate an economy in recession and temporarily improve growth. In the long run, however, the resulting deficits lower national savings and are a drag on the economy. Brookings Institution economist William Gale and now-CBO director Peter Orszag concluded that the 2001 and 2003 tax cuts are “likely to reduce, not increase, national income in the long term” because of their effect in swelling the deficit.8

Given the evidence, economists across the political spectrum reject the notion that tax cuts pay for themselves.

In sum, the idea that tax cuts pay for themselves sounds too good to be true because it is too good to be true.
Tax cuts lose revenue, and when they are deficit financed, they can also contribute to poorer economic performance over the long term.
The references can be found in the original pdf document.

What this is saying is that giving up tax money to boost the economy simply doesn't work. The money goes primarily to the wealthy or to large businesses which are not short of capital anyway. If they need more money it is easy to borrow it or sell stock.

Now at the moment, there is too little money available to consumers to buy goods and services, so jobs are not being created. That lack of job creation means that consumption is lowered.

There are two ways to make the economy grow. One is to provide more money directly to consumers like the stimulus package last Spring. That had some effect, but it was a quick hiccup that rapidly dissipated. Another stimulus, one that would be more long lasting, was recommended by Robert Reich:
A Second Stimulus: Much Bigger Than the First, and Focused on Infrastructure

It will soon dawn on Congress (although it may never dawn on the White House) that we need a much larger second stimulus package than is now being contemplated in order to give the economy the jump-start it needs and fill in for consumers who can't and won't spend more. My guess is that this second stimulus plan, including infrastructure, will ultimately reach $200 billion or more.
This would both create jobs and rebuild the worn down infrastructure that the tax cuts over the last two or more decades has let wear out. Just rebuilding bridges is a desperate need in America. And the rebuilt infrastructure will help private businesses operate at lower costs.

But the real point is that general tax cuts are the worst possible answer to the current economic problems. They don't work and they damage America.

Happy talk vs Truth about the economy

Courtesy of Calculated Risk, here is Jon Stewart on the economy.

When I write about "Happy Talk" - that's what we are hearing from George W. Bush.

Pointless horserace journalism

Really. Who gives a shit which candidate some pundit would rather "have a beer with" or go party with? But I guess that is a lot easier to write about than if the "journalists" had to actually understand issues and go out and "report"[*] for a living.

My apologies, journalists, for using that dirty word. There just is no other word that gets at that idea.

"Report" - what a journalist does when he or she is forced to actually work for a living. A rare condition observed less and less during modern political campaigns.

Jim Hightower on Texas Progressivism

Bill Sher from Campaign for America's Future took the opportunity at this weekend's Netroots Nation convention in Austin to interview Jim Hightower. Questions: 1) Is blogging changing Texas politics? 2) What impact is the Obama campaign having on Texas politics? 3) Is Obama Progressive?

As someone who has lived in Texas for 62 years I'd say that Jim Hightower throughly understands the politics of this state. Here's the interview.

Side note: There are some good video interviews coming from Netroots Nation, especially on Talking Points Memo. It looks like video reports is going to be the next big wave in progressive political blogging.

People have figured out how to actually record the interview and put it up on the Internet. My guess is that the next advance is going to be packaging the videos so that people know where to find them. Crooks and Liars has long been a good place to go for videos, but you never know what to expect to find there. Talking Points Memo is now using its main site to drive traffic to its videos, and it has set up a special category for videos like it has TPM Muckraker and TPM Cafe. There is a possibility of a big synergy there.

Campaign for America's Future has not gotten there yet. Each video there is a one - off. The website doesn't have the unity of direction that Josh Marshall has given Talking Points Memo.

Friday, July 18, 2008

McCain has for years avoided every meeting on Afghanistan of the Senate Armed Service Committee he chairs.

According the the McCain campaign, the European Affairs Subcommittee of the Senate Foreign Relations Committee which Obama chairs has not scheduled any hearings on Afghanistan in the last year and a half. So ABC News looked into the issue. And what did they find?
Obama attended the full Senate Foreign Relations Committee hearing on Afghanistan in March 2007.
McCain's record is much worse.
Sen. John McCain has attended even fewer Afghanistan-related Senate hearings over the past two years than Obama's one. Which is a nice way of saying, McCain, R-Ariz., the top Republican on the Senate Armed Service Committee, has attended zero of his committee's six hearings on Afghanistan over the last two years.
This failed message from the McCain campaign is simply political incompetence. It certainly supports the allegations that the McCain is poorly managed.

Major US banks announce more large losses

There's an old saying in business that the job of the accountants is to wait until the battle is over and then go out and bayonet the wounded. Well, today the New York Times reports some more bayoneting going on with Citigroup, Merrill Lynch and J.P. Morgan banks. There is some strong doubt, however, that the battle is over.
A year into the tight credit market, and the losses keep coming.

Citigroup said Friday morning that it lost $2.5 billion, or 54 cents a share, in the second quarter.

The loss was largely caused by $7.2 billion of write-downs of Citigroup’s investments in mortgages and other loans and by a weakness in the consumer market, which cost Citigroup $4.4 billion in credit losses and $2.5 billion to increase reserves.

But the chief executive, Vikram Pandit, positioned the $2.5 billion loss as progress. Last quarter, the financial conglomerate lost $5.1 billion. [Snip]

Citigroup is a barometer of the pain felt in all parts of the financial industry, and the company’s results show the downturn spreading from the credit markets to the real economy. Consumers — stung by high oil and food prices — are falling behind on their mortgages, auto loans and credit cards. Increasingly, that pain is being felt beyond the United States.

The bank has recorded more than $56 billion in credit losses and write-downs in the last four quarters. Citigroup lost more than $17 billion in that time. And its share price has fallen nearly 70 percent since the credit market began to tighten. [Snip]

Citigroup’s revenue was $18.7 billion, down 29 percent, mostly because of its write-downs. In addition to mortgage bond deteriorating, Citigroup was hurt by a drop in the credit quality of companies that reinsure its bonds.

Operating expenses were up 9 percent at $15.9 billion, in part because of charges taken while the bank lays off thousands. So far this year, the bank has reduced its work force by 11,000.

Citigroup’s credit card income fell around the world, with North America the hardest hit but growing problems evident elsewhere. Troubled spots included Brazil, India and Mexico where there was a rise in past-due payments and credit costs.

Citigroup continued to be stung by lower securitization revenues, as the pipeline for repackaging loans into bonds remained frozen.

Bank executives said a recovery would take two to three years. [Snip]

On Thursday, Merrill Lynch announced a loss of $4.8 billion, surprising even the most pessimistic analysts. The loss was largely caused by another $9.7 billion in write-downs in mortgage investments. Merrill was forced to raise capital by selling assets like its 20 percent stake in Bloomberg, the financial data service mostly owned by Mayor Michael R. Bloomberg of New York.

Also on Thursday, JPMorgan Chase said its quarterly income fell 53 percent from the second quarter last year.
While the reports of lower revenue and losses are from past operations, the highlighted fact that "Consumers are falling behind on their mortgages, auto loans and credit cards" indicates that the battle is far from over.

Thursday, July 17, 2008

Just for fun - how predictable was the current economic mess?

If you want to know how predictable the current economic mess was, here is what I blogged back in October 11, 2005.
We can look for high interest rates and very high inflation, probably accompanied with increased unemployment. This is likely to begin significantly occurring within a year or two from now. But if you are part of the investing class, you can invest in minerals and stay ahead of inflation.
Now ask yourself - if someone like myself with some finance and economics education but no experience in the financial industry could recognize what was happening nearly three years ago, how likely is it that the Wall Street Bankers and government economists and regulators didn't see it coming?

I thought it would be a little sooner, but the prime mover of the credit mess has been mortgage loans and mortgage-backed financial instruments. I did not then understand that Mortgages go into default and then foreclosure quite slowly. From the time that a mortgage holder finds himself unable to keep up the payments until the time the home is sold in foreclosure can take between six months and a year. After that, the financial industry is designed to deal with some defaults and foreclosures, so it took even longer for the number of them to build up to the point that they were threatening financial institutions.

So while I expected the problem to grow relatively slowly, this has been close to the outside of my expectations. The point is, though, that the direction was clear back in Fall of 2005, even before Alan Greenspan retired as chief of the Federal Reserve. Greenspan was still raising interest rates in the Fall of 2005 and would continue well into 2006.

So remember - the current economic mess is a direct result of conservative-driven deregulation of the financial economy, or as I have said repeatedly our current economic problems are the direct and inevitable result of the Reagan Revolution and the free market, small government, no regulation, low taxes ideology conservative movement.

One other thing to keep in mind - when the total failure George Bush says that the American economy is inherently strong, he is spreading uninformed "happy talk". An economy whose manufacturing sector is only 12% of the GDP, which depends on homebuilding of homes that are too pricey for the market to buy without artificially low interest rates for 40% of GDP and which is dominated by banking and financial institutions is not a strong economy. [Source Eric Margolis]

Depending primarily on homebuilding to keep the economy going is the equivalent of everyone making a living by taking in each other's laundry.

The current economic mess was highly predictable as Greenspan created two bubbles in order to manipulate the economy (dot com and housing.) Similarly it was predictable by experts that the invasion of Iraq would result in an insurgency problem that we did not have enough troops or a proper occupation and counterinsurgency strategy to handle. And it is clearly predictable that free unrestrained and unregulated financial markets always lead to larger and larger boom-and-bust cycles with the busts more than destroying any value created during the booms.

It's also clearly predictable that the economic mess America is currently in will not start magically clearing up in early 2009. There are too many fundamental problems that are not being addressed for that to happen, just as was true in the 1930's.

Does Innate in-born talent give a real edge in life success?

If you are hiring to staff an organization that has to be creative and innovative to succeed, do you want to hire individuals who have been identified as talented very early in life and who have been trained at the best schools (Ivy League, or similar institutions?) Or do you search for people who search out challenges that help them to grow?

The unnuanced version of that question is whether success comes from nature or nurture? Are the most creative and innovative individuals born with the required talents or do they possess a learned mindset that allows them to develop the required skills?

Stanford psychologist Carol Dweck thinks she knows the answer, and she has the research to support her opinion. Go read the New York Times for the answer.

More from the unrepentant Free Market Libertarian Republicans

It should be no secret that I blame much of America's current economic woes on the absolute and rigid "free Market" "small Government" "No New Taxes" ideology of the Republican Party. Besides the Wall Street Bankers, the Libertarian Republicans such a Alan Greenspan, Phil Gramm, Dick Armey and Grover Norquist are especially responsible for much of the current credit crisis.

Their champion in the Republican Presidential primaries was Ron Paul who consistently drew about 10% of the Republican votes.

So what?

Well, the Republican Party is concerned about the poor showing of the Republican brand name. Too many people blame them for the series of disasters that have characterized the Bush administration. So they decided to write a new Party Platform. But the existing leadership, feeling that they were out of touch with grassroots Republicans, chose to set up a website and ask for suggestions for the platform from grassroots Republicans. That's the current story. From Wired:
Ron Paul supporters have made themselves at home on the the GOP platform site, sounding many of the themes that turned the Texas congressman's doomed run for the Republican presidential nod into an internet cause célèbre.

"Get rid of the unconstitutional Federal Reserve, and go back to a sound gold and silver based currency," wrote Cathy, a contributor from Stevensville, Montana, in a post to the "Jobs and Economic Growth" section of the site. [Snip]

Paul's army of online supporters, who've collectively contributed millions of dollars and thousands of hours of volunteering, are still out there, and they're now working to sway the direction of the party. [Snip]

Says Bob in Clemons, North Carolina: "We need to abolish the Federal Reserve and go back to the gold standard. Not just any gold though, I heard about this stuff, pure-strain gold that has been around since God created the universe. That's what we should base our currency around since it is so close to God." [Snip]

"If the Republican party is to remain a relevant part of America's post-boomer political future, then our position on same-sex marriage must change," wrote another. "As a young person and a 'Ron Paul Republican,' I feel that personal liberties, including the right for any adult to marry any other consenting adult, must be protected. At the very least, the issue should be left up to the states."

"As a paleo-conservative I do not support the current direction of the Republican party," writes "PauPer" in yet another entry. "I think Bob Barr and Ron Paul are the true conservative Republicans. The so-called neo-cons have neglected American Republican values. It's no longer left vs. right, it's state worship vs. individual rights. The feral federal government doesn't recognize state or individual rights, and not doing so make them traitors to American values. Peace out."

Will the Republican party respond to the disaffected online Paulites?

An e-mail to an RNC spokesperson wasn't returned by the time of this posting, nor was a phone call to platform committee chairman Rep. Kevin McCarthy (R-California).
I guess that the RNC spokesman and the platform committee chairman are hearing more than they really wanted to from the Ron Paul Libertarians. They'll take the Libertarian votes and money, but they really don't want the American public to identify those ideas with the Republican Party.

Can't say I blame them.

If you think the economy is bad now, just wait - Bush's real legacy

Eric Margolis, foreign correspondent, Defense analysts and columnist, has some chilling things to say about the American economy.

  • Why has the price of oil jumped from $40 a barrel to over $140 per barrel?

    "The principal villain is the once mighty US dollar.

    Most of oil’s price surge has been caused by the US dollar’s steady loss of value caused by Washington’s bungled foreign policy and orgy of debt. Increased demand from India, China, and other Asian nations, where gas prices are kept below world prices by government subsidies, have played an important but secondary role."

  • What has the Bush/Cheney administration done about the price of oil?

    "Former US Federal Reserve Chairman Alan Greenspan admitted in 2007 that the 2003 US invasion of Iraq had been about seizing oil. The Bush-Cheney strategy was aimed at seizing Iraq’s oil, then boosting production to break up the oil cartel, OPEC. The result was a disaster. In spite of 14,000 mercenaries guarding Iraq’s pipelines, its oil production is actually lower than before the US invasion, adding to the growing supply shortage on the world market."

  • How does this fit with the slow-motion credit crisis that America is undergoing?

    "In his excellent new book, `Bad Money,’ political analyst Kevin Phillips explains how the Clinton and Bush administrations allowed, and even aided, the unregulated finance industry to create the giant bubble of largely worthless securities that is now bursting.

    Phillips points out that finance has become America’s leading industry while manufacturing has shrunk to only 12%. Public and private debt has grown from $10.5 trillion in 1987 to $43 trillion. The housing bubble stimulated by the crack cocaine of absurdly low interest rates accounts for 40% of America’s gross domestic product.

    America’s reckless debt orgy is ending, bringing recession in its wake. The collapse of Wall Street’s house of cards continues, with half of bank profits going up in smoke. Soaring oil prices are so far the most painful symptom of America’s economic and geopolitical decline under the Bush administration."
Essentially the Clinton and Bush administrations allowed the Wall Street bankers to take over the American economy, transferring America's production capabilities overseas and creating new and riskier financial products designed to create fees and commissions instead of goods and services.

As the bankers took over the American economy, they ballooned up the housing industry by having Greenspan and the federal reserve maintain ridiculously low interest rates. The refusal to regulate financial instruments was part of the same deal. As manufacturing jobs dropped to 12% of the economy, housing was responsible for 40% of the Gross Domestic Product.

Only now the Housing Bubble has burst and the dollar has lost 40% of its value against the Euro, 15% against the Yen, and the price of oil is skyrocketing.

So what happens next? More from Margolis:
The next shoe to drop will be when oil producers start demanding payment in Euros or a basket of currencies. Interestingly, Saddam’s Iraq, Venezuela and Iran all began doing this, and quickly hit the top of Washington’s enemies list.

Control of Mideast oil is one of the main pillars of US world power. Breaking the half-century old link between the US dollar and oil will further accelerate America’s decline as a great power.

Two thirds of the world’s hard currency reserves are now held in Asia. China and Japan alone hold 47% of US foreign debt. As the US dollar weakens, Asian and Mideast nations will feel growing pressure to reduce their holdings of US dollars and debt and move to stronger currencies. If this happens, the US economy will be in for a huge crisis and face sharp interest rate hikes.
Bush and Cheney tried to solve the financial/oil crisis by using American military force to invade Iraq and gain control of Iraq's oil. That's the reason why the Bush administration has been trying so hard to negotiate a new Status of Forces Agreement (SOFA) that permitted a long-term American military presence in Iraq. Iraq's Shiite government has refused to go along, and is demanding a timetable for American withdrawal.

In short, the military solution to the oil crisis has failed, at tremendous cost. At the same time, the bankers have essentially destroyed America's manufacturing capabilities.

When Asia starts reducing their holdings of U.S. dollars, the result will be an even greater drop in the value of the dollar, accompanied by even higher oil prices and greater inflation. At some point, even Saudi Arabia will have to stop supporting the dollar (which they do now primarily because the inflow of petro-dollars and American military technology is the primary support for the House of Saud and most of their investments are in dollars which lose value as the dollar drops.)

This is the Bush legacy and the result of the Reagan Revolution/conservative movement free market small government no regulation ideology. It will mean a sharp drop American lifestyles and a sharp drop in American influence around the world.