Is the Recession ending soon? If so, then what?

Annie Lowrey presents a very interesting article on the state of the world economy in Foreign Policy. It consists of a short summary of what is happening and expected to happen in China, Japan, Africa and the United States and links to seven interviews with economic experts familiar with various parts of the world.

Let me summarize Annie Lowrey's summary found on the first page:

• China China has seen a sharp drop in exports and as a result, a sharp drop also its rapid internal export-fueled economic development. Their economy is being maintained by stimulus, but that can't go on forever. This is not a surprise to them, so the worldwide Recession is actually an opportunity to shift out of the export-fueled economic growth into something more sustainable. Since China expects to come out of the Recession in better shape than the rest of the world, that is going to give them the opportunity they needed to shift to a more sustainable economy.
  
  
• Japan With its essentially export based economy slowed by the drop in exports of its major high tech products, which have fallen out of favor with Japan's customers and potential customers, Japan has seen a 10% reduction in the overall economy. The move into the Recession has slowed, perhaps stopped, but there is no apparent engine of growth for them in the future.
  
  
• Africa The economy of the world's poorest continent has been based largely on aid, investment, and commodities. All are being reduced by the Recession, with no prospects seen for recovery of those items or replacements for them. Internally because their banks were not as integrated as in the west, they did not see the bank failures, so Africa has been economically devastated.
  
  
• The United States The dropping GDP that signals going into the Recession appears to be slowing, so the Recession is expected to reach the bottom, perhaps as early as this fall. How long the economy will remain at the lower level is very uncertain, being "variously described variously as "a curved L," a "Q," and a "U" -- not a real "V"." In short, things are getting worse more slowly, but the prospects of actually getting better any time soon are unlikely.

The article appears to present a realistic picture of the overall world economy. It's interesting that Lowery in her summary provides a lot more details of the internal situation for China, Japan and Africa than she does for the United States. Perhaps the many structural problems in the U.S. that make it at present an unstable economy are too much for her to find anyone to briefly deal with. Though perhaps she does not summarize it because there is no consensus regarding either what those structural weaknesses are or how to deal with the structural problems like the weak American financial sector. Meltzer, I think, has it right. "...we're going to have to export more to service debt we've sold and going to sell. Consumption growth has to slow down. We have to invest more to export more." In other words, the U.S. has to return to being a nation that produces and exports thinks and stops letting the financial sector tail wag the economic dog. To do that, the greed and arbitrariness - as well as most of the so-called "innovation" - has to be removed from the financial sector. Wall Street banks are going to have to become a utility useful to a manufacturing economy again, instead of being the powerful Gods wielding lightening bolts of money who determine which businesses and industries survive and grow and which ones die.

Lowery does not tell why there is no significant discussion of the European block (Edwin Truman briefly mentions it), Russia, or Latin America. That could be because those areas are not going to either further depress the world economy nor are they going to provide any engine for its recovery. Or again, she simply may not have been able to find an acknowledged expert who would summarize the common wisdom on those areas. Or maybe just a space limitation for the article., and they were the least consequential. In any case, it would have been nice to know why Lowery did not address them.

The picture Lowery presents is that the drop into the Recession will soon reach the bottom but that recovery any time soon after reaching the bottom is uncertain. China expects to lead the world when that recovery does occur. It's just very unclear how long the time period of that "bottom" will last. The level of the "bottom" itself is right now artificially dependent on national stimuli, and that stimuli cannot continue for a long period of time. Yet no one knows what can replace those stimuli payments provided by the various national governments. (Or at least none of her respondents are commenting on those prospects.)

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The interviews with the experts are short, essentially bullet points for question with a brief answer. They are worth reading individually. Links to the seven interviews Lowery is presenting are here:

• Louis Kuijs on China
• Shanta Devarajan on Africa
• Kyoji Fukao on Japan
• Allan H. Meltzer on the United States
• Jim O'Neill on emerging economies
• Robert Reich on the United States
• Edwin Truman on the United States and Europe

A strange Supreme Court ruling written by Scalia

This ruling created some strange bedfellows. Anton Scalia, the court's most conservative member, switched over to join the court's four liberal members. In fact, Scalia wrote the opinion. The issue was whether the federal banking laws preempt similar state laws designed to protect consumers. From McClatchy News Service:

WASHINGTON — In a rebuke of the Bush administration, the Supreme Court ruled Monday that a federal bank regulator erred in quashing efforts by New York state to combat the kind of predatory mortgage lending that triggered the nation's financial crisis.

[...]

The five justices held that contrary to what the Bush administration had argued, states can enforce their own laws on matters such as discrimination and predatory lending, even if that crosses into areas under federal regulation.

Justice Clarence Thomas, writing for the four dissenters, argued that laws dating back to the nation's founding prevent states from meddling in federal bank regulation. He was joined by Chief Justice John G. Roberts and justices Anthony Kennedy and Samuel Alito.

The ruling angered many in the financial sector, who fear it'll lead to a patchwork of state laws that'll make it harder for banks and other financial firms to take a national approach to the marketplace.

"We are worried about the effect that this ruling could have on the markets," said Rich Whiting, general counsel for the Financial Services Roundtable, a trade group representing the nation's 100 largest financial firms, in a statement. The decision "hinders the ability of financial services firms from conducting business in the United States. Even worse, it will cause confusion for consumers, especially those who move from state to state."
[Highlighting mine - Editor WTF=o]

The reported statement [Highlighted above] from the financial sector is very likely accurate.

This decision WILL hinder the national banks from providing uniform services across the nation. It will certainly make it less economically beneficial to consolidate many local banks and create the kinds of mega-banks who helped the massive Wall Street banks create the mortgage crisis.

In other words, it removes some of the economies of scale that caused the creation of banks like Bank of America. That means that regional banks will be able to compete on a more equitable basis, and banking services will be provided in a more competitive market across the nation.

So does that mean that the megabanks will have higher costs and pass them on to the consumers? Half right. The higher costs will mean that there is less opportunity to make mega profits for the top managers. Along with that, the much greater competition will mean that the consumers will get lower prices than is possible when dealing with a single monopoly national bank, or with one of three or four oligopoly banks. Along with lower costs, the bankers will have greater knowledge of the needs of local markets than the mega banks possibly can, meaning the regional banks will have a shift of some competitive power away from the mega banks. The customers will win.

Too bad, Wall Street. You will have less opportunity to cause boom and bust economic cycles. Instead the free market will have the best opportunity to function.

Joan Baez has come out in support of the Iranian Protesters

This is quite good. Joan Baez has this version of "We shall overcome" posted on U-Tube. Towards the end she has some verses in Persian.



[Source - Juan Cole's blog "Informed Comment."

Greatest Health Care System in the World - for investors

Forget the propaganda that America has the greatest health care system in the world. Focus instead on the fact that of some 330 million Americans, at least 500 thousand are uninsured and an estimated number much like that have insurance that is so poor that if they or their families have a major illness, they will be stuck with up to half or more of the bill. More than half of all bankruptcies are caused by major illness, most by people who are technically insured.

What's wrong with this picture? Ezra Klein writes about it.

The best way to drive down "medical-loss," explains Potter, is to stop insuring unhealthy people. You won't, after all, have to spend very much of a healthy person's dollar on medical care because he or she won't need much medical care. And the insurance industry accomplishes this through two main policies. "One is policy rescission," says Potter. "They look carefully to see if a sick policyholder may have omitted a minor illness, a pre-existing condition, when applying for coverage, and then they use that as justification to cancel the policy, even if the enrollee has never missed a premium payment."

And don't be fooled: rescission is important to the business model. Last week, at a hearing before the House Subcommittee on Oversight and Investigation, Rep. Bart Stupak, the committee chairman, asked three insurance industry executives if they would commit to ending rescission except in cases of intentional fraud. "No," they each said.

Potter also emphasized the practice known as "purging." This is where insurers rid themselves of unprofitable accounts by slapping them with "intentionally unrealistic rate increases." One famous example came when Cigna decided to drive the Entertainment Industry Group Insurance Trust in California and New Jersey off of its books. It hit them with a rate increase that would have left some family plans costing more than $44,000 a year, and it gave them three months to come up with the cash.

The issue isn't that insurance companies are evil. It's that they need to be profitable. They have a fiduciary responsibility to maximize profit for shareholders. And as Potter explains, he's watched an insurer's stock price fall by more than 20 percent in a single day because the first-quarter medical-loss ratio had increased from 77.9 percent to 79.4 percent.

The reason we generally like markets is that the profit incentive spurs useful innovations. But in some markets, that's not the case. We don't allow a bustling market in heroin, for instance, because we don't want a lot of innovation in heroin creation, packaging and advertising. Are we really sure we want a bustling market in how to cleverly revoke the insurance of people who prove to be sickly?

Only a government insurance system can set the priority where it belongs - on keeping and getting patients well. The free market will always put profits above the needs of the patients and sacrifice patients to get greater profits. The ideal system is government mandated single payer. That's politically impossible, so the next best alternative is universal health care with a strong public health insurance option available for everyone to choose.

That's what needs to come out of the Congress this Fall. It will be over the dead bodies of the Republicans and most of the Blue Dog Democrats. It's been too long already. Anyone who votes against health care should be targeted in their next election.

How do we, the public, get Obama to act on what we need?

Do you really wonder what effects we, the public, can have on Obama and his policies? Consider the conditions he is operating in.

The government bureaucracy operates the way the law is written and was previously implemented. The President can only change that by decree around the edges (by Executive Order.) Making changes to those procedures and processes is a slow, painstaking process no matter what it might look like or what politicians promise. That's what protected most of America from the great mischief that Bush, Cheney and Rumsfeld conducted for as long as it did.

Only those things that are high priority get changed. That is true for both good and bad changes. If the President doesn't put the spotlight on a change they want and hold the light there, the change does not happen. By law, tradition, and operational necessity the bureaucracy will revert to the previous methods unless continually pressured. Routine always predominates in EVERY large bureaucracy, public or private. Since the President and his staff have limited time, energy and expertise to expend on making those changes only the highest priority items get their attention.

The job of making changes is most difficult for the federal government. The federal government is the largest bureaucracy there is. That's why big organizations are not as innovative as smaller ones are.

That inertia in bureaucracy is what protected most of America from the great mischief that Bush, Cheney and Rumsfeld wanted and conducted for as long as they did. But they had eight years to conduct their mischief, so they were able to do a lot of damage. Besides, starting a war is something that could be done rather quickly by the President. Note that the media focuses on the changes. The things that stay the same aren't reported on, so all we in the public learn of are the changes and sometimes the big failures. That makes the operations of the President seem a lot more dynamic than they really are.

What's that mean to Obama and the many things we want from him? Don't forget that Obama was handed two badly prosecuted wars and a level of economic collapse unforeseen this time last year to deal with. Those HAVE to be his top priorities right now, followed by getting health care passed. He doesn't really have a lot of leeway to take care of items of lesser priority to the nation as a whole.

So what can we do to get Obama to change things? We have to flood his office with demands that the change be made. That way we get to change the priorities of the Office of the Presidency. That's what FDR meant when hesaid "Maam, I want to do those things, but you must make me." If we don't change Obama's priorities, then lobbyists, his kitchen cabinet and other politicians will.

Will today end the misguided economic happy talk?

Not likely, but it should Here is Warren Buffet on the economy.

Warren Buffett doesn't see the "green shoots" Ben Bernanke and other bullish investors have spoken of in recent months. In fact, the billionaire investor believes the economic picture will grow darker before things improve.

"Everything I see about the economy is that we have had no bounce," Buffett told CNBC anchor Becky Quick in a televised interview Wednesday. "There were a lot of excesses to be wrung out and that process is still under way, and it looks to me that it will be under way for quite awhile. In the annual report, I said that the economy would be in shambles this year and probably well beyond, and I think that is true."

Unemployment, said Buffett, will continue to drag the economy down. He told Bloomberg news that unemployment is "very likely to go above 10%." About 9.4% of the population -- about 14.5 million people -- was unemployed in May, the last month for which statistics are available. High unemployment will continue to depress consumer demand for everything from energy to cars and homes, Buffett said.

Wednesday's news about new-home sales supported Buffett's argument. New-home sales fell 0.6% in May, dashing the hopes of many bullish investors who believed the economy and credit markets had turned around enough to fuel big ticket purchases.

Just to Accentuate Buffet's gloomy opinion, today's unemployment report is out:

The Labor Department on Thursday said initial claims for jobless benefits rose last week by 15,000 to a seasonally adjusted 627,000. Economists expected a drop to 600,000, according to Thomson Reuters. Several states reported more claims than expected from teachers, cafeteria workers and other school employees, a department analyst said.

The number of people continuing to receive unemployment insurance rose by 29,000 to 6.74 million, slightly above analysts' estimates of 6.7 million. The four-week average of claims, which smoothes out fluctuations, was largely unchanged, at 616,750.

The economy will be held down by that unemployment as consumers fail to have the funds to increase buying. That's assuming they don't go all sensible on us and start saving a lot of what they don't have to spend.

But the Wall Street hucksters and their off-the-street relatives trying to boost sales will continue to spout the "...see shoots of recovery breaking through. We'll start recovering before the end of 2009" line. Sorry. They just want you to spend your money on their products, that's all that is. Warren Buffet sees it that same way.

Expect no economic recovery soon

Anyone who thinks the deficit is too high and that the government is spending and borrowing money excessively should go look at the chart and article posted by Jonathon Taplin. Foreclosures are increasing a great deal more rapidly than home sales. That's one major warning of more economic trouble coming.

The problem right now is not inflation and a government deficit. It's a depression that his being held off by the federal government.
Consumers do not have the money to spend, the banks are not expanding credit, and the private markets have completely failed to be able to support a society as large are the United States. The Government spending is the only thing keeping a lot of people in business.

Economically the U.S. is in uncharted waters and no one knows exactly what to do about it, so everyone is hunkering down and trying to find ways to protect their own backsides right now. The only positive notes are coming from the perpetual optimists who are trying to sell their wares. That's the source of the media economic happy talk. It's whistling past the graveyard right now.

What's disgusting about this is that the Republican Party has become the political party of "NO!" in an effort to regain the power that they lost by creating this economic disaster. They offer nothing positive that might solve the economic problems. Instead they are working to obstruct everything that is proposed that might work so that the government will fail to bring America out of the economic crisis. Only if the Republicans can orchestrate a complete failure of government will they possibly be able to return to power in this coming generation. The majority of the public appears to be on to them, however.

In any case, though, don't expect the economy to recover this year. It won't. It can't. There is no expanding consumer market for businesses to grow into, and without that there will not be a significant reduction in unemployment which would allow the money to consumers to buy more. So when you hear "Economic Happy Talk" in the media, just ask what they are selling and ignore what they are saying. It's another desperate used car salesman at work.

Khamenei has lost his legitimacy as Iran's leader

What does it mean that the Iranian Supreme Leader, Ayatollah Ali Khamenei, is being reviled in the streets now after twenty years in which he has been viewed as the unquestioned leader of Iran whose word was never disputed? He is going to have to rely on his remaining loyal followers to enforce his rulings on the rest of Iranians.

His most loyal followers and those capable of enforcing his decisions are the Iranian Revolutionary Guard. If he depends on them to enforce his rulings his prior position in Iranian society is gone forever.

The Ayatollah has lost his legitimacy to govern irretrievably. He either has to put together a successful military dictatorship or go.

See the analysis by Hamza Hendawi from the Associated Press.

Here's a look at how the Republicans came up with the messages to kill health care reform

This comes from Katie Halper and the SEIU. It was posted at TPMCafe. It's quite fun.



All the Republican flacks hard at work to mislead the public for no better reason than the fact that they want to gain back the political power they lost when conservatism was implemented and proved a total disaster under Bush and Cheney.

American Conservatism as an ideology with which to run government always results in disaster because it is diametrically opposed to good governance processes. Conservatives to succeed in government must abandon the ideology. Check the history of why the Republicans lost the House in 1954 after only having control for two years and never regained it until a new generation of suckers was old enough to buy their lies and self-serving nostrums in 1994. The Republican time in control of both the Presidency and the Congress has always failed, although rarely as spectacularly as the last eight years.

Here are a few things I want to see in health care reform - given the absence of single payer

Here are a few provisions I'd like to see in whatever bill passes short of single payer.

One thing that would help is a single universal health risk pool. A private insurer who operated in the Health insurance market would be required to accept any applicant, regardless of prior history, and would be forbidden to selectively rate up any applicant.

Add to that "risk adjustment" and the health insurance system would be operating pretty much on a level playing field. Everyone would be forced to make their money by paying lower health care costs. There's a lot of room for innovation in that.

Also we need a single standardized definition of the terms used in medical billing, so that physicians and hospitals would have to hire only enough clerical staff to deal with one basic system billing system. The idea that every insurance company has its own system is simply a ploy to lock in health care providers to that insurance company. Any efficiencies found in medical billing could go to physicians and hospitals or to the insurance company. That's another incentive to lower costs and streamline the billing system. It would also lower what it costs to run administration for medical billing in the physicians and hospitals.

I am assuming that insurance companies will be allowed to sell supplemental insurance policies that cover costs above what the standard benefits the new health care system will provide, but such policies should clearly be add-ons to the normal insurance, not included in as part of the normal insurance like the private insurance companies offering Medicare benefits do today. That way the purchasers would know what they were paying and could see whatever additional benefits to supplemental policy provided. Again, the cost of health care needs to be up front and transparent as much as possible.

I'd also like to see a single universal appeals board for all denials of payment, private and government. Without that standardized appeals system the patients have no real recourse usually, which is why the insurance companies have been able to get away with the rescissions.

Sweeten the pot for physicians by paying off parts of the student loans taken by them. My DO graduated from medical school with a 30-year payment schedule. For each year in the system, pay off a year of loan (up to a max each year to prevent gaming the system, perhaps. That would require research, but the date would be easy to get.)

I'm sure all of that could be gamed, but the profit in gaming it would be a lot lower that what we currently pay. Remember, the federal government already pays of half of all health care expenses in the nation.

Here's what we should be recognizing in the Iranian conflict

We have now seen over a week of spectacular newsworthy items come out of Iran since their election. The conflict is within Iran, but Americans are mostly interested because of America's on-going conflict with Iran. One of many questions is why the conflicts have been occurring at all. Here's what I think it happening.

The Iranian conflict demonstrates very clearly that conflicts between nations are almost always conflicts between the powerful and wealthy elites of those nations, not between the peoples of those nations. Conflicts within nations are similarly largely between the leaders of one group and the leaders of the opposing groups.

The leaders in some cases owe their power to a vocal minority of ideologues who they represent, so they cater to that minority. The leaders generally fear losing their social positions and wealth, so they demagogue the masses and point to powerful "enemies" in other countries or other groups or to powerless minorities to whom the leaders attribute great and sinister power. This conflict permits them to maintain their social position and the wealth that normally accompanies it.

Wealth and power are effectively synonymous. The wealthy generally select those in power, and the powerful individuals can use their position and power to gain wealth. The biggest difference between those two groups is their methods of manipulating society, one group by buying people to do what they want and the other by using the necessary hierarchy of government to enforce rules on others. Both are focused on protecting great wealth, either because they have it or because they have been selected to protect it. Here's how that wealth-protection works to select politicians in a democracy or industrialized nation.

The wealthy, very often people who have inherited their wealth, use money to provide a crucial element of support to politicians who support them and help protect their wealth. They also hire others to establish a philosophy that legitimizes the government. In America that is primarily political conservative ideology or the "Free Market" myth. The conservative ideology here is designed to protect wealth and redistribute it away from the middle and lower classes. That's the reason why repeal of the inheritance tax is such an issue with Republicans and conservatives, as are efforts to lower tax rates on the wealthy and allow them to avoid regulation or even disclosure. In Iran a militant and mutant form of Shiite Islam performs much the same function. The main purposes of the ideology are to motivate individuals to achieve the goals of protecting wealth and power and to differentiate between those group members are belong to one group or nation or another and thus are superior to their assigned opponents.

as an example, the Republican Party leaders are largely those who have the favor of wealthy donors, if they aren't wealthy themselves. We can see that from Norm Coleman's investigation for bribery in Minnesota and from the existence of "wingnut welfare" which protects the political careers of favored politicians when they are out of office. Over a long period of time, every politician hits rough patches, and that's when the money can really help. Those politicians who do not have wealth of their own or wealthy backers are forced out of political careers sooner or later because of the inherent uncertainty of such careers.

Internationally conflicts in the last century (at least) _ have all been based on the effects of international trade, primarily oil. These conflicts are primarily of interest to the wealthy in the various nations, particularly since the most reliable and lucrative businesses tend to be those where someone causes the government to give them customers. Government power gives the wealthy members of a powerful oligarchy the ability to redirect trade and profits to themselves. In the Middle East this has led to their oligarchs allying themselves to international oil companies and repressing their respective peoples to support their own incomes and local power.

The real key, though, is that the international conflicts come from the local powerful elites who disagree sharply with the powerful elites of other nations, and then demagogue their people to fight other national groups. We invaded Iraq because Saddam was unwilling to submit to the oil companies - and yet those oil companies (competing with each other and protecting their prior investments) kept him in power by giving him the money that belonged to Iraq. Here in the U.S. we have recently watched the way the Oil Companies and Business interests - through the Bush administration - demagogued Americans into an unnecessary war. (And much of our mass media, as usual, was very much involved in the demagoguery. It's the owners that do that, not the reporters. In fact, the editors have to cater to the owners to keep their careers.)

Powerful religious leaders are even more dependent on wealthy donors. To keep their positions, they also have to cater to protecting the wealth of the wealthy families. As an example, the American evangelicals in the American South in the early 1800's were largely anti-slavery. But the wealthy planters supported those Preachers who supported their wealth and taught that God, through the Bible said that African slaves were not fully human. That religious attitude lasted in the Southern Baptist Church until they finally apologized for teaching that the Bible supported slavery in the 1990's. Organized western religion is ideologically-based (they call it doctrine) and any Preacher who can argue that the Bible supports what the wealthy want the masses to believe will get a church, good donations and a long career as a Preacher. Every hierarchy is subject to such manipulation by the wealthy simply because wealth creates lives and careers.

The result of all this is that the wealthy families maintain their wealth by getting their nominees into positions of power, and those nominees owe their positions largely to those wealthy families. So together they make up the dominant groups of power brokers. To maintain that power, they create enemies, real or make believe, and demagogue the masses to fight them. It's best if the leaders can egg those enemies into attacking the nation because that mobilizes the followers to consolidate power in the hands of a few hardliners who can easily convince others that they are the only ones who can defend us all against those enemies. Not all intergroup or international conflicts are manipulated this way, but the tendency is always there.

Once in a while we get to see behind the charade of group dynamics and see the real people on the ground who have been demagogued. That's what we are currently seeing in Iran with the protests. But even that is an internal battle for power between elite groups in Iran.

Our Real economic crisis

We are undergoing a "false dawn" economically right now. The stock market has stopped crashing and occasionally jumps up a bit as a few optimistic individuals think the bottom has arrived and they can make big profits by investing at this time. Everyone in the business media is blaming last fall's world-wide market freeze and collapse on the subprime mortgage scams. We know about them now so they are over, right?

Right?

Not hardly. First, and not most important, the banking industry is strongly resisting the critical changes in supervision needed to avoid such scams and economic idiocies in the future, so another economic collapse is just a matter of time. The Republican conservatives have decided that they have to oppose Obama and the Democrats in order to regain power for themselves, so they are in no mood to think rationally about anything but their own power and politics. But second and much more important, the economical structural causes of our current problems are being hidden by the federal government's massive panicky financial giveaways.

Johathon Taplin posted a very illuminating article explaining how the very structure of our economy has been warped out of all good sense in the last three or more decades. He focuses on production capacity under-utilization, a lack of productive product innovation and the encouragement of too much consumer spending at the cost of savings. Here is a quote with some of his core ideas:

The Big Lie of the current economic debate is that we just went through a "hundred year flood"--that this was all caused by the Sub Prime mortgage crisis. But the problems of stagnation and capacity utilization have been increasing since 1975 when overall capacity utilization was at 86%. It hasn't been above 82% since 1995 and today it is below 77%. But the larger problem has been that we have misallocated our capital since the problems of economic stagnation first raised their head in the mid 1970's. Steindl knew there were solutions, but he doubted we had the political will to solve them.

With the 1976 republication of his Maturity and Stagnation in American Capitalism, Steindl allowed that technical innovation, product development, public spending, and research and development initiatives might provide the means to escape from investment inertia. Even so, he was extremely concerned that most accumulation strategies in mature capitalist nations would focus on military-industrial activity and war itself. Using both public and private investment funds for other purposes, while obviously desirable, would be "exceedingly hard" given "the workings of political institutions."

Reagan's solution to stagnation was Military Keynesianism. Instead of investing in alternative energy solutions or more efficient transportation when the Arab Oil Embargo was staring us in the face, he chose to create the largest military expenditure in peace time history with borrowed money. And what do we have to show for it? Our current economic crisis.

Broadly speaking this is all caused by too many politicians who get elected to office based on showing the current administration has failed to accomplish important tasks. Not a bad idea, until the outsider politicians begin making up imaginary and unreal problems just to win elections. So a lot the current economic set of problems stem from economic ignorance and ideology held by many of our politicians in power.

A great deal of the current economic problem is based on the Republican and conservative faith that everything is local and that any overall systemic evaluation and regulation of the economic systems themselves is pure oppression. The "Free Market" ideology is a political gimmick designed to prevent essential regulation on the basis that any regulation leads down the slippery slope to central government oppression. But avoiding any evaluation and dissemination of recognized systemic problems means that local economic problems are ignored and allowed to spread to other localities.

In other words, the political demand for localism means that systemic problems are ignored. This is manifested in the absolute refusal of the Republicans to allow the federal government to even investigate many systemic problems and put out advisory statements (non-regulatory white papers) for fear of the slippery slope leading to actual regulation.

Taplin's point that the economy has been steered into the inherently nonproductive investment on the military-industrial complex is extremely important. I would add to that the fact that in America banking and financial services have replaced manufacturing and production as the most important parts of the economy. A lot of this has involved shipping American jobs overseas in order to expand financial services.

Another problem has been the extreme antilabor bias of the American business culture. Executives see the most important part of managing their businesses is to prevent their employees from organizing and making demands for their collective services. Since these businesses cannot exist without labor because they do all the actual productive work, if the workers are organized they can criticize bad bosses and bad labor policies. Since the American business culture also demands that workers obey commands and not talk back or criticize the bosses, this becomes intolerable. (Not that there are not bad labor leaders also, but they are dwarfed in magnitude by the numbers of bad, ignorant and uncaring managers.)

The fact is, however, that America's economy is like a house built on a bad foundation. When a shock hits the house, it is much more likely to collapse than one with a stable foundation. But the current resistance to correcting the instabilities in America's economic foundation are immense and increasing along with the belief that the economic crisis is over.

Unfortunately, it's not over. It's only being postponed to give us time to shore up the real problems. It's resistance to recognizing and correcting those problems that is currently the real danger.

The economic disaster is waiting to come back redoubled.

Why should politicians in Congress support tough measures on the banks?

The problem was that all their previous losses had eliminated their reserves. The reserves were demanded by those they borrowed money to lend because the reserves were the only guarantee that the investment bank could pay the organizations they borrowed from. If the investment banks couldn't borrow money they had nothing to lend. They operate on the spread between the rate at which they borrow and the markup they charge those they invest in or lend to.

So the banking system locked up and the economy was really headed towards a 1930's style Depression.

To prevent that the feds guaranteed the money the investment banks borrowed. Their lenders would get their money back based on the full faith and credit of the U.S. taxpayers. The investment banks could borrow and now they are lending/investing. The economy has stopped most of its crash.

But now the banks don't need reserves in order to borrow. The lenders that Wall Street depends on have a direct pipeline the Federal Government tax money. No known money source is more reliable.

In addition, the Fed has been pumping really cheap money out to prime the pumps. The result is that now the investment banks can lend/invest and the spread between what they borrow at and what they invest at has gotten a lot bigger.

The bonuses have to come big and fast. This current state of affairs won't last, and the investment banks know it. So they are socking away as much as they can and rapidly as possible beyond recovery by the feds. As Goober Peas (above 3:58 pm) points out, the second wave of economic down turn is just waiting to hit.

As long as there are positive moves in the stock market the Congressman are being fooled into thinking the recovery h as arrived. It hasn't. We are in the eye of the storm, and the big waves haven't hit yet.

I see no way around it, either. Congress is collectively and individually too stupid to see it coming, as well as bought and paid for by the Wall Street banks. Their lobbyists are working the hill overtime to make sure the False God of the Free Market is not disrupted until the disaster hits.Then Obama is going to get the blame for letting it happen.

Obama is not a finance expert, and the Treasury is full of Wall Street trained experts who believe in the Wall Street bank philosophies. Obama is also hamstrung by the Democrats in Congress (see the above paragraph.)

Wait for it. After the Alt-A loans start going South and the ARMs reset, the economy is going to turn back down. It's the Wall Street banks' and Congressional Democrats who are at fault. The Republicans are just crazy roadblocks in the way of progress.

Anyone think the government can recover those bonuses when the recovery is aborted?

Good "AMA" health care commercial

Watch this "commercial" by Bill Maher. The AMA will hate it - particularly because it is true, just exaggerated.



Also, Digby makes an excellent point about this "greatest health care system in the world." Free lancers, students, and self-employed individuals have to avoid going to the doctor because if the doctor finds something that is recorded as a "preexisting condition" and you then move out of state or even just out of the network area, you are dropped by your old insurance company and have to find a new one in that great free market that McCain was going to throw us all into.

If you have a preexisting condition on your record then even if you can find new insurance then the premiums will be sharply jacked up. Very frequently that means people are trapped in one location or job just to keep their health insurance.

Universal health insurance with a single rating pool and with everyone paying into the system whether they are healthy or not ends that, even with private insurance companies. It's just that everyone pays and since everyone is in the same universal rating pool, preexisting conditions do not exist. Neither do jacked-up premiums, since the insurance company does not have to ensure that they are only administering insurance and paying for people in their own private rating pool.

The insurance companies, even in a private system, are paid on a per-capita basis. They collect the same premium as every other insurance company per person insured. If someone is especially expensive, then the individual companies themselves pay for loss insurance for themselves. Excessive losses are "reinsured." It's like a gambling casino. For a pool large enough, the losses are quite predictable.

Of course, the high executive salaries are no longer justified. That's why they want to kill universal health care and leave 50 million Americans uninsured. They make much bigger profits that way.

The Bush/Cheney attack on Iran would have stopped the current Iranian revolution

Do you realize where the young people in Iran would have been today if we or the Israelis had attacked Iran? Iran would have been on a war footing, just as America was after December 7, 1941 and Ahmahdinejad would have been reelected with no questions asked.Those same young people who are today demonstrating in the streets would instead be volunteering to attack the enemies who attacked Iran.

Think not? Bernard Avishai provides the in-depth analysis.

Think war brings peace? Ask the Palestinians in Gaza. The Israelis did not secure peace, or secure their borders, or secure the the long term existence of Israel by attacking Gaza. Nor did the Gazans obtain peace and stability by shooting rockets into Israel. Nor did the Iranian hardliners secure Iran by shipping rockets and weapons to the Palestinians. All the hardliners of all the nations have to offer is a perpetual cycle of more war and killing and starvation for their people.

War does not bring peace and social stability. War begats more war.

Peace and stability require a political solution - along with careful and appropriate policing to deal with individual crazies and bandits.

Here's a big part of what's wrong with private health insurers

The LA Times has a good article about a Congressional Hearing on health insurers that should have happened years ago. The health insurers are running a deadly and very expensive scam that would make the Mafia proud. They are collecting premiums, but when severe and expensive cases happen, they cancel just those policies, allegedly for fraud. As the story points out, in a large number of cases there was NO FRAUD ^*. The real reason for canceling is that they don't want to pay the medical bills that are higher than what the insured has paid in. That is, they want to sell insurance but not pay it. From the LA Times:

Executives of three of the nation's largest health insurers told federal lawmakers in Washington on Tuesday that they would continue canceling medical coverage for some sick policyholders, despite withering criticism from Republican and Democratic members of Congress who decried the practice as unfair and abusive.

The hearing on the controversial action known as rescission, which has left thousands of Americans burdened with costly medical bills despite paying insurance premiums, began a day after President Obama outlined his proposals for revamping the nation's healthcare system.

An investigation by the House Subcommittee on Oversight and Investigations showed that health insurers WellPoint Inc., UnitedHealth Group and Assurant Inc. canceled the coverage of more than 20,000 people, allowing the companies to avoid paying more than $300 million in medical claims over a five-year period.

It also found that policyholders with breast cancer, lymphoma and more than 1,000 other conditions were targeted for rescission and that employees were praised in performance reviews for terminating the policies of customers with expensive illnesses.
[highlighting mine - Editor WTF-o]

Go read the full article and you'll be disgusted. You will see why no private insurance company can be trusted to deliver what they promised - and the customer paid for. But there is a cure.

Universal health care with a single insurance pool that covers everyone prevents this. (It doesn't matter who is paying. That's a very different issue.) Health insurers would have to accept anyone, and preexisting conditions would not matter. (This too can be gamed, but not like the clear fraud the insurance companies have just testified to Congress that they are conducting.)

With a single universal health insurance pool covering everyone, there would be no "fraud" of the type the health care executives testified to. There would be no excuse for health insurers to cancel a policy when someone threatened to file a claim on it. The possible fraud is for someone who is not in an insured pool to try to join a health insurance pool once they are sick (called "adverse selection"), and raise its costs. Everyone would pay the same price, sick or well. An insurance company that found a patient who they took on who was extremely expensive should have reinsured everyone they covered for catastrophic health costs, and with a universal health insurance pool reinsurance would be predictable and profitable.

But of course, a company that was big enough to reinsure itself would not have to pay for reinsurance - you know, a company like Blue Cross or and an organization like the government. More profit for Blue Cross -- or lower costs for the government by not buying reinsurance. The statistical Law of Large Numbers rewards big insurance pools with predictable costs.

Who is paying for the profits the health insurers use to pay the exorbitant salaries of their CEO's and pay dividends to their stock holders? Sick people who get their insurance canceled because they submit claims for what they are paying for. And everyone else whose premiums are jacked up when those canceled people go into public health care. The public health care system pays for treatment without the benefit of the insurance payments made by the policy holders of the insurance company who canceled the policy.

One last thing to consider. My analysis is not based on secret insurance information. Any semi-competent insurance agent will understand it, and the health insurance executives know it clearly because it is what they depend on to pretend to innovate their products. They are really innovating in new ways to cancel expensive clients. But if the health insurance system were managed and supervised, their methods of "innovation" would disappear along with the wasted money the policy holders who don't get sick are throwing away. (Insurance means that everyone pays in and those who are sick get covered beyond what they could pay for themselves.) Along with the exposure that what they are calling "innovation" is, in fact, fraud, the excuses for high executive payouts disappear. Health insurance would become what it should be - a predictable utility. Executives would be paid what civil servants get paid because their jobs would become routine as the excess costs of avoiding payment are washed out of the system. That's pretty much what has happened in every nation that has been sensible to establish universal health care.

That excess wasted money would either be paid back in lower premiums or in coverage of the many uninsured. The predictability provided by the single universal health insurance pool would make health care planning much easier. Low income city districts and rural areas that don't currently get adequate health care coverage could be covered with health care providers because they could expect to get paid for their services. In addition, a lot of the increases in price of health care could be removed from the system.

But the executives and their stockholders wouldn't get what economists call "rent payments" - in economics, a payment to a factor of production in excess of that which is needed to keep it employed in its current use. More than 20,000 people that we can document are paying those "economic rent payments." So are the rest of us, through taxes to support the tax-supported health care those people were thrown onto when the insurers canceled their policies and refunded their payments.

If you aren't disgusted at the scam the private health insurers are running, you should be. It makes Bernie Madoff look like a relative piker.

---

^* "Fraud only occurs when three elements come together - motivation, opportunity, and rationalisation" See Flat Rock. Either motivation or rationalization was missing in many of the cases described. The insurance companies canceled the policies anyway. The real problem was that the company was on the hook for more money than the premiums they had received.

Anonymous report suggests Ahmadinejad voters may be deserting him

Jim Sleeper reports from one of his prior students, currently reporting out of Iran, that many who voted for the Tienanmen government are now realizing that Ahmadinejad was planning a coup and consolidation of power and is well on his way to getting there. So they are not supporting Ahmadinejad's apparent agenda.

Combine this with the very effective non-violent revolution that is being waged against the Ahmadinejad and it is both the seeds and the desired result. The government does not dare kill a lot of the revolutionaries (because that's what they are) because they are working to delegitimize the government. The bodies of protesters shown in the media will also greatly delegitimize the Ahmadinejad government. It is right out of the playbooks written by Gandhi, Martin Luther King, and the Orange and Green Revolutions in eastern Europe (which Vladimir Putin has roundly denounced as Western-inspired.)

A similar set of protest actions in Tiananmen Square twenty years ago did not work because the Communist government of China was able to shut down communications outside China and then totally repress the story of Tiananmen Square. The 1999 Iranian protests were also shut down by the government, but with the new forms of communication, the Iranian government has been unable to keep the news and pictures from getting out to the rest of the world.

The government's efforts to repress the news of what they are doing to spreading the rest of the world simply aren't working, and apparently the Iranian government has a very sophisticated Internet control operation. What's happening, though is that they cannot keep up with the workarounds that the younger computer uses are developing. The government closes off access to one website, the protesters twitter everyone the URL of another website, and everyone goes there. Twitter, apparently, cannot be shut off. Nor can access to overseas URLs be shut off on a blanket basis.

The result is that the Ahmadinejad government's repression measures are themselves being fed back to the Iranian population to delegitimize the government, and the government can't keep up with the various news sources. So the Ahmadinejad government is being forced to delegitimize itself.

We'll see if it works this time.

One thing to consider - this is not a sudden conflict caused by the election. There are two sides, the government and the protesters, and both have prepared their actions very much in depth. The kind of highly disciplined demonstrations the protesters have been conducting do not happen out of someone's hip pocket. Similarly, the Ahmadinejad government appears to have prepared their coup attempt long before the election. On both sides it it a media war with the government having the monopoly on using force. It's a fascinating conflict.

I wonder if the U.S. has a modern enough Internet system to successfully conduct a similar set of protests? Our broadband system is technologically behind that of most other industrial nations now and as well as that of many developing ones. (That's because of the phone company monopoly and the way Congress is bought and paid for by lobbyists.)

Machiavelli on the current Iranian situation

Merk Kleiman provides some excellent quotes explaining what seems to be happening in Iran this week.

The statement is, however, predicated on the idea that the Ayatollah Khamene'i is in fact in charge and has made the statements declaring that Ahmadinejad did win the election with an unlikely 66% of the vote. That may be in question. Laura Rozen is doing great reporting as this item from her blog War and Piece demonstrates:

One man who worked in the Ministry of Interior, which carried out the vote count, said the government had been preparing its fraud for weeks, purging anyone of doubtful loyalty and importing pliable staff members from around the country.

“They didn’t rig the vote,” claimed this man, who showed his ministry identification card but pleaded not to be named. “They didn’t even look at the vote. They just wrote the name and put the number in front of it.”

This suggests that the takeover by Amahdinejad has been long planned and carefully prepared for. It has been suggested that what we are watching is a coup by the military, Intelligence Services and the Revolutionary Guard (from which Ahmadinejad came) and it is aimed a usurping the power of the Ayatollahs.

Since someone on radio said that the Ayatollah did not give his announcement that Ahmadinejad won the election himself (issued two hours after the polls closed - remember that this was voted on paper ballots that had to be hand counted - there is reason to suspect it really is a coup by the military hardliners.

Laura also reports what Gary Sick previously wrote:

In 1997, Iran’s hard line leadership was stunned by the landslide election of Mohammed Khatami, a reformer who promised to bring rule of law and a more human face to the harsh visage of the Iranian revolution. It took the authorities almost a year to recover their composure and to reassert their control through naked force and cynical manipulation of the constitution and legal system. The authorities did not, however, falsify the election results and even permitted a resounding reelection four years later. Instead, they preferred to prevent the president from implementing his reform program.

In 2005, when it appeared that no hard line conservative might survive the first round of the presidential election, there were credible reports of ballot manipulation to insure that Mr Ahmadinejad could run (and win) against former president Rafsanjani in the second round.

Now I may just be a cynical old man, but that sounds a lot like this current situation is another battle in a long-running conflict between the government of Iran, kept in place by the hardliners with military force and the use of religious imagery. The two quotes I presented to begin this place rather strongly suggest that both the government and the reformers have been preparing for this election and both sides are quite well organized. The stuff we are seeing reported (badly by our media, incompetently by American TV "news" when it is not being ignored) is part of a longer deeper battle.

Finally, I believe it was Juan Cole who wrote that the deaths of protesters were going to cause more and greater protests. (Sorry - I can't find the link to his quote.) But what he said that the funeral processions would lead to more protests, as would the 40 days of mourning that followed the funerals. Then, any additional killings by the government troops will lead to a new round of funeral - protest - mourning - protest. So it could stretch out for a long period of time. And my own observation is that the Iranian military and police do not have good enough control on their troops to keep them from killing more protesters in the heat of the moment. That is classic peaceful protest such as was used by Gandhi against the British in India. And twitter is the protester's friend - as are the many other modern methods of communication going back to faxes as the Soviet dissidents used to use.

Overall I would guess that Iran is going to be in for a really long, hot summer.

The global economic order needs a dominant economy to function well. The U.S. is abandoning that role and there is no other economy to replace us.

Dani Rodrik posted a very interesting blog at TPM Cafe today that included this line:

...global economic order is difficult to establish and maintain in the absence of a dominant economic power.

That statement crystallized a number of ideas I have been playing with.

The idea that for a stable and effective global economic order to exist it demands a dominant economic power explains a great deal. It would suggest that the long period of global stability and economic order in the 19th century was brought about by the dominance of Great Britain (at first with its contra-Napoleonic allies) as it underwent industrialization, and that the rapid industrial growth of Germany in the late '80's and '90's and years prior to WW I was a major contributor to the outbreak of WW I itself. A war, I might add, that effectively destroyed the economy and global dominance of the British Empire.

After that there was no single dominating economy following WW I although Britain, France, and the distant, reticent and isolationist U.S. were all duking it out for dominance. (The economic power of the U.S. was already obvious, but it was not applied to international politics. The German nationalists, of course, greatly resented that they were excluded from the club they knew they belonged in. The resulting economic and political turbulence combined with militant nationalism that saw all international power as based in the military led almost inevitably into resuming the Great War on a much wider scale. The German dominant social and political class had never matured (the British upper class were no better.) That same immaturity also was a key factor in starting WW II. In both cases they "knew" they could assert their national power (by military means) and regain the status they demanded. It was a reaction from weakness.

WW II then proceeded to destroy every industrialized economy of any size in the world outside the U.S., leaving the U.S. as dominant by default - as much by the accident of isolation more than any other single factor. Since the 60's the rebuilding of most of the rest of the world has placed the continuation of that U.S. dominance in severe doubt. So has the overvaluing of the dollar and the resulting shift of the American economy from predominantly production to predominantly banking. Essentially America has abandoned much of its basis of economic dominance other than geography. It doesn't help at all that we have long outstripped our oil resources, the single most important basis for an industrial economy after coal. We have joined Japan and Europe in our need for imported oil to fuel our industrial economy.

The U.S. power is now maintained by super aggressive spending on the military(with its associated industrial complex), but it also is maintained by having the dollar as the world's reserve currency and the oil trading currency. Unfortunately the previous relative dominance of our educational and university systems and our willingness to take in students from anywhere in the world has been allowed to decline badly. That and the economic innovation it caused was one of the pillars of our dominance of the world economy, but in the name of "fiscal restraint" we have abandoned it. Such expenditures do not present a predictable short-term gain the markets can recognize to justify those such investments, you see. But innovation is inherently unpredictable and depends on smart, motivated and well-educated individuals free to apply their ideas. So it is necessary to find, educate and motivate such individuals and permit them the relative freedom to put their insights into effect.

Couple those international factors with the effective monopoly control of oil resources by the middle east (Saudi Arabia still the dominant nation) as well as Russia along with the rise of the European Union, Japan. China and India, and there's not much left to support American global economic dominance beyond a set of international banking institutions badly infected with the idiocy of the absolute Free Market- small government ideology which operates efficiently only by abandoning large swaths of poor populations.

Only governments can modify the structures of the economy that keep those populations unable to participate in the economy to their fullest extent, but government actions to bring those populations into the economy and society costs the entrenched powers big time. The biggest price the entrenched power pay is dealing with problems and the innovations by those segments of the population as they become more integrated into the economy. That rocks the stability the the financial markets strive for, no matter how many people are benefited. They'd much rather lock in the existing social and economic system in which they dominate and never let it change.

Since banking is the last major element of American dominance (other than the ability to rapidly extend military power to anywhere in the world), I'd guess that we really stepped in it by profligate and ignorant banking processes that created the current severe Recession that may be the beginnings of Depression. Worse, we rapidly spread both the failed management of banking and the associated economic woes to the rest of the world. That gives the rest of the world a really strong motivation to kick us off our privileged economic perch. America's attempt to spread the often unworkable "Free Market" ideology gives them good reason. (Free Markets work for the winners, but abandon the losers. That creates both social and political problems. that makes the absolute free market unworkable.)

Unfortunately, as was true after WW I, there is no replacement in the wings for U.S. dominance. That puts the world back into the lack of a dominant economy that uses its power to control the global economy that preceded both WW I and WW II.

Those are the implications that I drew from the line quoted above. Mind you, I am not a historian. I am a retiree with an academic background in economics and business (an MBA with extensive study after that in Management, Economics and Finance) as well as having retired as an Army Reserve Logistics Officer. (That means I operated or planned for maintenance, supply and transportation systems for Corps and Field Armies in the field. That's a hell of a lot of people and equipment operating in places where there is no outside economic or legal or civil government support at all.) When I retired from work a few years ago I started reading all the history I never had time to read while I was working. I soon developed a focus on the question of how Europe took 400 years and somehow came to dominate the world by the late 19th century. Interestingly the whole process of slavery in America, the Caribbean and northern South America is included. It was firsts and foremost an economic thing as world commodity markets developed, but it warped the societies where it was practiced in way still very recognizable - as well as socially dysfunctional. I'm also still looking for the basic causes of WW I, because it destroyed that domination and its aftermath set up the international game as it is played today.

My question is whether I have this analysis above right. It seems reasonable to me, but how do I know? I'm no historian, so I am looking for feedback and criticism.

So I just thought I would throw this out for consideration. Comments from readers would be greatly appreciated.

Whither the economy for the next year

Want to know were the economy is going in the next year or so? There will be no turnaround until the real estate market and the mortgage-based bonds based on it turn around. That will not happen for more than a year, maybe more. Calculated Risk posted excerpts from Fitch Ratings.

Essentially Fitch predicts that "...from the first quarter of 2009, home prices will fall an additional 12.5% nationally and 36% in California, with home prices not exhibiting stability until the second half of 2010. To date, national home prices have declined by 27%."

Those drops in home prices are going to go straight to the capital accounts of the banks that have mortgage-backed bonds as their basis. The banks are being slow to lend even now in large part because they don't know how long they will have to hold out before their portfolios rebound and can be sold for something close to what is on the bank books at present.

Until the banks themselves generally get back into the economy, unemployment will at best stabilize at a nasty high level. Employment will not pick up until the banks start lending to start ups again, and that's NOT going to be this year.

In the meantime, the layoffs from GM and Chrysler are continuing apace, and will last a while. Each dealership layoff will effect several other local jobs, so employment will continue to be depressed for that reason also. (Question: how soon will Penske take to outsource the Saturn to China? That was what he originally planned, and keeping the American plants open is merely an expensive publicity stunt. It won't last.)

There are no significant plans reported that will actually increase employment, and without increasing employment, the national consumption will remain depresses. Businesses will not throw money at significant start ups until there is a predictable consumer market. Do not plan on that for over a year from now.

Forget the "economic happy talk" based on market blips. Those are based on stock trading considerations, not economic considerations. Short-term changes in the market are primarily based on trading considerations. You should realize by now that the stock markets are clearly NOT good and reliable predictors of the economic directions.

And no, I as of yet have no clue how much over a year it will be. Essentially the economy is not going to turn around in the next year to fifteen months at the earliest.

We've seen this right-wing terrorism before. From 1992 until Newt took the House.

America has just seen the murder of Dr. George Tiller by an anti-abortion zealot and a well-known white supremacist shooting down a security guard in the United States Holocaust Memorial Museum within roughly one week.

It shouldn't be a surprise to anyone. We were warned. The Department of Homeland Security released a report (initiated by the Bush administration) that recognized growing right-wing extremism. Oddly the conservative media took umbrage at that report, but the two killers Scott Roeder and James Von Brunn certainly validated it. So where is this coming from?

Paul Krugman reported something extremely important Friday.

Today, as in the early years of the Clinton administration but to an even greater extent, right-wing extremism is being systematically fed by the conservative media and political establishment.

Now, for the most part, the likes of Fox News and the R.N.C. haven’t directly incited violence, despite Bill O’Reilly’s declarations that “some” called Dr. Tiller “Tiller the Baby Killer,” that he had “blood on his hands,” and that he was a “guy operating a death mill.” But they have gone out of their way to provide a platform for conspiracy theories and apocalyptic rhetoric, just as they did the last time a Democrat held the White House.

And at this point, whatever dividing line there was between mainstream conservatism and the black-helicopter crowd seems to have been virtually erased.

These people are inciting violence for the purpose of regaining political control, the same political control recently lost by the conservative Republicans when their administration of government was determined to be a complete failure. The right-wing conservative media is stoking violence and hiding behind freedom of speech and freedom of the press to do it. Then they are denying they told anyone to go out and kill, even while they excoriate the Obama administration in terms not heard since they previously treated Bill Clinton the same way.

What the American right-wing politicians and media are doing amounts to terrorism. They are instigating and promotion it and letting their fringe elements individually decide when and where to act on it. Then they the pundits and politicians deny they approve of those actions even while urging others like Terry Randall of Operation Rescue fame.

There are limits to freedom of speech and the press. The classic example is that it is criminal to yell fire in a crowded theater. That's not free speech. It's a felony.

Dave Niewert has just published an excellent and timely new book on the American right wing extremists called "The Eliminationists." In it he makes the point that American conservative politicians used to advocate conservative policies, but they were generally law-and-order people who rejected crazy fringe ideas and condemned violence. Their rhetoric was that of sane careful administrators even if conservative. But that changed in the early 90's. Led by the talk radio rhetoric, the mainstream Republican conservatives adopted the rhetoric and many of the ideas held by the fringe groups such as the radical anti-abortionists (Eric Rudolph) and the militia and Patriot movements, so that now there is no difference in rhetoric between mainstream conservative politicians and the radical right wing militia groups and the anti-abortion extremists. The only difference is that the mainstream conservative politicians stopped short of picking up guns themselves and killing someone.

But the result of the increase in inflammatory conservative rhetoric on right-wing TV and radio has been seen by the fringe right wing movements as giving them from the mainstream culture permission to act on the extreme rhetoric and crazy stories.

Bob Somerby at the Daily Howler points out that this all happened before, the last time there was a Democratic President and a Democratic Congress. It included one crazy who crashed his light plane into the White House to try to kill President Clinton. Much of the extreme rhetoric and violence died down, though, as soon as Newt Gingrich orchestrated the takeover of the House of Representatives in 1994.

That's what this is all about. The right-wing has been kicked out of power because they can't run government effectively. They have no policies for America. But they have a way to regain power, and it is through terrorism, extremist rhetoric and sowing massive amounts of fear in the public. Then they offer themselves as the only possible cure for the very terrorism they are stoking. And the mainstream media lets them get away with it without comment. In fact, they spent two years (1998 - 2000) gratuitously trashing and making up lies about the Democratic nominee for President until the Presidential election was so close the right-wing packed US Supreme Court could swing the 2000 election to the Republican candidate. The trashing of the President and 2000 Presidential candidate stopped when Bush was elected. Bush got a love fest for eight years except during the proof of each of his worst disasters when the media couldn't avoid reporting negatively on him. Funny thing. It started again as soon as Barack Obama took office. It has started slow, as the media finds its stories and themes, but it was building process under Clinton also. But we are seeing the same pattern.

Think history will repeat itself? I do. It's not a conspiracy, it's cultural. The institutionalized powers and the super wealthy in America feel threatened and displaced by a Democratic party government that actually works to benefit average Americans. They will remove the Democrats. Again.

Why is Obama not implementing DADT? I think the price of doing it is too high.

A lot of Obama supporters have been very upset that he did not direct the military to eliminate Don't Ask. Don't Tell. It is costing him popularity on the left. What hasn't he removed that policy? This is my opinion regarding why he hasn't done so. The key is that he wants to pass Health Care Reform, and can't afford any outside political fights that build the political power of his opponents up. It will be the fight of the century as is, going up against more entrenched power than almost anything else he might want. So look at who is the real power defending DADT.

Personally I think the main defenders of the DADT are the majority of the top flag officers in the Pentagon. There's a lot of other who object, but the top Pentagon flag officers are the ones with the greatest political power to thwart what Obama wants done.

The reason the Pentagon flag officers are being catered to is because the Pentagon is absolutely critical to the conduct of the current two wars. But it's more than that. As LtC. John Nagl pointed out in his book (strongly recommended), we Americans have a cultural binary attitude towards how we fight wars. When at peace the civilians run things and when America is at war we turn the operation of the war over to the military. Since the Civil War. This has only becpome more true since the 1860's. Now fighting a total war has involved the entire American society beyond just the military, and we essentially give the generals the power to mobilize the nations to fight. So since the generals have the wartime power to mobilize American society they are using their power to protect the military. This is widely politically accepted and contributed to winning WW II.

The Pentagon Flag officers are very savvy politically and would not be where they are without understanding how to use the power the Pentagon has in American politics. It was and remains their job to make sure that American society supports the war effort. So why do they believe that gays in the military are such a threat to their institutions?

Those men - the flag officers - grew up when I did, and the greatest horror of a straight teenage boy in those days was to be accused of being homosexual. It was an accusation that could not be defended against and it would destroy your social life. Add to that the hyper-sensitivity of teenage boys to social opinion, and almost every male of that age is extremely sensitive to male homosexuality.

Then these generals and admirals all are the same people who entered the hyper masculine world of the military and adapted better than almost anyone else there. They have lived very successfully in that world now for over three decades and they "know" how it works. The military is also a closed society, with relatively few social contacts to the outside society. Those contacts that exist are carefully controlled.

Finally, within the Pentagon and in the American military world those men collectively and to a great extend personally have close to total authority over everything in life. They are also each personally responsible for the effectiveness and efficiency of the military as fighting forces. Even if they are not personally homophobic they "know" that homosexuality is likely to disrupt the efficient functioning of the military in combat. And remember, combat is something they have not personally experienced at the grunt level since Vietnam. This intuition-base- on-experience in long past conditions is a standard flaw (or benefit, depending on the current conditions) in the intuition of all CEO's of big organizations. When the environment changes their intuitive view of what is importantgenerally does not. Correct decisions under changed outside circumstances one has not experienced personally are more difficult. Add to that that introducing major new social conditions to the military gets people killed until everyone figures out how to deal with the changes. History has repeatedly proven that. The military can easily adapt to new technology these days but new social systems are still a major and unpredictable threat.

So we have flag officers who are seriously adverse to accepting social changes for very good reasons. They are also charged with protecting the military from unpredictable changes and have very good reasons for that attitude. They are also in effective charge of a lot of political levers they properly do not hesitate to use to protect the institutions of the military. So how do those levers of power over civilian society work?

An example of the political power the generals at the Pentagon have was General William Westmoreland. He was quite aware that LBJ wanted to pass Medicare, something that was as highly unpopular with the right wing as health care is today. But LBJ was not sending increased troops to Vietnam to support Westy's strategy of attrition against the Viet Cong. So Westy very publicly demanded that LBJ increase troop strength to half a million men so Westy could fight a war of attrition. Had LBJ not caved to the demand we still wouldn't have Medicare or the Civil Rights Law. LBJ knew it, but the General had him over a barrel.

Similarly the flag officers have effective control over many of the Senators and Congresspersons who have major military expenditures in their states or districts. Those areas with military bases, for example, tend to have very conservative representatives. The military caters to such politicians and carefully provides them the pork they need to get reelected. This gives the Pentagon a lot of power in Congress, power that can be used to thwart a President.

The upshot is that Obama is in much the same position as LBJ was. Obama wants Health care to pass, and the flag officers are using that to demand that he not scrap DADT as the (a?) price of them supporting his efforts in Iraq and Afghanistan. They are probably doing it more for the efficient operations of the military than for personal bias, because inefficiencies in the military during combat cause unnecessary deaths. Their intuition on the effects of inefficiencies in the military is spot on.

I am, by the way, fully aware that Obama is on public record opposing gay marriage. But he is a politician first, and a superb one. If there were a powerful Washington political bloc that wanted gay marriage and he needed their support for something he considered important it is my opinion that he would scrap DADT for them in a heartbeat. But if DADT were to cost political power points going into the health care bill as this does, he is also fully aware that Gays in the Military cost Bill Clinton a lot of power and built up his enemies prior to the last effort to pass universal health care. Obama's biggest priority is the health care bill, and I agree with him. DADT isn't going away, the efforts to eliminate it will only grow as the ancients die off and the younger people age, so the priority right now is the health care bill. Universal health care has been stalled for over 70 years.

That is why I do not think that DADT has a chance of being repealed this year. There is too much against it, and I doubt seriously that not repealing it is something Obama feels strongly about. Such an action is just too dangerous to what is much more important right now.

Like any historical argument, I can't prove this one, but I find it fits the facts.

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Addendum 6/13/2009 4:40pm CDT
Something that had not occurred to me yesterday. Obama's positions on Gay Marraige and DADT are squarely in the mainstream of Washington, D.C. villager thought. For the Republicans to attack him on them, they have to step outside of mainstream thought for the villagers and for the mainstream media.

That's a great position for Obama to have the Republicans in. For them to attack Obama, they isolate themselves. They build no power credits. Since my thesis is that everything Obama is doing right now is geared towards passing health care reform, he is minimizing the political strength his opponents can have.

Once the health care battle is over, Obama will have Presidential power credits to spend on other issues. At that time, if DADT and Gay Marriage are not part of the issues he addresses, then it seems likely to me that he can be influenced by public opinion. Not before.

I have no inside information, of course. I am entirely speculating. But this makes sense to me.

The War in Afghanistan and Northwest pakistan can be won

America's real fight in Afghanistan is against al Qaeda fighters and the leaders who direct and supply them. Al Qaeda is allied with and supporting the Taliban attempt to retake control of Afghanistan. This is a movement largely motivated by an extreme fundamentalist version of Islam, which provides the basis for the alliance between the Taliban and al Qaeda. The alliance allows al Qaeda to conduct its worldwide mission, while the Taliban protect them and use al Qaeda expertise and resources to retake control of Afghanistan.

The U.S. and NATO forces are succeeding in driving the leadership out of Afghanistan. So they are taking refuge in Northwest Pakistan. This has led the Taliban to try to strengthen their control of territory in Pakistan. This puts the Pakistani nuclear weapons in danger of being taken over by radicals who are likely to either use them or sell them to terrorists.

The Pakistan Army has redirected some of its resources^* away from Pakistan's border with India and gone after the Taliban in the Swat valley in the Northwest region. They appear to be having some success against the Taliban. The New York Times reported yesterday:

American officials say they are seeing the first evidence that dozens of fighters with Al Qaeda, and a small handful of the terrorist group’s leaders, are moving to Somalia and Yemen from their principal haven in Pakistan’s tribal areas. In communications that are being watched carefully at the Pentagon, the White House and the Central Intelligence Agency, the terrorist groups in all three locations are now communicating more frequently, and apparently trying to coordinate their actions, the officials said.

Of course, this will increase the need to create more effective governments in Yemen and especially in Somalia. In the age of terrorism^**, such failed states cannot be allowed to become refuges for the bandit and insurgent groups who operate using assymetric war against the rest of the world. With the stronger motivation of those nations possibly being too weak to remove them then perhaps those weak nations will be able to get the assistance they need to become more modern and effective states. All of that is going to be required to win the war against terrorist tactics and the insurgents who use them. But with greater success in Pakistan, we (meaning the modern industrialized nations of the world) may be getting there.

Now the Pakistani pressure on the Northwest Pakistan refuges together with the targeted predator strikes on the insurgent leadership based there is forcing them to look to move elsewhere. So some al Qaeda leaders and fighters are leaving Pakistan and moving to Somalia and Yemen.

The solutions will result from the effects of many nations all using diplomacy, trade policies and limited military actions. The quite rapid progress in the Afghanistan/Pakistan theater clearly demonstrate the greater effectiveness of the Obama administration methods over the go-in-alone military-oriented methods of the Bush administration.

[A note: "NATO extends anti-piracy mission off Somalia". This is, of course, related to the battle against al Qaeda and its Taliban ally.]

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^* This raises a number of questions. The Pakistani government is quite weak, having only limited control over the Army. The Army itself still sees the great threat against Pakistan to by India. The biggest symbol of the conflict between those two nations remains the Kashmir conflict, so the Pakistani Army is loath to take any resources away from focus on India and Kashmir. In fact, the Pakistani Army assisted the growth and combat by the Taliban as a way to maintain control of the Pakistani border away from India.

A major reason for the Terror attack on Mumbai, India by terrorists from Pakistan is surely intended to cause the Indians to increase military pressure on Pakistan.

So has the incursion of the Taliban into Pakistan proper convinced the Pakistani Army to take resources away from defense from India to deal with the more immediate threat to Pakistan? Has there been effective diplomacy between Pakistan and India to give the Pakistanis the belief of a reduced threat from the Indian borders? One hopes the U.S. has brokered such diplomacy, since an American guarantee of Indian promises adds credibility to the Indian promises. British guarantees are probably very effective there also.

As I say, there are a lot of questions raised by the Pakistani attack into the Swat Valley.

^** John A. Nagle in his excellent book on counter-insurgency Learning to eat soup with a knife points out that the growth of insurgency and terrorist tactics since WW II is not surprising. It results from the loss of Imperial control over much of the world along with the wide spreading of cheap and effective small arms and bomb technology and supplies. The tactics have grown as communications technology has developed. The result is that the problems that are resulting in terrorism have to be dealt with as civil-military political problems with the primary focus on political solutions rather than on military ones. Neither the American culture nor its military deal well with this kind of problem. In spite of long experience with irregular warfare, the military has never easily adapted to this environment.

Government official registers voters by day, sells lists of voters names to Republican candidates by night

Republicans in Texas have an absolute abhorrence for voter fraud, but only one kind. They are focused on voter fraud by individuals impersonating other voters, a form of voter fraud there is almost no evidence of. Because of this obsession, the recently adjourned Texas biennial Legislative session adjourned without accomplishing much of anything on badly needed bills because the Republicans demanded that a voter picture ID law be passed over the objections of the Democrats. Democrats are aware that this unnecessary legal provision will reduce the number of individuals who can vote by about 3% without changing the chances for real voter fraud.

Because the Democrats prevented the passage of the Voter ID law in this last legislative session, the Texas Governor Perry is going to have to call the Legislature back into special session this year. Texas law has the provision that special sessions can consider only the issues the Governor lists when he calls for the session. This is going to be thirty more days of legislative session expense caused because of the Republican Party's obsession with suppressing the votes of people who legally vote but are unlikely to voter for Republicans.

Here's one reason why the Republican obsession with retaining power is just flat wrong. From the Houston Chronicle we get the news story of the Harris County associate voter registrar Ed Johnson who by day determines which individuals who request to register to vote are allowed on the voter rolls as well as which provisional ballots are considered valid after elections. By night he is a Republican consultant, selling copies of the County's registered voter list to Republican candidates for office.

Ed Johnson is associate voter registrar at the Harris County Tax Assessor-Collector’s Office, where he’s worked since 1999. He’s also a paid director for Computer Data Systems, a venture started in 2003 with state Rep. Dwayne Bohac, R-Houston. The company sells the same voter information Johnson is paid by taxpayers to manage in a nonpolitical manner.

[...]

According to a recently dismantled Web site, CDS sells voter data to Republican candidates. No records indicating information was sold to Democrats could be found. Secretary of state records show Bohac as the registered agent and Johnson as a director.

Johnson’s party affiliation was not known on Wednesday, but he is known in political circles as a Republican consultant.

This stinks to high heaven. A related question is whether the voter suppression is occurring when individuals apply to be registered to vote in Harris County.

Last year, the Texas Democratic Party charged in a lawsuit that the Tax Assessor-Collector’s Office is rejecting voter applications at a much higher rate than any other Texas county elections office.

“Harris County had 70,000 voter registration applications rejected,” said Texas Democratic Party attorney Chad Dunn. “That’s exponentially higher than anywhere else in the state.”

Dunn said Dallas County rejected 1,800 for the same period, January 2006 through October 2008.

The two consultants also said they are concerned that Johnson’s role in the approval of provisional ballots may be tainted.

When voters show up at a polling place without their driver’s licenses or voter registration cards, but have proof of their addresses and insist they are registered to vote, they are asked to fill out provisional ballots. In close elections, provisional ballots are used. This past election, there were several close races in Harris County.

Cook said that while Johnson may not get the final say in deciding whether provisional ballots are used, “his office is one of the stops for provisional ballots.”

The threat of unauthorized individuals voting and swinging elections has never been documented to occur in any recent American election. Yet the problem of partisans who prevent their opponents from registering to vote or from getting to the polls in order vote have occurred frequently in recent years - actions by Republicans to suppress Democratic votes. [If there are cases of Democrats suppressing Republican votes, they are not reported in the media.]

What Johnson is doing is an example of a civil servant selling the products of his office for personal gain - pure corruption. He is also in the position to prevent people from registering to vote, which is suppression. The indication is that his office is acting to suppress votes (currently in litigation.) To this kind of fraud the Republicans are quite tone-deaf. But they know that if the public has the right to vote and is able to use it, they cannot win majorities of the votes for their programs. Pools show that the public rejects their policies. So that's why are working hard to limit the franchise to only conservative Republicans.

Hey! Why not? With Katherine Harris (Florida Secretary of State and simultaneously Co-Chair of the Bush for President campaign in Florida) scrubbing likely Democrats from the Florida voting rolls in 2000 they succeeded in holding the counted vote to such a narrow difference that the (Republican-dominated) U.S. Supreme Court was able to give the 2000 Presidential election to George W. Bush. The key was suppression of potential Democratic votes. They are still doing it as a policy of the party.

Where did the federal deficit come from?

The Federal Government is now running massive deficits, and is expected to do so for several years into the future. Why is this the case, and how much of it is the responsibility of the Obama administration which took over the reins of power in January of this year? The New York Times has investigated this and reported. Here are some key excerpts from that report.

There are two basic truths about the enormous deficits that the federal government will run in the coming years.

The first is that President Obama’s agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying. The second is that Mr. Obama does not have a realistic plan for eliminating the deficit, despite what his advisers have suggested.

The New York Times analyzed Congressional Budget Office reports going back almost a decade, with the aim of understanding how the federal government came to be far deeper in debt than it has been since the years just after World War II. This debt will constrain the country’s choices for years and could end up doing serious economic damage if foreign lenders become unwilling to finance it.

[...]

The story of today’s deficits starts in January 2001, as President Bill Clinton was leaving office. The Congressional Budget Office estimated then that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years.

You can think of that roughly $2 trillion swing as coming from four broad categories: the business cycle, President George W. Bush’s policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama.

The first category — the business cycle — accounts for 37 percent of the $2 trillion swing. It’s a reflection of the fact that both the 2001 recession and the current one reduced tax revenue, required more spending on safety-net programs and changed economists’ assumptions about how much in taxes the government would collect in future years.

About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt.

Mr. Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies — together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama — account for 20 percent of the swing.

About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas.

If the analysis is extended further into the future, well beyond 2012, the Obama agenda accounts for only a slightly higher share of the projected deficits.

[...]

The solution, though, is no mystery. It will involve some combination of tax increases and spending cuts. And it won’t be limited to pay-as-you-go rules, tax increases on somebody else, or a crackdown on waste, fraud and abuse. Your taxes will probably go up, and some government programs you favor will become less generous.

The Bush administration was terribly profligate with the government's money and the result is that the taxpayers are going to get caught holding the stick. It's really that simple.

What won't be simple will be HOW we dig out of the mess the Republicans have left behind. Two wars and a recession on top of failure to manage government resources has left a horrible residue after eight years. Bush came in and spent money like a drunken sailor in a foreign port. But accountants and tax collectors do not live in the fantasy alternate universe that Rupert Murdoch is so respected for creating on FOX "News" Neither do the rest of us, as is becoming rapidly more clear. The complaints are coming from people who felt happy, war and protected there, but are now being evicted for not paying the rent.

It's long past time for the evictions. It'll be interesting to see what form the Republican Party takes, if any, once the necessary move back to reality is accepted.