As I write this, President Obama is preparing another fine-sounding, yet empty speech. His subject this time is financial reform. You may recall last week’s lofty address to the joint session of Congress, promoting his latest, somewhat-less-nebulous approach to healthcare reform. He assured the audience that the so-called “public option” (wherein a government-created entity competes with private sector healthcare insurers) would be an integral part of the plan. Within a week, two pieces of political toast from the Democratic Party (Nancy Pelosi and Harry Reid) set about undermining that aspect of the healthcare reform agenda. This is just one reason why, on November 2, 2010, the people who elected Democrats in 2006 and 2008 will be taking a “voters’ holiday”, paving the way for Republican majorities in the Senate and House. The moral lapse involving the public option was documented by David Sirota for Danny Schechter’s NewsDissector blog:
House Speaker Nancy Pelosi for the first time yesterday suggested she may be backing off her support of the public option – the government-run health plan that the private insurance industry is desperately trying to kill. According to CNN, Pelosi and Senate Majority Leader Harry Reid “said they would support any provision that increases competition and accessibility for health insurance – whether or not it is the public option favored by most Democrats.”
This announcement came just hours before Steve Elmendorf, a registered UnitedHealth lobbyist and the head of UnitedHealth’s lobbying firm Elmendorf Strategies, blasted this email invitation throughout Washington, D.C. I just happened to get my hands on a copy of the invitation from a source – check it out:
From: Steve Elmendorf [mailto:steve@elmendorfstrategies.com]
Sent: Friday, September 11, 2009 8:31 AM
Subject: event with Speaker Pelosi at my home
You are cordially invited to a reception with
Speaker of the House
Nancy Pelosi
Thursday, September 24, 2009
6:30pm ~ 8:00pm
At the home of
Steve Elmendorf
2301 Connecticut Avenue, NW
Apt. 7B
Washington, D.C.
$5,000 PAC
$2,400 Individual
Again, Elmendorf is a registered lobbyist for UnitedHealth, and his firm’s website brags about its work for UnitedHealth on its website.
The sequencing here is important: Pelosi makes her announcement and then just hours later, the fundraising invitation goes out. Coincidental? I’m guessing no – these things rarely ever are.
I wrote a book a few years ago called Hostile Takeover whose premise was that corruption and legalized bribery has become so widespread that nobody in Washington even tries to hide it. This is about as good an example of that truism as I’ve ever seen.
Whatever President Obama proposes to accomplish in terms of financial reform will surely be met with a similar fate. Worse yet, his appointment of “Turbo” Tim Geithner as Treasury Secretary and his nomination of Ben Bernanke to a second term as Federal Reserve chairman are the best signals of the President’s true intention: Preservation of the status quo, regardless of the cost to the taxpayers.
On this first anniversary of the demise of Lehman Brothers and the acknowledgment of the financial crisis, many commentators have noted the keen observations by Simon Johnson, a former chief economist at the International Monetary Fund, published in the May, 2009 issue of The Atlantic. The theme of Johnson’s article, “The Quiet Coup” was that the current economic and financial crisis in the United States is “shockingly reminiscent” of those experienced in emerging markets (i.e. banana republics and proto-capitalist regimes). The devil behind all the details in setting these systems upright after a financial crisis is the age-old concept of moral hazard or more simply: sleaze. In making the comparison of the United States to the emerging market countries he encountered at the IMF, Mr. Johnson began this way:
But there’s a deeper and more disturbing similarity: elite business interests — financiers, in the case of the U.S. — played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
Here are a few more passages from “The Quiet Coup” that our political leaders would be well-advised to consider:
Even leaving aside fairness to taxpayers, the government’s velvet-glove approach with the banks is deeply troubling, for one simple reason: it is inadequate to change the behavior of a financial sector accustomed to doing business on its own terms, at a time when that behavior must change. As an unnamed senior bank official said to The New York Times last fall, “It doesn’t matter how much Hank Paulson gives us, no one is going to lend a nickel until the economy turns.” But there’s the rub: the economy can’t recover until the banks are healthy and willing to lend.
* * *
The second problem the U.S. faces—the power of the oligarchy— is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.
Oversize institutions disproportionately influence public policy; the major banks we have today draw much of their power from being too big to fail. Nationalization and re-privatization would not change that; while the replacement of the bank executives who got us into this crisis would be just and sensible, ultimately, the swapping-out of one set of powerful managers for another would change only the names of the oligarchs.
Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business. Where this proves impractical—since we’ll want to sell the banks quickly— they could be sold whole, but with the requirement of being broken up within a short time. Banks that remain in private hands should also be subject to size limitations.
Mr. Johnson pointed out the need to overhaul our current antitrust laws – not because any single institution controls so much market share as to influence prices – but because the failure of any one “to big to fail” bank could collapse the entire financial system.
One of my favorite reporters at The New York Times, Gretchen Morgenson, observed the anniversary of the Lehman Brothers failure with an essay that focused, in large part, on a recent paper by Edward Kane, a finance professor at Boston College, who created the expression: “zombie bank” in 1987. This month, the Networks Financial Institute at Indiana State University published a policy brief by Dr. Kane on the subject of financial regulation. In her article: “But Who Is Watching Regulators?”, Ms. Morgenson summed up Professor Kane’s paper in the following way:
This ugly financial episode we’ve all had to live through makes clear, Mr. Kane says, that taxpayers must protect themselves against two things: the corrupting influence of bureaucratic self-interest among regulators and the political clout wielded by the large institutions they are supposed to police. Finally, he argues, taxpayers must demand that the government publicize the costs of efforts taken to save the financial system from itself.
Although you may have seen widely-publicized news reports about an “overwhelming number” of academicians opposing the current efforts to require transparency from the Federal Reserve, Professor Kane provides a strong argument in favor of Fed transparency as well as scrutiny of the Treasury and the other government entities enmeshed the complex system of bailouts created within the past year.
At thirty-eight pages, his paper is quite a deep read. Nevertheless, it’s packed with great criticism of the Federal Reserve and the Treasury. We need more of this and when someone of Professor Kane’s stature provides it, there had better be people in high places taking it very seriously. The following are just a few of the many astute observations made by Dr. Kane:
Agency elitism would be evidenced by the extent to which its leaders use crises to establish interpretations and precedents that cover up its mistakes, inflate its powers, expand its discretion, and extend its jurisdiction. According to this standard, Fed efforts to use the crisis as a platform for self-congratulation and for securing enlarged systemic-risk authority sidetracks rather than promotes effective reform.
* * *
A financial institution’s incentive to disobey, circumvent or lobby against a particular rule increases with the opportunity cost of compliance. This means that, to sort out the welfare consequences of any regulatory program, we must assess not only the costs and benefits of compliance, but include the costs and benefits of circumvention as well.
* * *
Realistically, every government-managed program of disaster relief is a strongly lobbied and nontransparent tax-transfer scheme for redistributing wealth and shifting risk away from the disaster’s immediate victims. A financial crisis externalizes – in margin and other collateral calls, in depositor runs, and in bank and borrower pleas for government assistance – a political and economic struggle over when and how losses accumulated in corporate balance sheets and in the portfolios of insolvent financial institutions are to be unwound and reallocated across society. At the same time, insolvent firms and government rescuers share a common interest in mischaracterizing the size and nature of the redistribution so as to minimize taxpayer unrest.
In principle, lenders and investors that voluntarily assume real and financial risks should reap the gains and bear the losses their risk exposures generate. However, in crises, losers pressure government officials to rescue them and to induce other parties to share their pain.
The advocates of crony capitalism and their tools (our politicians and regulatory bureaucrats) need to know that we are on to them. If the current administration is willing to facilitate more of the same, then it’s time for some new candidates to step forward.
Have you become sick of hearing about the “green shoots”? Back on March 15, Federal Reserve Chairman Ben Bernanke appeared on 60 Minutes and made the self-serving, self-congratulatory claim that “green shoots” could be found in the economy. I guess we’re supposed to thank him for all the extra money printing he had mandated, to facilitate this claimed result. While we normal people continued to cope with ongoing job losses, an almost nonexistent job market, unavailable mortgages, a constipated real estate market and fear about the future . . . Chairman Bernanke was trying to sell us on some good news. Since that time, the expression “green shoots” has been the mantra for those pundits who, for whatever reason, want the naive public to believe in the emperor’s new clothes. The usual motive for chatting up the “green shoots” is to encourage a widespread popular return to investing in the stock market and by so doing, make life more rewarding for those at brokerage firms.
This week brings us a “reality check” that will come in the form of earnings reports from the second quarter of 2009, required for disclosure by publicly-held corporations, traded on our nation’s stock exchanges. Recent news reports have focused on the fact that despite the “bear market rally” that began in May, last week’s drop in stock prices revealed widespread investor concern that the truth will not support all the hype they have been reading since the spring. Here’s what E.S. Browning had to say in the July 8 edition of The Wall Street Journal:
Expectations for the current earnings season are very low, and investors are worried companies will give weak outlooks for the second half of the year.
“We kind of think the market got ahead of itself. It ran too fast, too hard, and we are soon going to be staring at second-quarter earnings reports that are not going to be pretty,” said Janna Sampson, who helps oversee $1.3 billion as co-chief investment officer of OakBrook Investments in Lisle, Ill.
After the market bottomed March 9, investors increasingly embraced risky assets, bidding up stocks, especially those of smaller companies with little or no profit.
Those unfortunate investors were hit by two “sucker punches”. The first was the often-repeated claim that “stocks are now a bargain . . . we’ve hit the bottom so now is the time to BUY!” The second sucker punch involved the use of high-speed trading programs (such as the one recently stolen from Goldman Sachs) to run up the prices on stocks and exploit “retail investors” such as you and me. An astute explanation of this process was recently published by Sal Arnuk and Joseph Saluzzi of Themis Trading. You can read that report here. What’s even more interesting about the computer program used by (and stolen from) Goldman Sachs, is the statement made by Assistant U.S.Attorney Joseph Facciponti, as quoted in the July 6 article by David Glovin and Christine Harper for Bloomberg News:
“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said, according to a recording of the hearing made public today.
So Goldman Sachs has a computer program that allows the user to “manipulate the markets in unfair ways”? That’s quite a revelation! If that weren’t bad enough . . . according to a recent report by Tyler Durden at Zero Hedge, Goldman Sachs is not the only kid on the block with a high-frequency trading program.
Alexendra Twin of CNN (in addition to providing us with a schedule of earnings reports and other important economic data to be released over this week and next) pointed out another important reason for last spring’s stock market rally, which is not likely to be a factor this month:
Last quarter, analysts and corporations alike ratcheted down forecasts, setting up a period in which a greater percentage of companies than usual beat forecasts. But this quarter could be different. Fewer companies have been cutting forecasts and analysts haven’t budged as much either, giving corporations less of an opportunity to defy expectations.
“The question is whether we’ll see a similar surprise factor this time,” said John Butters, senior research analyst at Thomson Reuters. “If companies haven’t cut and analysts haven’t cut, can results beat forecasts?”
My take on this process is a bit more cynical: the system is being “gamed” by companies’ providing artificially low estimates for future earnings, in order to win at what commentator Bill Fleckenstein calls “beat the number”.
Once we have read about all these reports — will we finally stop hearing about “green shoots”? I have my money on bad economic news, as I continue to maintain my position in the SRS exchange-traded fund. Nevertheless, I’m keeping one hand on the ripcord, ready to bail out at any minute.
Back on January 16, 1991, it seemed as though anyone with cable TV was glued to their set, watching the beginning of Operation Desert Storm. As the coalition forces began their aerial assault on Baghdad, most American reporters were pinned down at the Al-Rashid Hotel. As it turned out, CNN was the only news service able to communicate with the rest of the world during that time. Bernard Shaw, John Holliman and Peter Arnett gained instant fame as CNN’s “Boys of Baghdad”, providing non-stop coverage of the invasion from Room 906 of the Al-Rashid. The event helped establish CNN as a “top tier” news organization. CNN’s coverage of this event became the subject of a documentary film by HBO, entitled Live From Baghdad.
On Friday June 12, many of the world’s news services focused their attention on Iran’s presidential election. Incumbent President Mahmoud Ahmadinejad was being faced with a serious challenge by Mir Hussein Mousavi, one of three other contenders for the post. Mousavi’s supporters were highly organized and energetic. They adopted the color green as their symbol and they began calling for a “green revolution”. Al Jazeera reported that Yadollah Javani, political chief of Iran’s Revolutionary Guard, had issued a warning from his website that any such revolution would be “nipped in the bud”. This should have been a tip that the Revolutionary Guard had every intention of subverting the public will.
On Saturday, June 13, Iran’s state-owned news service, Fars, declared incumbent President Mahmoud Ahmadinejad the winner, with nearly two-thirds of the vote. A landslide of such proportions was completely unexpected, given the large turnout at rallies in support of the leading challenger, Mir Hussein Mousavi, as well as the recent poll, indicating that Ahmadinejad was leading his three challengers with only 34 percent of the vote. As a result, many expected that a runoff election between Ahmadinejad and Mousavi would have been necessary. Because of this claimed “landslide” victory, it immediately became obvious that the election had been stolen. Juan Cole, President of the Global Americana Institute, wrote the following on his blog, Informed Comment:
As the real numbers started coming into the Interior Ministry late on Friday, it became clear that Mousavi was winning. Mousavi’s spokesman abroad, filmmaker Mohsen Makhbalbaf, alleges that the ministry even contacted Mousavi’s camp and said it would begin preparing the population for this victory.
The ministry must have informed Supreme Leader Ali Khamenei, who has had a feud with Mousavi for over 30 years, who found this outcome unsupportable. And, apparently, he and other top leaders had been so confident of an Ahmadinejad win that they had made no contingency plans for what to do if he looked as though he would lose.
They therefore sent blanket instructions to the Electoral Commission to falsify the vote counts.
This clumsy cover-up then produced the incredible result of an Ahmadinejad landlside in Tabriz and Isfahan and Tehran.
The public reaction on the streets of Tehran was documented for Slate by Jason Rezaian:
A feeling of dejection hung in the air for most of Saturday. Spontaneous street demonstrations early in the day were small and were quickly broken up by riot police on motorcycles.
As reality set in, people began taking to the streets en masse. Around 5 p.m. on the approach to Fatemi Square, where the Interior Ministry is located, I could see that the entire traffic circle had been closed to car traffic. About 200 riot police waited in the middle of the square. I headed down an alley, just steps away, where protesters had created a blockade of flaming garbage cans.
The demonstrators pushed aside a garbage can, opening a path, and rushed forward. Simultaneously, baton-wielding police charged. The protesters hurled rocks, and the police responded by beating everyone who couldn’t escape into one of the connecting alleys.
Citizens, nearly all on the side of the protesters, left their front gates open just a little to offer those of us fleeing the police an escape route.
The ensuing riots resulted in phone cam videos posted to YouTube. Messages were sent out over Twitter under the hashtags: #IranElection and #Iran Election.
Many mainstream media news outlets had reporters “on the ground” in Tehran. ABC News had Jim Sciutto there. Mr. Sciutto sent a message out over Twitter at 9:20 on Saturday morning:
police confiscated our camera and videotapes. We are shooting protests and police violence on our cell phones
Sciutto and other reporters whose equipment had been confiscated, began shooting riot videos on their phone cams. Many networks, including ABC, MSNBC and Fox News began to broadcast these … but not CNN. Many Twitter users, following the Iranian violence became outraged over CNN’s failure to cover the rioting. As a result, they started a new discussion thread, using the hashtag: #CNNFail. Many of these postings criticized the quality of CNN’s limited reporting on these events.
Here were some of the messages I found on CNNFail:
Shazzy919 — ChristianeAmanpour: “No indication of curfew or further forceful action” really????
ahockley — There’s currently a story on CNN titled “Do journalists Twitter too much?”
charlieprofit — CNN just ran the same report aired earlier where they call some Iranian protesters Vigilantes
Robot117 — My animosity toward CNN for their utter incompetence in reporting this news is growing
georgedick — CNN still referring to “The landslide win of Iranian President Mahmoud Ahmadinejad”. WTF.
In fact, ABC’s Jim Sciutto made the following comment on Twitter concerning CNN’s fiasco:
Did CNN Intl really just air pix of a water-skiing squirrel? Anyone remember ‘Ron Burgundy’? 12:14 AM Jun 14th from web
A review of CNN’s website reveals that some of their coverage seemed like an attempt to legitimize Ahmadinejad’s “victory”:
The landslide defeat of Ahmadinejad’s leading opponent, Mir Hossein Moussavi, who some analysts predicted would win the election, triggered angry protests in Iran and other cities around the world.
* * *
Moussavi’s supporters say the election was rigged. But the huge turnout for Ahmadinejad’s victory speech Sunday leaves no doubt that the president carries plenty of support.
For all the ridicule directed against Twitter and its users, the CNNFail event will become an historical milestone for the moment when this communication medium finally earned some respect.
Comments Off on Hillary Clinton Begins Making History
March 5, 2009
While most American media outlets focus their attention on Rush Limbaugh’s vainglorious publicity extravaganza, Hillary Clinton is traveling around the world, letting everyone know that the foreign policy of the United States is being drastically changed by the new administration.
The new Secretary of State took quite a bit of heat for her failure to stage a fit of righteous indignation over China’s record of human rights abuses, during her visit there. Nevertheless, America has been a critic of these transgressions for decades. Given the current economic situation, our need to maintain a healthy business relationship with China and our country’s embarrassing human rights track record for the past eight years, her decision to leave that issue on the back burner for her initial visit, wasn’t such a bad idea.
Her trip to the Middle East was the first step toward rehabilitating the role of the United States as an effective peace broker for the Israeli – Palestinian conflict. As Barak Ravid reported for Haaretz, prior to Clinton’s arrival in Israel, a list of demands or “red lines” was created and “approved by Prime Minister Ehud Olmert, Foreign Minister Tzipi Livni and Defense Minister Ehud Barak at a meeting with senior defense officials last week”. These individuals are apparently so accustomed to browbeating Condoleezza Rice, they feel comfortable about dictating their own “marching orders” to be followed by Clinton as she approaches engaging Iran in formal, diplomatic relations. The Haaretz article itemized these four mandates as follows:
1. Any dialogue must be both preceded by and accompanied by harsher sanctions against Iran, both within the framework of the UN Security Council and outside it. Otherwise, the talks are liable to be perceived by both Iran and the international community as acceptance of Iran’s nuclear program.
2. Before the dialogue begins, the U.S. should formulate an action plan with Russia, China, France, Germany and Britain regarding what to do if the talks fail. Specifically, there must be an agreement that the talks’ failure will prompt extremely harsh international sanctions on Iran.
3. A time limit must be set for the talks, to prevent Iran from merely buying time to complete its nuclear development. The talks should also be defined as a “one-time opportunity” for Tehran.
4. Timing is critical, and the U.S. should consider whether it makes sense to begin the talks before Iran’s presidential election in June.
Steve Clemons of The Washington Note emphasized that “Israel is crossing the line” by attempting to dictate this agenda to our new Secretary of State and President:
Iran’s pretensions in the region are a problem in my view — but Iran, which fears regime change efforts by the US and other of its neighbors, is responding to an “ecosystem” that many around the world have complicity in building.
Israel should be rebuffed by Hillary Clinton. She should listen to Israel’s views on the region of course — and consider proposals. But this kind of instruction manual on what red lines can be tolerated or not is pretty outrageous — and borders on the type of irresponsibility and consequences of what a Taiwanese declaration of independence from China would mean.
In another Haaretz article by Barak Ravid, we see Clinton giving Israel some “pushback” that may or may not have been anticipated:
U.S. Secretary of State Hillary Clinton on Wednesday blasted Israel’s plans to demolish Palestinian homes in East Jerusalem as a violation of its international obligations and “unhelpful” to Middle East peace efforts.
“Clearly this kind of activity is unhelpful and not in keeping with the obligations entered into under the ‘road map’,” Clinton said, referring to the long-stalled peace plan.
On March 4, a day before meeting with Israeli leaders in Jerusalem, Clinton met with Palestinian Authority President Mahmoud Abbas and Palestinian Prime Minister Salam Fayyad in the West Bank city of Ramallah. According to a CNN report, Clinton advised the Palestinian leaders that the United States is committed to the “two-state solution” (establishing a separate Palestinian state) despite the objections to that plan, voiced by Israel’s Prime Minister-designate, Benjamin Netanyahu.
“The United States through President Obama is committed to a comprehensive peace including a two-state solution,” Clinton said. “I have said that publicly, I have said that privately. There is no difference in any message.”
Meanwhile, Secretary Clinton made it a point to single out Iran’s “supreme leader”, Ayatollah Ali Khamenei, for interfering in Palestinian affairs by funding terrorism “whether it’s Hezbollah, Hamas or other proxies”. As the Voice of America News pointed out:
Khamenei also called the Jewish state a “cancerous tumor” and accused U.S. President Barack Obama of following what he called the same mistaken path as George W. Bush in supporting Israel. He made the comments during a conference in Tehran earlier Wednesday.
Clinton and Palestinian President Mahmoud Abbas dismissed the ayatollah’s remarks. Mr. Abbas said Iran should look after its own affairs and stop trying to widen the divide among Palestinians.
Although many critics of the new administration complain that Obama has failed to deliver on his promise of “Change”, one important agent of Change on the Obama team is turning out to be none other than Hillary Clinton. Who could have foreseen that development at this point, last year?
Comments Off on The Stupid War Against The Stimulus
February 23, 2009
We keep hearing rants against President Obama’s economic stimulus bill. The final version of the bill was passed by both the House of Representatives and the Senate on February 13. On February 17, it was signed into law by our new President. It is now called the American Recovery and Reinvestment Act of 2009. Nevertheless, there are people out there (nearly all of them Republicans) fuming about the stimulus bill, despite the fact that the debate is now over. The bill has already gone into effect. So what’s the point? Many commentators feel that currently, there is fierce competition to stand out as the new leader of the Republican Party. Louisiana Governor Bobby Jindal apparently believes he can advance his career by complaining about the stimulus and refusing to accept money allocated under the stimulus bill to expand eligibility for unemployment compensation because it would increase taxes on employers. As Robert Pear and J. David Goodman reported for The New York Times, Mississippi Governor Haley Barbour said that he, too, would reject the money for expanding unemployment insurance:
“There is some we will not take in Mississippi,” Governor Barbour told CNN’s “State of the Union” on Sunday. “We want more jobs. You don’t get more jobs by putting an extra tax on creating jobs.”
The article noted that California Governor Arnold Schwarzenegger (also a Republican) would be happy to take any money from the stimulus bill that had been rejected by any other governor.
The hostility against the stimulus just doesn’t make sense. A few Republicans may think they might look like heroes to the traditional Republican “base” right now, but as the stimulus plan begins to bear fruit, they are going to look like fools.
Tom Friedman discussed one intriguing conversation he had with a true American capitalist (the sort of voter Republicans always have taken for granted) in the February 21 New York Times:
The wind and solar industries in America “were dead in the fourth quarter,” said John Woolard, chief executive of BrightSource Energy, which builds and operates cutting-edge solar-thermal plants in the Mojave Desert. Almost five gigawatts of new solar-thermal projects — the equivalent of five big nuclear plants — at various stages of permitting were being held up because of a lack of financing.
“All of these projects will now go ahead,” said Woolard. “You are talking about thousands of jobs … We really got something right in this legislation.”
These jobs will be in engineering, constructing and operating huge solar systems and wind farms and manufacturing new photovoltaics. Together they will drive innovation in all these areas — and move wind and solar technology down the cost-volume learning curve so they can compete against fossil fuels and become export industries at the “ChinIndia price,” that is the price at which they can scale in China and India.
Mr. Wollard “gets it” but the usual Republican spokesmen don’t. As Jonathan Alter points out in the March 2 edition of Newsweek:
Columnist Charles Krauthammer called the $787 billion stimulus package “a legislative abomination,” and Karl Rove wrote that “the more Americans learn about the bill, the less they like it.”
Polls say otherwise. The public likes the signs of action, respects that the new president is willing to admit error and appreciates his constant reminders that there are no easy cures to what ails us.
* * *
The GOP did a good job trivializing the stimulus, but Obama may have the last laugh. The package is so big, and stretches across so many states, that it provides him at least four years of photo ops as Daddy O on tour, bringing home the jobs right in your local media market. It was hardly a coincidence that video of bridge repair in Missouri began airing only moments after the president signed the bill.
As Walter Alarkon explained in his February 21 posting on The Hill website, there is a split among Republican governors as to whether the party’s next leader will be a centrist or a traditional conservative. As his piece demonstrated, there are some Republicans who “get it”:
One possible White House hopeful, Utah Gov. Jon Huntsman Jr. (R), wouldn’t criticize the stimulus despite his red state bona fides. He said that the federal money would fund infrastructure projects that could help the Beehive State’s economy.
“You have to have a party that is results oriented, that actually develops solutions to some of our nagging problems of today,” he said.
He said that Republicans who turn to “gratuitous rhetoric” will continue to lose.
Another Republican who “gets it” is Florida Governor Charlie Crist. During his February 22 appearance on NBC’s Meet The Press, David Gregory asked Governor Crist whether he thought it was a mistake for the Republican Party to define itself by opposition to the stimulus. Governor Crist gave this response:
Well, it may be. All I know is I have to do what I think is in the best interest of the people of Florida. And from my perspective, it’s to try and help them. Help them every single day in every way that I can in education, in infrastructure, in health care; do the kinds of things that keep us from having to raise taxes. You know, another part that people don’t talk about in the stimulus bill is that it cuts taxes. About a third of it cuts taxes. . . . At the same time, because of the stimulus we’ll be able to pay our teachers more next year than we were this past year. So I think it works, it works well, it helps people, it does what’s right.
How does one argue with that? The current moot debate over the stimulus bill simply underscores one of the reasons why the Republicans suffered such huge losses in 2006 and 2008. They need to abandon the failed strategy of focusing on the preferences of their so-called “base” and start representing the rest of America. If they don’t learn this lesson, they will never win a majority in the Senate or the House and they will have to abandon their dreams of another Republican President.
One of the most interesting characters to emerge from the 2008 election cycle is a young man named Nate Silver. Not to be upstaged by Sarah Palin, once he caught the interest of the mainstream media, Nate immediately picked up a new, snappy-looking pair of eyeglasses.
Nate is a 30-year-old math wizard who turned the world of political polling on its ear by introducing said ear to some new sounds that make nearly perfect mathematical and sonic sense. He graduated cum laude from the University of Chicago in 1980 with a major in Economics. He then took a job for a few years, working for a consulting firm. During that time, he developed a statistical system to forecast the performance of professional baseball players. In 2003, he went to work for a group producing an annual book on professional baseball player performance analysis and performance forecasts, called Baseball Prospectus. He then sold his statistical analysis system to that company and joined their staff.
In November of 2007, Nate began using his skills and systems to make forecasts of the Presidential primaries, using the pseudonym: “Poblano” on the Daily Kos website. On February 11, 2008, neocon William Kristol wrote an opinion piece for the New York Times, wherein he made note of “an interesting regression analysis at the Daily Kos Web site” done by Mr. Silver. The next month, Nate started his blog, FiveThirtyEight.com, where he utilized his new system for analyzing and forecasting Presidential primary results, as well as the ultimate outcome the 2008 Presidential election. As a consequence of this endeavor, the studios at CNN and MSNBC quickly became familiar surroundings to him. By November 14, 2008, The New York Observer had this to say about Nate:
Mr. Silver’s statistical skills were ratified when the outcome of the presidential race aligned almost exactly with his final predictions both for the popular vote and the Electoral College breakdown …
Later that day, Leon Neyfakh reported on The Observer website that Nate had inked a book deal with Penguin Group, USA including a $700,000 advance. Although this advance is only ten percent of the amount allegedly offered as an advance to Sarah Palin for “her” “book”, you need to keep in mind that Nate is only 30 years old and Sarah will be a grandmother soon.
As the recount for Minnesota’s Senatorial election moves along, Nate’s November 23 posting on his FiveThirtyEight.com website has received quite a bit of attention. The title alone says it all: “Projection: Franken to Win Recount by 27 Votes”. Will Mr. Silver’s “streak” continue? A reader, identified as “Max” posted the following comment on that blog: “If you are right about this you should put all others out of business.”
Nate provided us with another interesting take on the 2008 election, with a particular focus on the state of California. I was surprised at how Maureen Dowd’s article in the November 23 New York Times exhibited either an unfamiliarity with Nate’s California analysis or (less likely) a refusal to agree with it. To my disappointment, I detected Ms. Dowd’s apparent acceptance of the “conventional wisdom” concerning California’s controversial ballot initiative:
This month, gays who supported Barack Obama had the bittersweet experience of seeing some of the black and Latino voters who surged to the polls to vote Democratic also vote for Proposition 8, which turned gay “I dos” into “You can’ts.”
She should have known better. I would expect a pundit of her stature to be familiar with Nate’s November 11 posting on FiveThirtyEight.com: “Prop 8 Myths”. Here is some of what he had to say:
But the notion that Prop 8 passed because of the Obama turnout surge is silly.
* * *
At the end of the day, Prop 8’s passage was more a generational matter than a racial one. If nobody over the age of 65 had voted, Prop 8 would have failed by a point or two. It appears that the generational splits may be larger within minority communities than among whites, although the data on this is sketchy.
Get with it, Maureen! If Al Franken turns out to be Minnesota’s new junior Senator, you will no longer be justified in overlooking the observations of Nate Silver.
The long-awaited 2008 Elections are finally underway. According to the Early Voting Information Center website, 32 States allow in-person early voting. As the voting proceeds, we are seeing an enormous number of people opting to cast their votes before November 4. On Tuesday, October 28, Gary Langer (polling director for ABC News) reported that as of that morning, 9 percent of “likely voters” had already voted. As reported in the October 30 Washington Post, Michael McDonald, an associate professor at George Mason University who compiles early-voting statistics, observed that his running total of early voters now tops 16.5 million. USA Today reports that approximately 25 percent of Georgia’s registered voters have already cast their ballots. In Florida, Governor Charlie Crist extended the hours for early voting. Prior to Crist’s executive order, Florida law allowed for early voting 8 hours per weekday and a total of 8 hours over the weekend. The polls in Florida will now be open 12 hours per day, through Sunday, the last day for early voting. The Miami Herald reported that prior to Christ’s signing of the order, the long, winding lines at the polling stations resulted in waits of as long as four hours to get to a voting machine. The Herald reported that as of Tuesday morning, 10 percent of the state’s registered voters had already voted. On Wednesday, October 29, Susan Saulny reported in The New York Times that there have been rumors circulating in Jacksonville, Florida’s African-American community that early voting could not be trusted because the votes cast early would be discarded.
By this point, there are already reports of voting machine problems and irregularities. Martina Stewart reported for CNN that in Jefferson County, Texas, the County Clerk admitted to receiving “about half a dozen calls” that touch-screen voting machines were recording votes inaccurately. Apparently, the candidates’ names are so close to each other on the screen that there is a possibility of pressing the wrong name when making the selection. The machines have a “summary screen” where the voter can verify that the correct candidates were selected before finally hitting the button to actually cast the votes. Similar problems were discussed by a reporter named Bill Murray at WSAZ in West Virginia. Murray’s report pointed out that long fingernails and contact with the screen by bracelets could result in erroneous votes.
On Monday October 27, The New Mexico Independent reported that in Albuquerque, the American Civil Liberties Union filed a lawsuit against a Republican state lawmaker, alleging violations of the Voting Rights Act and disclosure of confidential information about voters, including Social Security numbers. The article discussed the efforts of a Republican State Representative, Justine Fox-Young (a defendant in the suit) to support claims of voter fraud in the state’s June election. The Independent had previously reported that Republican Party attorney Pat Rogers had hired a private investigator named Al Romero to make contact with voters whose registrations were under scrutiny by Republican activists. The article discussed allegations by two legally-registered Hispanic voters, that they had been intimidated by Romero. Pat Rogers had been cited in the U.S. Department of Justice report about the firing of U.S. attorneys and was described as one of the New Mexico GOP activists who complained to the Department of Justice about then-U.S. Attorney David Iglesias. Iglesias was one of the U.S. Attorneys fired by Attorney General Alberto Gonzales for political reasons. The firing of Iglesias was a result of his failure to pursue a politically-motivated, bogus “voter fraud” investigation.
If Barack Obama defeats John McCain by a narrow margin, we can expect protracted recounts and microscopic inspections of voter registration documents. My concern about this was reinforced when I read a quote from McCain speechwriter, Mark Salter, in a Washington Post article by Michael Leahy, on Thursday. Speaking about John McCain, Salter said:
“And he’s not going to go down without a fight. Some people mistake that for something else. Some people believe in being gracious losers just so other people will look at them kindly. He isn’t like that. … He’s going to fight hard, and if other people don’t think he’s being gracious, well, that’s the way it will be. But he’s not alone in that. And I’ll remind people of that, if I have to.”
So, don’t expect McCain to be a “gracious loser”. Unless there is a landslide on Tuesday, there could be a long, ugly fight, reminiscent of the election fiasco of 2000.
Most of the criticism directed against Barack Obama this past week concerned what has been described as his “Celebrity” status. The McCain camp actually believes that this theme hurts Obama. Greg Sargent reported in TalkingPointsMemo.com that McCain is spending over $140,000 per day to run the ad featuring Paris Hilton and Britney Spears. This, according to Sargent, amounts to roughly one third of McCain’s TV ad spending. Meanwhile, many of us in the audience are wondering whether this ad campaign may actually be helping Obama. Given America’s fascination with celebrities, might some people be motivated to vote for Obama simply to put a celebrity in the White House?
For his part, Obama disappointed many of us last week with his “flip” on the issue of offshore oil drilling. There is unanimous consensus among experts on the point that planning new offshore oil rigs will do nothing to effect the availability of gasoline for approximately ten years. By then, we will likely have the infrastructure and technology available for cost-effective electric cars. Nevertheless, Obama appeared to be reacting to mounting pressure from the Republicans to allow for more offshore drilling. Worse yet, new poll results reveal that a majority of Americans actually believe that enacting legislation to permit more offshore drilling would reduce the price of gasoline now. A CNN/Opinion Research Corporation poll released on July 30 revealed that 69% of the respondents favored offshore drilling, with 51% actually believing that legislation approving increased offshore drilling would lower oil prices within the next year. The people participating in these polls were probably the same poll participants who expressed belief (and who probably still do believe) that Saddam Hussein was responsible for the September 11 attacks. Rather than attempting to educate those “low information voters” on the futility of planning more oil platforms to solve today’s problems, Obama has chosen to drink the Kool Aid favored by McCain and announce that he supports expanded offshore drilling. One would have expected this issue to die when McCain had to cancel a speech he was going to give on an oil rig, because of Hurricane Dolly on July 24. If he wanted to, Obama could have chosen to ridicule McCain for this failed stunt and criticize McCain’s claim that Hurricanes Rita and Katrina did not damage any oil rigs located in the Gulf of Mexico. As reported by Michael Shear of The Washington Post on July 23, those hurricanes actually destroyed 113 oil rigs, contrary to McCain’s claim.
The article by Adam Smith and Wes Allison of The St. Petersburg Times on August 1, contrasted Obama’s earlier campaign promise with his current position. Quoting a speech given by the candidate early this summer, they included this passage:
“And when I am president,” Obama said in June in Chicago, “I will keep the moratorium in place and prevent oil companies from drilling off Florida’s coasts. That’s how we can protect our coasts and still make the investments that will reduce our dependence on foreign oil and bring down gas prices for good.”
Obama’s new position on this subject goes back to that same type of compromise we saw him demonstrate by voting in favor of the FISA “wiretap” bill. The voting public is not likely to see this type of weak compromise as the sort of “change” promised by the sign on the podium.
Looking back to Jonathan Darman’s July 11 article for Newsweek, he discussed the results of their poll taken on July 9 – 10. Senator Obama voted in favor of the controversial FISA bill on July 9 (after having discussed his intention to do so a week earlier). This poll revealed that the Democrat lost his 12-point lead among independent voters and fell behind McCain among independents by 7 points. The people “sitting on the fence”, the independents, are the voters tracking Obama’s campaign moves with the most scrutiny. They are also the voters he needs most. This latest “flip” in favor of offshore oil drilling could have the same effect on the independent voters as his vote in favor of FISA. Given Obama’s concern about the poll results concerning the popularity of offshore drilling, the next poll results to show the impact of his position change on this subject, particularly from the perspective of independent voters, might give him a good scare.
TheCenterLane.com offers opinion, news and commentary on politics, the economy, finance and other random events that either find their way into the news or are ignored by the news reporting business. As the name suggests, our focus will be on what seems to be happening in The Center Lane of American politics and what the view from the Center reveals about the events in the left and right lanes. Your Host, John T. Burke, Jr., earned his Bachelor of Arts degree from Boston College with a double major in Speech Communications and Philosophy. He earned his law degree (Juris Doctor) from the Illinois Institute of Technology / Chicago-Kent College of Law.
The Longest Year
September 14, 2009
As I write this, President Obama is preparing another fine-sounding, yet empty speech. His subject this time is financial reform. You may recall last week’s lofty address to the joint session of Congress, promoting his latest, somewhat-less-nebulous approach to healthcare reform. He assured the audience that the so-called “public option” (wherein a government-created entity competes with private sector healthcare insurers) would be an integral part of the plan. Within a week, two pieces of political toast from the Democratic Party (Nancy Pelosi and Harry Reid) set about undermining that aspect of the healthcare reform agenda. This is just one reason why, on November 2, 2010, the people who elected Democrats in 2006 and 2008 will be taking a “voters’ holiday”, paving the way for Republican majorities in the Senate and House. The moral lapse involving the public option was documented by David Sirota for Danny Schechter’s NewsDissector blog:
Whatever President Obama proposes to accomplish in terms of financial reform will surely be met with a similar fate. Worse yet, his appointment of “Turbo” Tim Geithner as Treasury Secretary and his nomination of Ben Bernanke to a second term as Federal Reserve chairman are the best signals of the President’s true intention: Preservation of the status quo, regardless of the cost to the taxpayers.
On this first anniversary of the demise of Lehman Brothers and the acknowledgment of the financial crisis, many commentators have noted the keen observations by Simon Johnson, a former chief economist at the International Monetary Fund, published in the May, 2009 issue of The Atlantic. The theme of Johnson’s article, “The Quiet Coup” was that the current economic and financial crisis in the United States is “shockingly reminiscent” of those experienced in emerging markets (i.e. banana republics and proto-capitalist regimes). The devil behind all the details in setting these systems upright after a financial crisis is the age-old concept of moral hazard or more simply: sleaze. In making the comparison of the United States to the emerging market countries he encountered at the IMF, Mr. Johnson began this way:
Here are a few more passages from “The Quiet Coup” that our political leaders would be well-advised to consider:
Mr. Johnson pointed out the need to overhaul our current antitrust laws – not because any single institution controls so much market share as to influence prices – but because the failure of any one “to big to fail” bank could collapse the entire financial system.
One of my favorite reporters at The New York Times, Gretchen Morgenson, observed the anniversary of the Lehman Brothers failure with an essay that focused, in large part, on a recent paper by Edward Kane, a finance professor at Boston College, who created the expression: “zombie bank” in 1987. This month, the Networks Financial Institute at Indiana State University published a policy brief by Dr. Kane on the subject of financial regulation. In her article: “But Who Is Watching Regulators?”, Ms. Morgenson summed up Professor Kane’s paper in the following way:
The advocates of crony capitalism and their tools (our politicians and regulatory bureaucrats) need to know that we are on to them. If the current administration is willing to facilitate more of the same, then it’s time for some new candidates to step forward.
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