Forged on The Anvil of Haste - The Stimulus Bill!

Ex FBI'er, Fred Burton, continues to provide information regarding Mexico and its disintegration into three wars. (See 1 below.)

Lee Cary poses the same question I did in my last memo - how long will it take those enamored by Obama (The Forgotten Man) and turned off by GW, McCain and Palin, to realize they were snookered? (See 2 below.)

Bibi it will be. If the West and the Arabs are turned off by his political victory they have themselves partly to blame because Israelis felt frustrated between the West which used them as a pawn and Arab leaders who don't have the guts to stand up to their own terrorists. Turning to the right and a more hard nosed approach after Olmert's fatuous leadership left Israelis no rational alternative. (See 3 below.)

Yaakov Katz writes Olmert's linking of Salit's release to the Hamas cease fire deal may have harmed relationships with Egypt because it caught them by surprise. (See 4 below.)

Daniel Henninger is not buying what Obama is selling. The 'hair of the dog' elixir is not going to cure what ails us. It goes against instinct and Dennis Byrne sees the slow drip of financial ruin and the death of reason.

There has been a lot of harsh rhetoric and writing(s) about Obama's first four weeks and the actions he and his Party have taken. Some of it can be attributed to partisanship but most of it is deserved because he brought it on himself with able assistance from Pelosi, Reid and the Demwits. Their display of arrogance, duplicity and shortsightedeness, their insolent intemperance is there for anyone with a pair of eyes to see.

'My way or the highway' may be the rightful claim of the victor but it can boomerang, often does and so, I suspect, it will because the Stimulus Bill was crafted with little thought to consequences. Furthermore, it was forged on the anvil of haste. (See 5 and 5a below.)

"The Economist" weighs in on our home default problem(s) and Obama's solutions. (See 6 below.)

Obama's "Surge" has begun in Afghanistan and not a word of opposition or concern from Murtha, Biden or the Left controlled Congress. The New York Times is not screaming challenging headlnes nor are the media mavens castigating Obama and questioning his actions. Are we about to witness a double standard again?

Victor Davis Hanson poses this question: will the more Obama downplays boldness and resorts to talk will we be laying the ground for bigger problems and an eventual need to grasp a bigger stick? Will our new approach cause our "so called" allies to begin squirming? (See 7 below.)

Has Burris buried himself? Appears so.

Out of town til late Monday. Have a nice weekend.

Dick

1) Mexico: The Third War
By Fred Burton and Scott Stewart

Mexico has pretty much always been a rough-and-tumble place. In recent years, however, the security environment has deteriorated rapidly, and parts of the country have become incredibly violent. It is now common to see military weaponry such as fragmentation grenades and assault rifles used almost daily in attacks.

In fact, just last week we noted two separate strings of grenade attacks directed against police in Durango and Michoacan states. In the Michoacan incident, police in Uruapan and Lazaro Cardenas were targeted by three grenade attacks during a 12-hour period. Then on Feb. 17, a major firefight occurred just across the border from the United States in Reynosa, when Mexican authorities attempted to apprehend several armed men seen riding in a vehicle. The men fled to a nearby residence and engaged the pursuing police with gunfire, hand grenades and rocket-propelled grenades (RPGs). After the incident, in which five cartel gunmen were killed and several gunmen, cops, soldiers and civilians were wounded, authorities recovered a 60 mm mortar, five RPG rounds and two fragmentation grenades.

Make no mistake, considering the military weapons now being used in Mexico and the number of deaths involved, the country is in the middle of a war. In fact, there are actually three concurrent wars being waged in Mexico involving the Mexican drug cartels. The first is the battle being waged among the various Mexican drug cartels seeking control over lucrative smuggling corridors, called plazas. One such battleground is Ciudad Juarez, which provides access to the Interstate 10, Interstate 20 and Interstate 25 corridors inside the United States. The second battle is being fought between the various cartels and the Mexican government forces who are seeking to interrupt smuggling operations, curb violence and bring the cartel members to justice.

Then there is a third war being waged in Mexico, though because of its nature it is a bit more subdued. It does not get the same degree of international media attention generated by the running gun battles and grenade and RPG attacks. However, it is no less real, and in many ways it is more dangerous to innocent civilians (as well as foreign tourists and business travelers) than the pitched battles between the cartels and the Mexican government. This third war is the war being waged on the Mexican population by criminals who may or may not be involved with the cartels. Unlike the other battles, where cartel members or government forces are the primary targets and civilians are only killed as collateral damage, on this battlefront, civilians are squarely in the crosshairs.

The Criminal Front
There are many different shapes and sizes of criminal gangs in Mexico. While many of them are in some way related to the drug cartels, others have various types of connections to law enforcement — indeed, some criminal groups are composed of active and retired cops. These various types of criminal gangs target civilians in a number of ways, including, robbery, burglary, carjacking, extortion, fraud and counterfeiting. But of all the crimes committed by these gangs, perhaps the one that creates the most widespread psychological and emotional damage is kidnapping, which also is one of the most underreported crimes. There is no accurate figure for the number of kidnappings that occur in Mexico each year. All of the data regarding kidnapping is based on partial crime statistics and anecdotal accounts and, in the end, can produce only best-guess estimates. Despite this lack of hard data, however, there is little doubt — based even on the low end of these estimates & #8212; that Mexico has become the kidnapping capital of the world.

One of the difficult things about studying kidnapping in Mexico is that the crime not only is widespread, affecting almost every corner of the country, but also is executed by a wide range of actors who possess varying levels of professionalism — and very different motives. At one end of the spectrum are the high-end kidnapping gangs that abduct high-net-worth individuals and demand ransoms in the millions of dollars. Such groups employ teams of operatives who carry out specialized tasks such as collecting intelligence, conducting surveillance, snatching the target, negotiating with the victim’s family and establishing and guarding the safe houses.

At the other end of the spectrum are gangs that roam the streets and randomly kidnap targets of opportunity. These gangs are generally less professional than the high-end gangs and often will hold a victim for only a short time. In many instances, these groups hold the victim just long enough to use the victim’s ATM card to drain his or her checking account, or to receive a small ransom of perhaps several hundred or a few thousand dollars from the family. This type of opportunistic kidnapping is often referred to as an “express kidnapping”. Sometimes express kidnapping victims are held in the trunk of a car for the duration of their ordeal, which can sometimes last for days if the victim has a large amount in a checking account and a small daily ATM withdrawal limit. Other times, if an express kidnapping gang dis covers it has grabbed a high-value target by accident, the gang will hold the victim longer and demand a much higher ransom. Occasionally, these express kidnapping groups will even “sell” a high-value victim to a more professional kidnapping gang.

Between these extremes there is a wide range of groups that fall somewhere in the middle. These are the groups that might target a bank vice president or branch manager rather than the bank’s CEO, or that might kidnap the owner of a restaurant or other small business rather than a wealthy industrialist. The presence of such a broad spectrum of kidnapping groups ensures that almost no segment of the population is immune from the kidnapping threat. In recent years, the sheer magnitude of the threat in Mexico and the fear it generates has led to a crime called virtual kidnapping. In a virtual kidnapping, the victim is not really kidnapped. Instead, the criminals seek to convince a target’s family that a kidnapping has occurred, and then use threats and psychological pressure to force the family to pay a quick ransom. Although virtua l kidnapping has been around for several years, unwitting families continue to fall for the scam, which is a source of easy money. Some virtual kidnappings have even been conducted by criminals using telephones inside prisons.

As noted above, the motives for kidnapping vary. Many of the kidnappings that occur in Mexico are not conducted for ransom. Often the drug cartels will kidnap members of rival gangs or government officials in order to torture and execute them. This torture is conducted to extract information, intimidate rivals and, apparently in some cases, just to have a little fun. The bodies of such victims are frequently found beheaded or otherwise mutilated. Other times, cartel gunmen will kidnap drug dealers who are tardy in payments or who refuse to pay the “tax” required to operate in the cartel’s area of control.

Of course, cartel gunmen do not kidnap only their rivals or cops. As the cartel wars have heated up, and as drug revenues have dropped due to interference from rival cartels or the government, many cartels have resorted to kidnapping for ransom to supplement their cash flow. Perhaps the most widely known group that is engaging in this is the Arellano Felix Organization (AFO), also known as the Tijuana Cartel. The AFO has been reduced to a shadow of its former self, its smuggling operations dramatically impacted by the efforts of the U.S. and Mexican governments, as well as by attacks from other cartels and from an internal power struggle. Because of a steep decrease in smuggling revenues, the group has turned to kidnapping and extortion in order to raise the funds necessary to keep itself alive and to return to prominence as a smuggl ing organization.

In the Line of Fire
There is very little chance the Mexican government will be able to establish integrity in its law enforcement agencies, or bring law and order to large portions of the country, any time soon. Official corruption and ineptitude are endemic in Mexico, which means that Mexican citizens and visiting foreigners will have to face the threat of kidnapping for the foreseeable future. We believe that for civilians and visiting foreigners, the threat of kidnapping exceeds the threat of being hit by a stray bullet from a cartel firefight. Indeed, things are deteriorating so badly that even professional kidnapping negotiators, once seen as the key to a guaranteed payout, are now being kidnapped themselves. In an even more incredible twist of irony, anti-kidnapping authorities are being abducted and executed.

This environment — and the concerns it has sparked — has provided huge financial opportunities for the private security industry in Mexico. Armored car sales have gone through the roof, as have the number of uniformed guards and executive protection personnel. In fact, the demand for personnel is so acute that security companies are scrambling to find candidates. Such a scramble presents a host of obvious problems, ranging from lack of qualifications to insufficient vetting. In addition to old-fashioned security services, new security-technology companies are also cashing in on the environment of fear, but even high-tech tracking devices can have significant drawbacks and shortcomings.

For many people, armored cars and armed bodyguards can provide a false sense of security, and technology can become a deadly crutch that promotes complacency and actually increases vulnerability. Physical security measures are not enough. The presence of armed bodyguards — or armed guards combined with armored vehicles — does not provide absolute security. This is especially true in Mexico, where large teams of gunmen regularly conduct crimes using military ordnance. Frankly, there are very few executive protection details in the world that have the training and armament to withstand an assault by dozens of attackers armed with assault rifles and RPGs. Private security guards are frequently overwhelmed by Mexican crimi nals and either killed or forced to flee for their own safety. As we noted in May 2008 after the assassination of Edgar Millan Gomez, acting head of the Mexican Federal Police and the highest-ranking federal cop in Mexico, physical security measures must be supplemented by situational awareness, countersurveillance and protective intelligence.

Criminals look for and exploit vulnerabilities. Their chances for success increase greatly if they are allowed to conduct surveillance at will and are given the opportunity to thoroughly assess the protective security program. We have seen several cases in Mexico in which the criminals even chose to attack despite security measures. In such cases, criminals attack with adequate resources to overcome existing security. For example, if there are protective agents, the attackers will plan to neutralize them first. If there is an armored vehicle, they will find ways to defeat the armor or grab the target when he or she is outside the vehicle. Because of this, criminals must not be allowed to conduct surveillance at will.

Like many crimes, kidnapping is a process. There are certain steps that must be taken to conduct a kidnapping and certain times during the process when those executing it are vulnerable to detection. While these steps may be condensed and accomplished quite quickly in an ad hoc express kidnapping, they are nonetheless followed. In fact, because of the particular steps involved in conducting a kidnapping, the process is not unlike that followed to execute a terrorist attack. The common steps are target selection, planning, deployment, attack, escape and exploitation.

Like the perpetrators of a terrorist attack, those conducting a kidnapping are most vulnerable to detection when they are conducting surveillance — before they are ready to deploy and conduct their attack. As we’ve noted several times in past analyses, one of the secrets of countersurveillance is that most criminals are not very good at conducting surveillance. The primary reason they succeed is that no one is looking for them.

Of course, kidnappers are also very obvious once they launch their attack, pull their weapons and perhaps even begin to shoot. By this time, however, it might very well be too late to escape their attack. They will have selected their attack site and employed the forces they believe they need to complete the operation. While the kidnappers could botch their operation and the target could escape unscathed, it is simply not practical to pin one’s hopes on that possibility. It is clearly better to spot the kidnappers early and avoid their trap before it is sprung and the guns come out.

We have seen many instances of people in Mexico with armed security being kidnapped, and we believe we will likely see more cases of this in the coming months. This trend is due not only to the presence of highly armed and aggressive criminals and the low quality of some security personnel, but also to people placing their trust solely in reactive physical security. Ignoring the very real value of critical, proactive measures such as situational awareness, countersurveillance and protective intelligence can be a fatal mistake.

2) Awaiting the Awakening of the Forgotten Man
By Lee Cary

It took less than a month for the default leadership style of President Obama to appear. How long will it take for the forgotten man who believed in him to awaken to the consequences? Amity Schlaes has written an excellent history of the Depression entitled The Forgotten Man, detailing the futility of FDR's supposed cures. So as we face Obama's leadership, it is imporant to remember the forgotten man of our era.


Millions of votes cast by the forgotten man helped elected Barack Obama. Many among those postulated that, if elected, he would govern from the center. Some conjectured that he would, once in office, distance himself from the most liberal in his party, and convert his campaign promises into more moderate actions. He would, many a forgotten man thought, bring a refreshing breeze of bipartisan collegiality to a redundantly strident political environment.


One forgotten man I know speculated that Congress, with at least one chamber controlled by Republicans, would be a brake on Obama plans that aimed too far left.


Many a forgotten man heard Obama's promises to control spending, cut taxes and bring fiscal responsibility, and liked what they heard. They heard his plans for huge federal government initiatives in, for example, health care and education. And they accepted most as worthy issues that would, over time, be openly debated and vetted on their merit by the body politic. Voters would have, they were told and believed, many opportunities to register their thoughts and ideas via that most avant garde of public forums, on-line.


They presupposed that he would make good on his promise to post pending legislation five days (then it was two) before congressional votes (then none). He would appoint no lobbyists to his administration. Ethics would rule supreme - except in matters of paying one's taxes. He would scour the nation for the best and brightest and not rely on the same old Inside-the-Beltway denizens to walk the halls of his administration. But they're back.


Many a forgotten man listened, and liked what they heard. Obama sold them.


And when the votes were counted, many among the forgotten men breathed a sigh of relief that, at last, long-awaited change had come.


Now, less than a month in office, in the wake of the fast, forced-feeding of a gigantic spending bill that no member of Congress is known to have even read, one wonders if any among the forgotten man has awakened to the consequences of what has happened, and will happen.


Economist and New York Times columnist Paul Krugman has repeatedly called upon President Obama to be the reincarnation of FDR, but more aggressively active for bigger government. Krugman wants a newer New Deal on steroids. He titled one of his articles "Franklin Delano Obama."


It was FDR who first appealed to the cause of the forgotten man in national politics. It happened on April 7, 1932 during a radio address from Albany, New York. Running for what would be his first of four presidential terms, FDR said,



"These unhappy times call for the building of plans that rest upon the forgotten, the unorganized but the indispensable units of economic power, for plans like those of 1917 that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid."


Later in that speech, he leveraged class envy and juxtaposed the small forgotten man to the large banks and corporations, saying,


"Here should be an objective of Government itself, to provide at least as much assistance to the little fellow as it is now giving to the large banks and corporations. That is another example of building from the bottom up."


So, for FDR, the forgotten man was the "little fellow" oppressed by rich bankers and corporations. He, if elected president, would rescue the forgotten man from "an emergency at least equal to that of war."


Truth be known, Roosevelt didn't invent the notion of the forgotten man. That's credited to William Graham Sumner (1840-1910), a Yale professor. In an essay entitled "On the Case of a Certain Man who Is Never Thought Of" (1884), Sumner began with this definition of the original Forgotten Man.


"The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C's interests, are entirely overlooked. I call C the Forgotten Man.


For once let us look him up and consider his case, for the characteristic of all social doctors is that they fix their minds on some man or group of men whose case appeals to the sympathies and the imagination, and they plan remedies addressed to the particular trouble; they do not understand that all the parts of society hold together and that forces which are set in action act and react throughout the whole organism until an equilibrium is produced by a readjustment of all interests and rights.


They therefore ignore entirely the source from which they must draw all the energy which they employ in their remedies, and they ignore all the effects on other members of society than the ones they have in view. They are always under the dominion of the superstition of government, and forgetting that a government produces nothing at all, they leave out of sight the first fact to be remembered in all social discussion - that the state cannot get a cent for any man without taking it from some other man, and this latter must be a man who has produced and saved it. This latter is the Forgotten Man."


So the first Forgotten Man was not a subject of governmental pity, but the pocketbook for government charity to "others of whom they make pets."


"The friends of humanity start out with certain benevolent feelings towards ‘the poor,' ‘the weak,' ‘the laborers,' and others of whom they make pets. They generalize these classes and render them impersonal, and so constitute the classes into social pets. They turn to other classes and appeal to sympathy and generosity and to all the other noble sentiments of the human heart. Action in the line proposed consists in a transfer of capital from the better off to the worse off....


All schemes for patronizing ‘the working classes' savor of condescension. They are impertinent and out of place in this free democracy. There is not, in fact, any such state of things or any such relation as would make projects of this kind appropriate. Such projects demoralize both parties, flattering the vanity of one and undermining the self-respect of the other."


While the New Deal was a good faith effort to bring aid to FDR's forgotten man, New Deal initiatives helped lengthened the time that Sumner's forgotten man suffered through the Great Depression, despite repeated assertions to the contrary by Krugman's selective reading of history.


When Franklin Delano Roosevelt became president in 1933 there were 12,830,000 (24.74%) unemployed Americans. Five years later, in 1938, after a myriad of legislative and programmatic New Deal initiatives, there were 10,390,000 (18.91%) unemployed Americans. That year the nation was in the midst of a new recession within the longer-running Great Depression. It was also the year my father had to hock his only winter coat so that he and my mother could eat.


Most of Sumner's forgotten men and women who voted for Barack Obama, who will pay the expanded interest on the nation's new debt burden, have yet to awaken. A few have. Sadly, some never will. But to many, an awakening will eventually come, after time, and considerable pain. But it will come

3) Likud: Only Bibi can form government
By Ronen Medzini

Peres begins round of consultations with Knesset factions, Likud representatives urge president to task Netanyahu with forming coalition; earlier, Kadima's Mofaz says Livni-led government to unite nation


Likud representatives urged President Shimon Peres Wednesday evening to task Benjamin Netanyahu with forming Israel's next government.


"There is only one person who has a chance to form a government, and that's Benjamin Netanyahu," Knesset Member Gideon Sa'ar told Peres. "There is no mathematical possibility, even on paper, for Livni to form a government."


Likud MK Silvan Shalom, who also attended the meeting, told the president: "We came here with the sense that the people of Israel spoke out, and this statement was clear and unequivocal."


Shalom urged Peres to task Netanyahu with forming the next coalition "in order to prevent needless waste of time and instability."

"To be honest, he is the only person with the chance to form a government," Shalom said.

Mofaz: Livni government to unite nation

However, earlier in the evening, Kadima's representatives told Peres that Foreign Minister Tzipi Livni should be Israel's next prime minister.

The people's will must be respected, Transportation Minister Shaul Mofaz said during a press conference Wednesday evening after recommending to President Peres that Kadima Chairwoman Livni be granted the right to form a governmental coalition.


"The people decided that Kadima would lead the next government," Mofaz said.

Following the meeting with Peres, Mofaz said that a "Livni-led government would unite the nation." During the meeting, Kadima representatives stressed that the next coalition should be a broad national unity government.


Kadima representatives – Mofaz, Finance Minister Ronnie Bar-On and MK Tzachi Hanegbi – arrived at the presidential residence Wednesday evening in order to recommend that President Peres choose Kadima Chairwoman Livni to form the governing coalition.

"The fact that the president summoned Kadima first speaks for itself," Mofaz added. "In the face of the current challenges, the State of Israel needs a unity government. A national unity government headed by Kadima and by Tzipi Livni would be able to unite all sections of the nation…this is the wish of the people, and it cannot be ignored."


Earlier, members of the Central Elections Committee arrived at the presidential residence to deliver the formal results of the votes for Israel's 18th Knesset to Peres.

The president told members of the Committee that he is certain that a "blessed partnership will be formed," expressing his confidence that Israel's political leaders will have the welfare of the country before them as they establish a new coalition government

4)Analysis: Officials fear linking Schalit release with cease-fire puts Egypt relations at risk
By YAAKOV KATZ

When the IDF launched Operation Cast Lead in late December, two main objectives were set for it - to restore Israel's weakened deterrence vis-à-vis Hamas and to restore security to residents of the South.

But then came the stagnation, the hesitation and indecision. Israel failed to effectively use the momentum that the operation created and instead of reaching a cease-fire immediately, stalled and postponed its decision until Wednesday, when the security cabinet decided to reject the current proposal and link any deal to the release of abducted soldier Gilad Schalit.

At the security cabinet meeting on Wednesday, the ministers were presented with two alternatives - to accept the cease-fire proposal mediated by the Egyptians or to insert Schalit's release into the equation and postpone the implementation of a truce.

Until now, the Egyptians had been working on two parallel tracks that, while connected, were expected to be implemented independently. The first track was the cease-fire. The second track was the negotiations for Schalit's release.

The Egyptians claim to have been taken by complete surprise by Prime Minister Ehud Olmert's announcement Saturday that there would not be a truce without the release of Schalit.


"Everything else was settled. A deal was close to being announced," a source close to the Egyptian-negotiations told The Jerusalem Post on Monday.

Until the cabinet meeting, there were two schools of thought regarding these issues in the political establishment. The first, held by Defense Minister Ehud Barak and Maj.-Gen. (res.) Amos Gilad, the lead man in the cease-fire talks, was to first implement a truce with Hamas and then speed up talks for Schalit's release.

The second approach, announced by Olmert, was to link the two together.

This decision, Gilad has said privately in recent days, runs the risk of ruining Israel's strategic relationship with the Egyptians.

"The Egyptians invested a lot of their time and efforts into this cease-fire and we have just thrown it out the window," said one defense official on Wednesday.

The security cabinet's decision was made just hours before President Shimon Peres began consultations with the various Knesset factions ahead of his decision on who he will decide to task with forming a new government - Binyamin Netanyahu or Tzipi Livni.

The decision to link Schalit with the cease-fire likely means that the final decision on a prisoner swap has been passed on to the next government. Olmert even hinted this on Tuesday during his visit to the Kotel.

For Olmert this may turn out to be a smart move. As someone who has made no secret of his ambition to possibly return to political life one day, he will now be remembered for his last decision in office not to give in to Hamas's demands.

The alternative was to be remembered as the prime minister who released hundreds of murderous Palestinian terrorists.

5)Obama's 'Hair of the Dog' Stimulus The president's spending plan asks us to go against instinct.
By DANIEL HENNINGER

Medical science long ago debunked "hair of the dog" as a cure for hangovers. This truth, however, does not stop even the most intelligent on occasion from trying a wee nip of more-of-the-same to mitigate the symptoms of prior excess. We may call this the Paradox of Pleasure.



The American economy is about to explore on a grand scale a morning-after elixir the economist John Maynard Keynes called the Paradox of Thrift. Currently, the world's leading proponent of the paradox of thrift as a cure for what press parsons call "the excesses of the Bush era" is the president of the United States, Barack Obama.

On Tuesday Mr. Obama signed into law his $787,000,000,000 stimulus plan. Within the bill is a tax credit called "Making Work Pay." When Obama Press Secretary Robert Gibbs was asked on Jan. 29 if any part of the president's plan was untouchable, he singled out Making Work Pay. This provision is the stimulus plan's booster rocket.

Keynesian stimulus only ends or softens a recession if most of the money is spent, rather than saved. If suddenly parsimonious Americans save too much of the plan's outlays, it won't work.


Daniel Henninger says Barack Obama wants to stimulate the economy through spending, even though spending is what brought on the current economic crisis.
This, incidentally, is why Democratic economists claim to oppose using income-tax cuts to revive an economy. If one returns money to people in a large lump, as with a tax-rate reduction, they're likely to save rather than spend most of it. In other words, what would be revived is the long-dead American practice known as "thrift." Under current logic, that's bad.

Short-term economic stimulus, somewhat like a recreational drug, seeks an immediate "injection" of money into the economy, not the slow, steady drip of normal investment.

The Obama people keep telling audiences how "smart" their government is going to be, and Making Work Pay is a clever way to overcome humanity's unfortunate impulse to save rather than spend in hard times.

The provision will cut the payroll tax in a way that on average puts an extra $8 in a worker's weekly paycheck. The genius behind this idea is that eight bucks is such a pittance that no one will take the trouble to save it. It will all get spent, and stimulus theory succeeds.

The Obama camp insists that Making Work Pay (the name itself is a mysterious paradox) merely helps workers scrape by in tough times. The tax credit phases out for individuals beyond $75,000 of income and couples at $150,000. In fact, Keynes didn't much care whether poor people or rich people spent heavily to reignite aggregate demand.

Still, it looks to me as if there is a Paradox of Virtue in the middle of the Obama stimulus.
George Bush tried stimulus last year by mailing out checks up to about $1,200, and human nature "defeated" that stimulus by saving too much of the check. The U.S. savings rate rose in 2008 to nearly 4%. That was bad. The smarter Obama team wants the savings rate this year and next to return toward zero. They want their billions spent, not saved.

Thus, frugality and prudence are suppressed and the compulsion to spend that got us into this mess is promoted as a necessity. This year and next, Thorstein Veblen's conspicuous consumption will be a virtue, and Max Weber's Protestant ethic may be regarded a vice. The world is upside down.

The Obama hair-of-the-dog strategy, however, may be running into a values-altering headwind. The people have been watching, and what they've seen are the wretched excesses of the subprime lending fiasco, the humiliation of Wall Street's clueless plutocrats, and the self-destructive ambition of Bernie Madoff's investors. This may force a change.

Vogue editor Anna Wintour commented in the Journal this week on the changing world of the spending ladies: "I don't think she is going to shop the way she used to in the immediate future." Ms. Wintour says "there's a very correct correction going on."

Indeed. Anxious parents might even introduce their children to ancient habits, such as a dollar-pinching weekly allowance or passbook savings accounts (if they still exist).

Another problem for the stimulus is that Mr. Obama himself is an unconvincing evangelist for spending our way to economic salvation. Bill Clinton could sell it. But Barack Obama's austere persona reminds me of a character who might inhabit an Ingmar Bergman movie. He calls to mind one of Max von Sydow's portraits of grim Lutheran self-denial.

I think the "correct correction" is upon us. The massive jolt to personal wealth the past year is likely to reverse the decades-long drop in the personal savings rate. The administration's hopes for a trillion dollars of Keynesian spending are going to be tripped up by a new mood of national sobriety.

As always, this assumes for the sake of discussion that the plan's spending is indeed about the American economy, not just the needs of the Democratic Party. It further assumes that the government's never-ending rescues of home "owners" and banks doesn't replace one era of moral hazard with another. No Keynesian paradox in that, however. Just politics as usual.

5a) Slow Drip of Financial Ruin
By Dennis Byrne

It's the death of reason.

Well, maybe not its death, but passage of the $787 billion stimulus package has sent reason to the intensive-care unit, possibly to draw its last breath. How ironic that at the very moment we were celebrating the 200th anniversary of the birth of Charles Darwin, who with Newton, Galileo and other rational minds, freed Western thinking from the manacles of faith, miracles and doctrine, Congress and President Barack Obama launched history's most expensive government giveaway, based entirely on panic, divination and ignorance.

The emotions of fear and loathing are what spawned this monstrosity; reason and logic had nothing to do with it. It's no better than sorcery. Democrats sold this package purely on gut feeling, sentiment and intuition.

I once had a college sociology professor--Bud Bloomberg, a man as liberal as you could find--who fulminated against slapdash solutions to society's problems. First, define the problem, he lectured, and then craft the most efficient, direct and cost-effective solution, a solution that often turned out to be the simplest. The repeated failure to follow that framework in favor of a vague, hope-inspired panacea was why so many complex societal problems either weren't solved or made worse by heartfelt concoctions.

Hence, the American Recovery and Reinvestment Act of 2009, an unpalatable stew of every imaginable ingredient hatched by every imaginable chef, has come upon us, not targeted to any particular taste or need, but guaranteed to give every American the heaves and heartburn for generations to come. No more reason went into this gelatinous slop than the ridiculous and dishonest assertion that it was either "this or nothing." It's the ultimate whine of the naive do-something crowd that surfaces with every trouble, natural or man-made.

Senator after Democratic senator stood to disgorge this dishonest rhetoric during floor debate, repeatedly proclaiming the lie that Republican opponents had nothing of their own to offer. But you didn't have to search far to find examples of GOP solutions, such as the one on House Minority Leader John Boehner's Web site. You don't have to agree with his more moderate and targeted package of immediate tax relief for working families, more help for the small business sector (the nation's biggest job producer), no tax increases to pay for spending, jobless assistance and home price stabilization.

However, simple honesty should compel the Reids and Pelosis to refrain from saying the opposition has no plan. Democrats, of course, were able to get away with this slander because few in the media challenged it or bothered to report it. The media also have failed to challenge the economic methodologies that are the basis for claims that the stimulus will produce millions of jobs.

Reason is the facility of the mind used to intelligently form judgments, make decisions and solve problems. Emotions are feelings, desires, fears, hates and passionate drives--all of which are the tools that Obama deployed to sell the stimulus package to a gullible public. Endeavor to go through all 1,100 pages of this stuffed piggy and you'll find little rational connection between the nation's problems and its solutions--other than if we throw enough money out there, some of it will stick to the wall.

The lightning-like passage of this colossal spending package (amounting to more than the Iraq war) took just three weeks. Congress is supposed to be a deliberative body, making decisions judiciously, openly and unhurriedly. This was steamrolled.

Worse than the insult to the democratic process, however, is the substance of this lunacy. Our national debt will nudge close to 100 percent of gross domestic product, something that hasn't happened since World War II when the threat to our country was external, mortal and real, and not of our own making. Then, we had to sell war bonds to our own citizens, the only way we could finance the war. Now, with the possible drying up of foreign purchases of American debt, perhaps we'll have to revert to celebrity-studded beg-a-thons of the 1940s to buy our own debt. School kids could again pinch pennies and nickels for the cause. They'll love us for it.

6) America's foreclosure plan:Can’t pay or won’t pay?
From Economist

Barack Obama’s team wades into a debate over what is driving foreclosures


NO PART of the financial crisis has received so much attention, with so little to show for it, as the tidal wave of home foreclosures sweeping over America. Government programmes have been ineffectual, and private efforts not much better. Now it is Barack Obama’s turn. On Wednesday February 18th he pledged $75 billion to reduce the mortgage payments of homeowners at risk of default. Lenders who help people to refinance their mortgages will receive matching subsidies from the government. These could reduce a borrower’s monthly payments to as little as 31% of their income, and last for up to five years.

Firms that service mortgages held by investors will also receive fees for successful modifications. As a stick, Mr Obama reiterated his intention to alter the bankruptcy code so that courts can reduce mortgage principal. The details will depend on negotiations with Congress.

Some 5m homes have entered foreclosure in the past three years. Credit Suisse estimates that over 9m more will enter the process in the next four years. (In normal times, new foreclosures run at fewer than 1m a year.) Mr Obama predicts his plan will prevent up to 4m foreclosures. In a separate initiative, up to 5m borrowers will be able to refinance their mortgages at lower rates even if their equity is less than the 20% usually required by Fannie Mae and Freddie Mac, the now nationalised mortgage agencies.

Previous, less ambitious, efforts have flopped. George Bush’s first plan aimed to help up to 240,000 delinquent subprime borrowers refinance their debts into government-backed fixed-rate mortgages. Only 4,000 did so. A Democrat-inspired $300 billion plan to guarantee up to 400,000 mortgages attracted just 517 applications, as lenders balked at the requirement that they first write down the principal. Private-sector programmes have achieved higher numbers, but their success is mixed. Of 73,000 loans modified in the first quarter of last year, 43% were again delinquent eight months later (see chart).

Mr Obama’s chances of being any more successful depend on whether his team has correctly diagnosed what is driving the wave of foreclosures. Is it that homeowners cannot afford to pay; or is it that they are declining to do so, because their homes are now worth less than their mortgages, the phenomenon known as negative equity?

Both factors play a part, but economists are divided on their relative importance. One school thinks that, even in cases of negative equity, most homeowners will not default if they can afford the payments—not least because defaulting will wreck their credit records. A second school believes that once the home is worth less than the mortgage, homeowners have a significant incentive to walk away even if they can make the payment, since in many states lenders cannot then pursue them for the shortfall.

Mr Obama’s advisers were drawn to the first school, in part by a Federal Reserve Bank of Boston study that found that when home prices fell by 23% in Massachusetts between 1988 and 1993, only 6.4% of borrowers with negative equity ended up in foreclosure. The authors concluded that most such borrowers felt what they got from their home was still worth the payment. The advisers were also influenced by the Federal Deposit Insurance Corporation’s apparent success in reducing the payments of delinquent customers of IndyMac, a failed bank. In a matter of months, 10% of the bank’s 56,000 seriously delinquent borrowers had their payments reduced to 38% or less of income.

But others question the likelihood of success without reducing the principal. Edward Pinto, an independent financial industry consultant, estimates that 20% of borrowers with negative equity went to foreclosure in the past three years, in part because they started out much less creditworthy than their counterparts in Massachusetts two decades ago.

If negative equity is the real problem, principal will have to be reduced to stem the foreclosures. But lenders are reluctant: they worry that many homeowners who can afford their payments will choose to default, or that investors in the loans will sue them. With house prices still falling, many borrowers would soon have negative equity again. And the write-downs, whether voluntary or court-ordered, could destroy the lenders’ capital. Aggregate negative housing equity is thought to top $500 billion. The government could absorb some or all of this, but at an astronomical and politically unpalatable price.

In truth, both lower payments and lower principal would help reduce foreclosures. At present, banks aren’t doing much of either. Last month Communities Creating Opportunity, a non-profit group in Kansas City, Missouri, invited representatives of Bank of America and Countrywide to negotiate loan modifications with local customers. Damon Daniel, an organiser, says none of the 16 who applied got a write-down, though some might have their mortgages converted from an adjustable to a fixed interest rate.

Leslie Kohlmeyer and her husband fell behind on their payments two years ago when his construction business dried up. He eventually found new work and they resumed payments, but could not pay their arrears. Three days after Christmas, Countrywide notified them of foreclosure. Ms Kohlmeyer went to Mr Daniel’s event, where a Countrywide official arranged to suspend the foreclosure; her arrears were added to the loan balance, and her monthly payment went up by $20. She thinks she’ll be fine. Unless either she or her husband lose their jobs.

7) An 'Impulsive' America?
By Victor Davis Hanson

President Barack Obama's first TV interview was with the Dubai-based, partly Saudi-funded Al Arabiya satellite channel. In passing, he faulted past American policy for too readily "dictating" in the Middle East. He had better things to say about Saudi King Abdullah's "courage" in trying to solve the Middle East crisis.

Vice President Joe Biden likewise has promised the world a sharp break from the prior Bush administration that, from his references, was apparently to blame for bouts of anti-Americanism abroad. He assured the Europeans at the Munich Security Conference that it was time to press the reset button in foreign policy, and pledged a new chapter in America's overseas relations.

On her initial tour abroad, Secretary of State Hillary Clinton re-emphasized the Obama and Biden message, announcing that she would follow an approach that "values what others have to say." And then Clinton elaborated on this now well-worn "blame Bush" theme: "Too often in the recent past, our government has acted reflexively before considering available facts and evidence or hearing the perspectives of others." America, Clinton promised, from now on would be "neither impulsive nor ideological."

Contrast such admirable talk with recent events:

North Korea has just announced that it plans to launch a new Taepodong-2 missile capable of reaching the United States.

China, which holds hundreds of billions of dollars in U.S. Treasury bonds and will be asked to loan us billions more, advised the Obama administration to drop the "buy American" talk in the new Democratic stimulus program.

Iranian President Mahmoud Ahmadinejad recently bragged that his country would soon go nuclear, and that President Obama's offer to talk without preconditions revealed a new passivity in the West.

Russia just announced that it had developed a new strategic relationship with Iran, and warned that American-sponsored missile defense for Eastern Europe was unpalatable.

About the same time, the former Soviet republic of Kyrgyzstan, on Russian advice, disclosed that it may no longer allow Americans to use a base in their country to supply the war effort in Afghanistan.

Pakistan just released from house arrest A.Q. Khan, the father of the Pakistani nuclear bomb, who had sold nuclear technologies to the likes of Libya and North Korea.

This rather provocative behavior reminds us that President Obama's laudable assurances of a new age of American diplomacy may often be ignored -- or exploited --rather than always appreciated. North Korea, for example, may agree with Hillary Clinton's criticism of the United States the last eight years -- and thereby announce to her that it feels less obligated to keep promises once made with an "impulsive" United States.

European governments in France, Germany, Italy and most of Eastern Europe have long been pro-American. India is friendly; so is most of Asia. Africa has received billions of dollars in recent American help to combat AIDS.

These friends of ours., despite their serial complaining about the U.S., may privately be worrying that a kinder, more eloquent antithesis to George Bush will lead to too much dialogue and not enough leadership. After all, the agendas of Mahmoud Ahmadinejad, Hugo Chavez, Kim Jong Il, the leaders of Hamas and Hezbollah, Vladimir Putin and other roguish leaders transcend the Bush presidency.

We have already learned from Barack Obama's adjustments from his original positions on the Patriot Act , the FISA accords, the surge and overseas rendition that often the past administration faced only bad choices -- which were easier to criticize as a candidate than to reject outright as president.

Now, by so loudly broadcasting a near-divine morality, rather than just quietly putting its own imprint on us foreign policy, the Obama administration only sets itself up for the charge of hypocrisy.

True, it is wise to drop the unnecessary smoke-'em out dead-or-alive lingo that sometimes characterized the Bush administration. But it would be foolish to reject many of its successful initiatives simply because they were poorly articulated or sometimes couched in unfortunate tough-guy rhetoric.

The last president to promise such a grandiose break from the American past was Jimmy Carter. As he entered office in the post-Watergate, post-Vietnam age, he lectured the world about human rights. Carter promised an end to America's inordinate fears of communism, and vowed to show more kindness abroad -- and as recompense earned in a mere three years the Soviets in Afghanistan, communist insurgencies in Central America, and American hostages in Tehran.

Given the depressing nature of the world abroad, the more we now keep promising to be gentle, the bigger the stick later on we will have to carry.