Madoff Billions, Obama Trillions - Similar Consequences?

E.J. Dionne tries to place Obama. (See 1 below.)

Rupert Murdoch gets an award and makes a meaningful acceptance speech. (See 2 below.)

A proposition by Daniel Doron on how to acheive peace between Palestinians and Israel - economic recovery. Great concept but will it cause Palestinians to rise up against the zanies amongst them? Can they even if they wanted to? The Israelis left facilities in Gaza that employed thousands, privided a comfortable living and what did the Palestinian nuts do, they destroyed everything in a fit of rage and hate. (See 3 below.)

More Obama waste and pie in the sky projections? (See 4 below.)

And so to jail and a well deserved sentence. Madoff 'made off' with people's financial security, dreams, hopes, destroyed their charitable abilities, wrecked their lives. How very sad and tragic - 'man's inhumanity to man.'

Is it conceivable that our neophyte president could do comparabale, or even greater, damage in his desire to level the financial playing field as he rushes pell mell redistributing wealth? Madoff blew billions, Obama is into trillions. The verdict will be rendered ten years from now, (See 5 below.)

Even Old Europe can stand only so much Keynesian stimulus. (See 6 below.)


Is it remotely conceivable this economic downturn, like an exterminating company, will flush out a host of rats? It seems to be doing a pretty good job. Chris Dodd could be next , then comes the possibility of that man with the gravel throat from Harlem who just can't pay his taxes either and what if investigators really were serious about looking under Barney's skirt?

Downturns like Clorox have a cleansing effect. The problem is to avoid overzealous and stifling regulations that choke honest economic progress by going overboard and winding up throwing the traps out with the rats.(See 7 below.)

Fred Barnes writes about what he has learned about Obama the president. (See 8 below.)

McCordle suggests Obama's sunny personality has filtered into his forecasts. Francis Cianfrocca not overly enthusiastic with Obama's accomplishments to date either. (See 9 below.)

One more hypocrisy from our Democrat controlled Congress. Should they approve the Obama proposal which unions are lusting over, the elimination of secret balloting for union sponsored company elections, we wil have a Congress that is elected by secret ballots taking that privelege away from union members in order to pay off union compaign contributors.

In essence freedom of choice will no longer exist for union members.


Dick


1) Left of Center-Right
By E. J. Dionne

Maybe pragmatism isn't enough after all.

President Obama regularly speaks disdainfully of "ideology," says he is focused only on "what works," and loves to be described as "pragmatic."

Well, sure. No one ever admits to being an ideologue, and as historian Arthur Schlesinger Jr. observed many years ago, democratic government should be about "the search for remedy."

But there comes a time when first principles need to be articulated. The economic crisis has let loose a furious philosophical debate over the meltdown, its causes and its cures. Conservatives have entered this fight with guns blazing while progressives have hidden behind a Maginot Line armed only with the word "pragmatism."

This is surprising. Not for 80 years has there been a more opportune time to make the case for the bankruptcy of conservative ideas because the economic downturn came after nearly every conservative nostrum had become national policy.

Deregulating the financial markets, we were told, would do wonders for growth, as would slashing the income taxes of the wealthy and levies on capital gains and dividends. We were urged to trust the Wall Street wizards creating those innovative financial instruments and to believe that jacking up CEO pay relative to everyone else's would be splendid for corporate performance. Don't worry, we were assured, about rising inequalities.

And it has all come crashing down.

Conservatives know that if the narrative I just offered takes hold, they and their ideas will be forced into the wilderness for a generation or more. So they are shrewdly changing the story line, trying to pretend that the last eight years or even the last 30 years don't matter. They are trying to blame everything on Obama policies that have been operational for just a few weeks. And they are fighting for keeps.

They are right to do so, because ideologically, the country is now on a knife-edge. The conventional view, pushed hard by conservatives, is that we are a "center-right" nation because polls tend to show that there are roughly three conservatives for every two liberals, with the rest of the country in the middle.

But a new report released Wednesday by the Center for American Progress suggests a more complicated and interesting picture. Rather than rely on the three-way liberal/moderate/conservative ideological matrix, the center's poll offered respondents five choices: the old three, plus "progressive" and "libertarian."

The result: 36 percent of Americans say they are conservative or libertarian -- all but 2 percent of these are conservatives -- while 31 percent are liberal or progressive, split roughly evenly between the two groups. Moderates (and a small number who picked some other label) accounted for 31 percent.

The researchers then pressed moderates to choose up sides. When their choices were added to the others, the result was a nation split in half: 48 percent conservative or libertarian, 47 percent liberal or progressive.

Analyzing a long list of questions about specific issues, the center's researchers concluded that Americans are "solidly center-left in their ideas about (the) role of government, the economy and domestic politics and somewhat less so on cultural and social issues."

Certain conservative themes, notably fears that government spending is "wasteful and inefficient," remain powerful. "People are quite capable of believing in the need for government investments in education, health and other areas and also believing that government wastes money," said Ruy Teixeira, a senior fellow at the center-left think tank.

The downturn, he added, makes Americans more open to arguments on behalf of "a positive role for government" than they have been for a long time. And it is precisely because of the public's ideological ambivalence that liberals and progressives need to press their larger arguments on behalf of more economic equality, in defense of government's necessary role, and against utopian views of what unfettered capitalism can achieve.

The survey found another important ambivalence: sympathy for free market capitalism in the abstract, but skepticism about the rich and the rewards they reap. The Obama administration is courting danger if it does not offer a clear moral and philosophical analysis of what went wrong in the economy -- and an understandable case for what it's doing to fix things.

The worst outcome for Obama would be for the public to see his bank rescue efforts as a colossally inefficient waste of money and as an attempt to rescue the financiers from their own foolishness and greed. This would tag the president with the least popular aspects of both liberalism and conservatism. There would be nothing pragmatic about that.

2) Rupert Murdoch: Chairman and CEO, News Corporation

Thanks for those kind words, Hugh. Over the years, some of my wildest critics seem to have assumed I am Jewish. At the same time, some of my closest friends wish I were.

So tonight, let me set the record straight: I live in New York. I have a wife who craves Chinese food. And people I trust tell me I practically invented the word "chutzpah".

Ladies and gentleman, I thank you for having me tonight. I also want to thank Nelson Peltz … Michael Gould … and the many co-chairs for the time and effort they have put into this event. I am humbled by the honor you have given me - because this award speaks more to your good work than it does to mine.

Michael, I was fascinated to hear you talk about this history of this fine organization. The American Jewish Committee started in response to the persecution of Jews in Czarist Russia. And your response took a very American form: An organization that would speak up for those who could not speak for themselves.

In the century since your founding, the American Jewish Committee has become one of the world's most influential organizations. Yet though your concerns begin with the safety and welfare of Jews, these concerns are anything but parochial. The reason for this is clear: You know that the best guarantee of the security of Jews anywhere is the freedom of people everywhere.

Your good work has helped bring real and lasting changes to our world. Unfortunately, while some threats have been defeated, new ones have taken their place. And these new threats remind us the AJC's work is more vital than ever.

In Europe, men and woman who bear the tattoos of concentration camps today look out on a continent where Jewish lives and Jewish property are under attack - and public debate is poisoned by an anti-Semitism we thought had been dispatched to history's dustbin.

In Iran, we see a regime that backs Hezbollah and Hamas now on course to acquire a nuclear weapon.

In India, we see Islamic terrorists single out the Mumbai Jewish Center in a well-planned and well-coordinated attack that looks like it could be a test run for similar attacks in similar cities around the world.

Most fundamentally, we see a growing assault on both the legitimacy and security of the State of Israel.

This assault comes from people who make clear they have no intention of ever living side-by-side in peace with a Jewish state - no matter how many concessions Israel might make. The reason for this is also clear: These are men who cannot abide the idea of freedom, tolerance, and democracy. They hate Israel for the same reasons they hate us.

As I speak, the flashpoint is Gaza. For months now, Hamas has been raining down rockets on Israeli civilians. Like all terrorist attacks, the aim is to spread fear within free societies, and to paralyze its leaders. This Israel cannot afford. I do not need to tell anyone in this room that no sovereign nation can sit by while its civilian population is attacked.

Hamas knows this better than we do. And Hamas understands something else as well: In the 21st century, when democratic states respond to terrorist attacks, they face two terrible handicaps.

The first handicap is military. It's true that Israel's conventional superiority means it could flatten Gaza if it wanted. But the Israeli Defense Forces - unlike Hamas - are accountable to a democratically chosen government.

No matter which party is in the majority, every Israeli government knows it will be held accountable by its people and by the world for the lives that are lost because of its decisions. That's true for lives of innocent Palestinians caught in the crossfire. And it's also true for the Israeli soldiers who may lose their lives defending their people.

In this kind of war, Hamas does not need to defeat Israel militarily to win a big victory. In fact, Hamas knows that in some ways, dead Palestinians serve their purposes even better than dead Israelis.

In the West we look at this and say, "It makes no sense." But it does make sense.

If you are committed to Israel's destruction, and if you believe that dead Palestinians help you score a propaganda victory, you do things like launch rockets from a Palestinian schoolyard. This ensures that when the Israelis do respond, it will likely lead to the death of an innocent Palestinian - no matter how many precautions Israeli soldiers take.

Hamas gets away with this, moreover, because they do not rule Gaza by the consent of those they claim to represent. They rule by fear and intimidation. They are accountable to no one but themselves.

This is the chilling logic of Gaza. And it helps explain why even a strong military power like Israel can find itself at a disadvantage on the ground.

The second handicap for Israel is the global media war. For Hamas, the images of Palestinian suffering - of people losing their homes, of parents mourning their dead children, of tanks rolling through the streets -create sympathy for their cause.

In a battle marked by street to street fighting, the death of innocents is all but inevitable. That is also true of Gaza. And these deaths have led some to call for Israel to be charged with war crimes by an international tribunal.

But I am curious: Why do we never hear calls for Hamas leaders to be charged with war crimes?

Why, for example, do we hear no calls for human rights investigations into Hamas gunmen using Palestinian children as human shields? Why so few stories on the reports of Hamas assassins going to hospitals to hunt down their fellow Palestinians? And where are the international human rights groups demanding that Hamas stop blurring the most fundamental line in warfare: the distinction between civilian and combatant?

I suspect the answer has to do with the same grim logic that leads Hamas to provoke a military battle it knows it cannot win. Whether Israel is ever found guilty of any war crime hardly matters. Hamas gets propaganda win simply by having the charge made often and loudly enough.

In this, Israel finds itself in much the same position the United States found itself in Iraq before the surge. There, al Qaeda realized that it was in its interests to provoke sectarian violence between Shia and Sunni - no matter what the cost to innocent Iraqis. That is the nature of terror. And what we are seeing in Gaza is just one front in this much larger war.

In the West, we are used to thinking that Israel cannot survive without the help of Europe and the United States. Tonight I say to you: Maybe we should start wondering whether we in Europe and the United States can survive if we allow the terrorists to succeed in Israel.

In this new century, the "West" is no longer a matter of geography. The West is defined by societies committed to freedom and democracy. That at least is how the terrorists see it. And if we are serious about meeting this challenge, we would expand the only military alliance committed to the defense of the West to include those on the front lines of this war. That means bringing countries such as Israel into NATO.

My friends, I do not pretend to have all the answers to Gaza this evening. But I do know this: The free world makes a terrible mistake if we deceive ourselves into thinking this is not our fight.

In the end, the Israeli people are fighting the same enemy we are: cold-blooded killers who reject peace … who reject freedom … and who rule by the suicide vest, the car bomb, and the human shield.

Against such an enemy, I will not second-guess the decisions of a free Israel defending her citizens. And I would ask all those who support peace and freedom to do the same.

I thank you for listening. I thank you for this award. And I thank you for all you are doing to make our world a safer and freer place.

3) Mideast Peace Can Start With Economic Growth
By DANIEL DORON

Last week, Secretary of State Hillary Clinton told Israeli Prime Minister-designate Benjamin Netanyahu that the U.S. does not want to be restricted by "old formulas" when it comes to the peace process. As she works on a new approach, she may want to ask why costly diplomatic efforts have not led to Israeli-Palestinian peace but to ongoing war.

Though billions of dollars in "aid" have flowed into the Palestinian territories, there is still no Palestinian state, nor security for Israel. With no effective restrictions on this aid, Palestinian leaders used it to bolster terrorist groups and fight Israel, rather than build their society.

In order to succeed -- finally -- peace efforts need to create positive incentives. An economic peace process can create such a reality, as it has in the past until political obsessions interrupted it.



Associated PressFollowing Israel's conquest of the West Bank and the Gaza strip in 1967, Gen. Moshe Dayan wisely let the Palestinians manage their economic affairs. His "open bridges" policy facilitated the free movement of goods and people, and brought prosperity to the private sector. Hundreds of thousands of Palestinians were employed in Israel for much higher wages than under Jordanian and Egyptian rule. Living standards quintupled and agriculture, manufacturing, education, health and the status of women and children rapidly improved. Arabs enjoyed freedom of movement in Israel, yet there were practically no incidents of terrorism. Israelis shopped and ate in Arab towns. Their spending provided a lion's share of a skyrocketing Palestinian GDP.

This informal peace process was resisted, however, by traditional Palestinian elites. Modernization threatened their beliefs and their privileged status. Then, in 1987, an economic recession and harsher interference by Israeli bureaucracy in Arab life ignited an intifada that was taken over and politicized by the Palestinian Liberation Organization (PLO). Yasser Arafat's PLO killed whatever economic cooperation remained.

Today, many policy makers advocate a total separation between Israel and the Palestinians. But the latter cannot develop a prosperous economy and a viable state in economic isolation. Separation will result in economic ruin, as has already happened in Gaza. Israel and the West Bank are simply too small and too geographically integrated to support two economically divided entities. The fates of Israelis and the Palestinians are economically intertwined.

Jerusalem provides a good model of economic integration. The city has a large population of Israeli Jews and Palestinian Arabs living in close proximity. The latter are ardent Muslims, and most Jews in Jerusalem do not belong to the peace camp. Yet despite strenuous efforts by Palestinian terrorist organizations to inflame the city with repeated attacks, income from tourism has been so rewarding that Jerusalemites coexist without too many problems.

Wide-scale prosperity can come to the West Bank and Gaza by providing direct aid to Palestinian families still living in refugee camps. Unlike previous failed attempts, when aid was given to a corrupt Palestinian Authority, refugee families should get cheap loans and/or grants. Infrastructure construction should be allotted by competitive bidding to small and medium-sized Palestinian firms, not to politically connected mega-contractors. And to further perpetuate economic growth, the monopolies that now strangle both the Israeli and the Palestinian economies (often the same ones) must be broken.

For centuries, civilized Europeans slaughtered one another and political solutions were unable to stop the carnage. Then the creation of a European economic community shifted political priorities and peace came to reign. A similar process can lead, again, to peaceful developments in the Middle East. With no viable alternatives it's certainly worth trying.

4) Obama's $80 Billion Exaggeration Article
By JEROME GROOPMAN and PAMELA HARTZBAND


Last week, President Barack Obama convened a health-care summit in Washington to identify programs that would improve quality and restrain burgeoning costs. He stated that all his policies would be based on rigorous scientific evidence of benefit. The flagship proposal presented by the president at this gathering was the national adoption of electronic medical records -- a computer-based system that would contain every patient's clinical history, laboratory results, and treatments. This, he said, would save some $80 billion a year, safeguard against medical errors, reduce malpractice lawsuits, and greatly facilitate both preventive care and ongoing therapy of the chronically ill.

Following his announcement, we spoke with fellow physicians at the Harvard teaching hospitals, where electronic medical records have been in use for years. All of us were dumbfounded, wondering how such dramatic claims of cost-saving and quality improvement could be true.


The basis for the president's proposal is a theoretical study published in 2005 by the RAND Corporation, funded by companies including Hewlett-Packard and Xerox that stand to financially benefit from such an electronic system. And, as the RAND policy analysts readily admit in their report, there was no compelling evidence at the time to support their theoretical claims. Moreover, in the four years since the report, considerable data have been obtained that undermine their claims. The RAND study and the Obama proposal it spawned appear to be an elegant exercise in wishful thinking.

To be sure, there are real benefits from electronic medical records. Physicians and nurses can readily access all the information on their patients from a single site. Particularly helpful are alerts in the system that warn of potential dangers in the prescribing of a certain drug for a patient on other therapies that could result in toxicity. But do these benefits translate into $80 billion annually in cost-savings? The cost-savings from avoiding medication errors are relatively small, amounting at most to a few billion dollars yearly, as the RAND consultants admit.

Other potential cost-savings are far from certain. The impact of medication errors on malpractice costs is likely to be minimal, since the vast majority of lawsuits arise not from technical mistakes like incorrect prescriptions but from diagnostic errors, where the physician makes a misdiagnosis and the correct therapy is delayed or never delivered. There is no evidence that electronic medical records lower the chances of diagnostic error.

All of us are conditioned to respect the printed word, particularly when it appears repeatedly on a hospital computer screen, and once a misdiagnosis enters into the electronic record, it is rapidly and virally propagated. A study of orthopedic surgeons, comparing handheld PDA electronic records to paper records, showed an increase in wrong and redundant diagnoses using the computer -- 48 compared to seven in the paper-based cohort.

But the propagation of mistakes is not restricted to misdiagnoses. Once data are keyed in, they are rarely rechecked with respect to accuracy. For example, entering a patient's weight incorrectly will result in a drug dose that is too low or too high, and the computer has no way to respond to such human error.

Throughout their report, the RAND researchers essentially ignore downsides to electronic medical records. Rather, they base their cost calculations on 100% compliance with the computer programs "adopted widely and used effectively." The real-world use of electronic medical records is quite different from such an idealized vision.

Where do the RAND policy analysts posit major cost-savings? They imagine that the computer will guide doctors to deliver higher quality care, and that patients will better adhere to quality recommendations embedded in the computer programs. This would apply to both preventive interventions like vaccines and weight reduction, and to therapy of costly chronic maladies like diabetes and congestive heart failure. Over 15 years, the RAND analysts assert, more than $350 billion would be saved on inpatient care and nearly $150 billion on outpatient care. Unfortunately, data to support such an appealing scenario are lacking.

A 2008 study published in Circulation, a premier cardiology journal, assessed the influence of electronic medical records on the quality of care of more than 15,000 patients with heart failure. It concluded that "current use of electronic health records results in little improvement in the quality of heart failure care compared with paper-based systems." Similarly, researchers from the Brigham and Women's Hospital and Harvard Medical School, with colleagues from Stanford University, published an analysis in 2007 of some 1.8 billion ambulatory care visits. These experts concluded, "As implemented, electronic health records were not associated with better quality ambulatory care." And just this past January, a group of Canadian researchers reviewed more than 3,700 published papers on the use of electronic medical records in primary care delivered in seven countries. They found no solid evidence of either benefits or drawbacks accruing to patients. This gap in knowledge, they concluded, "should be of concern to adopters, payers, and jurisdictions."

What is clear is that electronic medical records facilitate documentation of services rendered by physicians and hospitals, which is used to justify billing. Doctors in particular are burdened with checking off scores of boxes on the computer screen to satisfy insurance requirements, so called "pay for performance." But again, there are no compelling data to demonstrate that such voluminous documentation translates into better outcomes for their sick patients.

Even before these new data, there were studies casting doubt on the benefits of electronic medical records. In response, the RAND researchers boldly stated, "We choose to interpret reported evidence of negative or no effect of health information technology as likely being attributable to ineffective or not-yet-effective implementation." This flies in the face of the scientific method, where an initial hypothesis needs to be modified or abandoned in the face of contradictory results. Rather than wrestle with contrary information, the report invokes the successes of computer-based systems in saving money in industries like banking, securities trading, and merchandizing, using ATM machines, online brokerage and bar-coded checkouts. Medical care of human beings -- treatment of acute and chronic illnesses and the even more complex process of effecting lifestyle changes like smoking cessation and weight loss to prevent disease -- is not analogous to buying bar-coded groceries and checking-account balances online.

Some have speculated that the patient data collected by the Obama administration in national electronic health records will be mined for research purposes to assess the cost effectiveness of different treatments. This analysis will then be used to dictate which drugs and devices doctors can provide to their patients in federally funded programs like Medicare. Private insurers often follow the lead of the government in such payments. If this is part of the administration's agenda, then it needs to be frankly stated as such. And Americans should decide whether they want to participate in such a national experiment only after learning about the nature of the analysis of their records and who will apply the results to their health care.

All agree skyrocketing health-care costs are a dangerous weight on the economic welfare of the nation. Much of the growing expense is due to the proliferation of new technology and costly treatments. Significant monies are spent for administrative overhead related to insurance billing and payments. The burden of the uninsured who use emergency rooms as their primary care providers, and extensive utilization of intensive care units at the end of life, further escalate costs.

The president and his health-care team have yet to address these difficult and pressing issues. Our culture adores technology, so it is not surprising that the electronic medical record has been touted as the first important step in curing the ills of our health-care system. But it is an overly simplistic and unsubstantiated part of the solution.

We both voted for President Obama, in part because of his pragmatic approach to problems, belief in empirical data, and openness to changing his mind when those data contradict his initial approach to a problem. We need the president to apply real scientific rigor to fix our health-care system rather than rely on elegant exercises in wishful thinking.

5) A 'sorry and ashamed' Bernard Madoff pleads guilt
By LARRY NEUMEISTER and TOM HAYS

Former financier Bernard Madoff, arrives at Federal Court in Manhattan, Saying he was "deeply sorry and ashamed," Bernard Madoff pleaded guilty Thursday to pulling off perhaps the biggest swindle in Wall Street history and was immediately led off to jail in handcuffs to the applause of his seething victims in the courtroom.

U.S. District Judge Denny Chin denied bail for Madoff, 70, and ordered him to jail, noting that he had the means to flee and an incentive to do so because of his age.

Madoff earlier spoke softly but firmly to the judge as he pleaded guilty to 11 charges in his first public comments about his crimes since the scandal broke in early December.

"I am actually grateful for this opportunity to publicly comment about my crimes, for which I am deeply sorry and ashamed," he said.

"As the years went by, I realized my risk and this day would inevitably come. I cannot adequately express how sorry I am for my crimes."

Madoff did not look at any of the three investors who spoke at the hearing, even when one turned in his direction and tried to address him.

The fraud, which prosecutors say may have totaled nearly $65 billion, turned a revered money man into an overnight global disgrace whose name became synonymous with the current economic meltdown.

Madoff described his crimes after he entered a guilty plea to all 11 counts he was charged with, including fraud, perjury, theft from an employee benefit plan, and two counts of international money laundering.

He told the judge that he believed the fraud would be short-term and that he could extricate himself.

Prosecutors say the disgraced financier, who has spent three months under house arrest in his $7 million in Manhattan penthouse, could face a maximum sentence of 150 years in prison at sentencing.

The plea came three months after the FBI claimed Madoff admitted to his sons that his once-revered investment fund was all a big lie — a Ponzi scheme that was in the billions of dollars. Since his arrest in December, the scandal has turned the 70-year-old former Nasdaq chairman into a pariah who has worn a bulletproof vest to court.

The scheme evaporated life fortunes, wiped out charities and apparently pushed at least two investors to commit suicide. Victims big and small were swindled by Madoff, from elderly Florida retirees to actors Kevin Bacon and Kyra Sedgwick and Nobel Peace Prize winner Elie Wiesel.

After arguments began on whether Madoff should remain free on bail, his lawyer Ira Sorkin described the bail conditions and how Madoff had, "at his wife's own expense," paid for private security at his $7 million penthouse.

Loud laughter erupted among some of the more than 100 spectators crammed into the large courtroom on the 24th floor of the federal courthouse in lower Manhattan. The judge warned the spectators to remain silent.

George Nierenberg, the first of the three investors to speak, approached the podium glaring at Madoff, then said in the financier's direction: "I don't know if you had a chance to turn around and look at the victims."

At the hint of a confrontation, a marshal sitting behind Madoff stood up, and the judge directed Nierenberg to speak directly to the bench.

The plea does not end the Madoff saga: Investigators are still undertaking the daunting task of unraveling how he pulled off the fraud for decades without being caught. They suspect that his family and top lieutenants who helped run his operation from its midtown Manhattan headquarters may have been involved.

Madoff's plea was absent a cooperation agreement that would have required him to name potential co-conspirators. But in court documents, prosecutors have indicated that low-level employees were in on the scam and may be cooperating.

Court papers say Madoff hired many people with little or no training or experience in the securities industry to serve as a secretive "back office" for his investment advisory business. He generated or had employees generate "tens of thousands of account statements and other documents through the U.S. Postal Service, operating a massive Ponzi scheme," prosecutors said.

The money was never invested, but was used by Madoff, his business and others, prosecutors said.

Authorities said he confessed to his family that he had carried out a $50 billion fraud. In court documents filed Tuesday, prosecutors raised the size of the fraud to $64.8 billion.

Experts say the actual loss was more likely much less and that higher numbers reflect false profits he promised investors. So far, authorities have located about $1 billion for jilted investors.

In addition to prison time, he said Madoff faces mandatory restitution to victims, forfeiture of ill-gotten gains and criminal fines.

6) Old Europe Is Right on Stimulus

Treasury Secretary Timothy Geithner heads to Europe today to lobby for a "global stimulus" from the G-20 countries that are holding an economic summit two weeks hence. This follows White House economic czar Larry Summers's weekend call for a "global stimulus," which leaders in Europe roundly rejected Monday. They were right to do so.

German Chancellor Angela Merkel and the other Europeans know whereof they speak, since a number of countries have decades of experience trying to spend in a vain attempt to boost growth. The Obama Administration came into office promising to listen to its friends and allies, so when Europe says non to gargantuan spending, maybe the President and his advisers should listen.


After a meeting of Euroland finance ministers Monday, Luxembourg's Jean-Claude Juncker delivered the Continent's verdict on global stimulus. "Recent American appeals insisting that the European make an additional budgetary effort to combat the effects of the crisis were not to our liking," he said. That's putting it nicely. When the EU established the euro in 1999, it put in place strict limits on deficit spending and debt-to-GDP ratios. Those limits have not been universally honored within the currency bloc, but there's a reason they're there.

For decades, countries like Greece, Italy and Belgium had run up huge national debts trying to pay for social-welfare programs and keep their economies afloat at the same time. The chief result of these policies was a huge pile of IOUs. In Italy, the national debt stood at 107% of GDP in 1999. In Belgium and Greece it was 104%. Greece's fiscal house was so disordered that it was excluded from the first group of euro countries.

So from its founding, the euro zone insisted that countries not respond to every economic downturn by piling up debt. Budget deficits are supposed to be limited to 3% of GDP, and total debt to 60% of GDP. This has worked imperfectly, but debt ratios have for the most part come down or remained steady. Italy's debt-to-GDP ratio is now 96%. Greece is at 105%, while France and Germany have hovered around 50% and 40%, respectively. U.S. debt stood at 36% of GDP at the end of 2007 -- before the financial panic and stimulus started piling it on. (See the nearby chart.) The U.S. has run up $1 trillion in publicly held debt in the past six months alone -- that's 7% of GDP right there. Calling on Europe to follow this example is like dangling a bottle of grappa in front of a recovering alcoholic.

While he's in the U.K., perhaps Mr. Geithner should also ask his European counterparts whether any of them have ever seen a 1.5 Keynesian "multiplier" in the wild. That's the idea -- promoted by Mr. Summers -- that every $1 of deficit spending yields $1.5 in economic growth. If that were true, Italy would be the richest country in Europe, instead of merely one of the most indebted.

And if the Treasury Secretary is looking for something to read on the plane, we recommend a recent paper by a trans-Atlantic team of four economists -- two Germans and two Americans. The authors -- John Cogan and John Taylor of Stanford and Tobias Cwik and Volker Wieland of Goethe University -- subject the Administration's stimulus to the most recent Keynesian scholarship.

The White House estimates of 3.6 million new jobs is based on an "Old Keynesian" model on the impact of government spending, while the new models adjust for the rational behavioral response to the stimulus by businesses and consumers. The White House figures, by economists Christina Romer and Jared Bernstein, also assume zero interest rates for a minimum of four years. The alternative assumes, more reasonably, that as growth returns interest rates will also rise.

What the four economists found is that the Administration's estimates for stimulus growth were six times as high as they could produce under a modern Keynesian simulation. By their estimates, the stimulus would produce, at most, 600,000 jobs and add perhaps 0.6% to GDP at its peak. That's nowhere near a multiplier of 1.5 and suggests the $800 billion would have been better devoted to business tax cuts or fixing the financial system. That's $1.3 million in spending per job, for those keeping score at home.

Our guess is that the Administration is itself worried that its stimulus will come up short, while it fears Congress won't abide another round. Already the outside intellectual godfathers of the Obama plan are denying paternity, claiming the biggest spending bill since World War II is "too small." (Talk about lacking the courage of your convictions.) So now they and Mr. Summers want the rest of the world to ride to the rescue by repeating our mistakes.

The problem isn't the size of Mr. Obama's fiscal stimulus but its design. If countries in Europe want to help the recovery, they'd do better to try marginal rate tax cuts on income and investment -- the sort of fiscal policy that actually changes incentives to work and invest. Then we could watch and see which approach encouraged recovery faster. But the last thing Europe should do is follow Larry Summers and the out-of-date Keynesians down the spending road to nowhere.

7) Chris Dodd's Irish 'Cottage'


The Senate Ethics Committee has been looking into possible conflicts of interest in Connecticut Senator Chris Dodd's 2003 mortgages. Now questions about another Dodd real-estate adventure, this one in Ireland, should keep the Ethicists even busier. All the more because Mr. Dodd's "cottage" purchase involves a crooked stock trader for whom the Senator once did a very big political favor.

Mr. Dodd is already under a cloud for receiving what a former loan officer claims was preferential treatment from Countrywide Financial on two mortgage refinancings -- in Connecticut and Washington -- in 2003. Countrywide was an aggressive lender to shaky borrowers and relied heavily on Fannie Mae and Freddie Mac to buy those mortgages in bulk. As a senior Member of the Senate Banking Committee, Mr. Dodd was one of Fannie's greatest promoters. Mr. Dodd promised last year to disclose mortgage documents to prove he got no special treatment, but so far all he's done is let a few hand-picked journalists take a quick peek before he put the papers back in storage.

Now enterprising Hartford Courant columnist Kevin Rennie has uncovered another suspicious real-estate investment. The story starts in 1994, when the Senator became one-third owner of a 10-acre estate, then valued at $160,000, on the island of Inishnee on Galway Bay. The property is near the fashionable village of Roundstone, a well-known celebrity haunt. William Kessinger bought the other two-thirds share in the estate. Edward Downe, Jr., who has been a business partner of Mr. Kessinger, signed the deed as a witness. Senator Dodd and Mr. Downe are long-time friends, and in 1986 they had purchased a condominium together in Washington, D.C.

Mr. Downe is also quite the character. The year before the Galway deal, in 1993, he pleaded guilty to insider trading and securities fraud and in 1994 agreed to pay the SEC $11 million in a civil settlement. The crimes were felonies and in 2001, as President Clinton was getting ready to leave office, Mr. Dodd successfully lobbied the White House for a full pardon for Mr. Downe.

The next year -- according to a transfer document at the Irish land registry viewed by Mr. Rennie -- Mr. Kessinger sold his two-thirds share to Mr. Dodd for $122,351. The Senator says he actually paid Mr. Kessinger $127,000, which he claims was based on an appraisal at the time. That means, at best, poor Mr. Kessinger earned less than 19% over eight years on the sale of his two-thirds share to Mr. Dodd. But according to Ireland's Central Bank, prices of existing homes in Ireland quadrupled from 1994 to 2004.

Perhaps Mr. Kessinger is a lousy businessman. Or maybe he merely relied on Mr. Dodd to tell him how much the property was worth. In his Senate financial disclosure documents from 2002-2007, Mr. Dodd reported that the Galway home was worth between $100,001 and $250,000. However, Mr. Rennie reports that in 2006 and 2007 the Senator added a footnote that reads: "value based on appraisal at time of purchase."

Mr. Dodd had good reason to add the qualifier. Senate rules call for valuations to be current and anyone who looked into the estimate would immediately spot Mr. Dodd's lowballing. A June 17, 2007 feature in Britain's Sunday Times did just that. "Diary" observed that in Roundstone "a two-bed recently made E680,000 ($918,000) and a cottage is currently on offer for E800,000." Noting Mr. Dodd's estimate of his property -- between E75,000 and E185,000 -- the diarist quipped, "to hell with the stamp duty, and form an orderly queue."

Mr. Dodd is busy these days blaming everyone else for the real-estate bubble and financial meltdown. But he owes his constituents and the Senate an honest accounting of his Galway property over the past 15 years. If its value grew with the rest of the area, he needs to explain why Mr. Kessinger handed it over for a song, why that isn't an unreported gift under Senate rules, and what role Mr. Downe might have played as a middleman.

More broadly, Connecticut voters might want to know why their senior Senator has hung around for years with Mr. Downe, the kind of financial scoundrel Mr. Dodd spends so much time denouncing.

8) Quirks :What we've learned about our new president.
By Fred Barnes

Now that Barack Obama has been president for seven weeks, we've learned a few more things about him. Like every president, Obama has quirks. Or maybe we should call them characteristics or tendencies that we hadn't expected. Here are a five of them:

1. Delegate and duck. Who'd have thought the fellow famous for his brains and tough-minded leadership would hand over much of his agenda to Democrats in Congress? Not I. This practice began with Obama's first piece of legislation, the economic "stimulus" package. It was mostly put together by House Speaker Nancy Pelosi, who touted it as an economic game-changer. The actual result? A wave of fear it won't work. Even economists friendly to Democrats told Pelosi this week that the measure won't come close to meeting Obama's goal of saving or creating up to 4 million jobs. Pelosi is now talking up a second stimulus package.

Given that experience, you might think Obama would be leery of giving congressional Democrats the more important job of drafting a massive health care reform bill. Not so. He's given them exactly that assignment. True, there may be a clever strategy behind his habit of delegating. If Democrats draft a bill, they're likely to pass it. Or perhaps Obama is just afraid of crossing Pelosi.


They'll have trouble, however, with a touchy moral issue Obama ducked when he lifted the ban on federal funding of embryonic stem cell research. That issue: cloning of embryos for research, so-called therapeutic cloning. Obama also ducked the matter of where to stash unrepentant terrorists once the prison at Guantanamo is shut down on his orders next year. And he's letting a task force determine what's proper in interrogating terrorists.

2. Doing the opposite. Obama insists he's not in favor of big government, then proposes a 10-year budget with vast amounts of new spending and a vastly expanded role for government. He denounces distractions that keep everyone from focusing on significant issues, but his White House aides cause a huge controversy by calling Rush Limbaugh the leader of the Republican party. He promises bipartisanship but doesn't practice it. He's against earmarks but refuses to call on Congress to strip them from the "omnibus" spending bill. He's the enemy of "business as usual" in Washington, but the way he conducts his presidency is business as usual. He's for making "tough choices," but doesn't make many. He's for "fiscal responsibility" but . . . well, you get the drift.

3. Loose ship. Obama ran the most spectacularly well organized and brilliantly managed presidential campaign I've ever seen. And his transition was rightly praised for its orderliness. I don't offer that praise lightly. But once he arrived in the White House, Obama has operated anything but a tight ship. He hasn't filled major posts at the Treasury Department, allowing Secretary Tim Geithner to be cast by the media as a lonely and forlorn figure. He inadvertently treated British prime minister Gordon Brown as if he's the leader of Sri Lanka or Surinam, causing Brown deep embarrassment at home and damaging the "special relationship" between the United Kingdom and America. His high-level nominees--some of them--continue to be folks with unpaid taxes. His vice president, Joe Biden, can't stop uttering dubious statements, the latest being his claim that 70 percent of Taliban forces are in it for the money. Did Gallup poll them?


4. Blame game. This is one of the rituals of Washington that Obama was going to halt. Instead, he's indulged. After an interview with the New York Times last week, he called back to respond further to a question about whether he's a socialist. "It was hard for me to believe that you were serious about that socialist question," he said, then went on to lay the blame for expanding government on President Bush. "It wasn't under me that we started buying a bunch of shares of banks," Obama noted. "And it wasn't on my watch that we passed a massive new entitlement, the prescription drug plan without a source of funding." Obama didn't mention that he supports the bank bailout and his party backed a more expensive version of the drug plan.

5. Straw man. Obama has been criticized for using this rhetorical device. But he can't stop himself. He's often declared he won't deal with those, presumably congressional Republicans, who would do nothing at all to boost the economy. But Republicans would do something, just not what he has. When he made his stem cell announcement, Obama said he was protecting scientists from "manipulation or coercion," listening to them "even when it's inconvenient," making sure "scientific data is never distorted or concealed," and basing "scientific decisions based on facts, not ideology." Whew! But who was doing all those things? Nobody, though Obama
seemed to be suggesting the Bush administration had.

Okay, these quirks are nothing to brag about. And Obama has some admirable characteristics as well. But I don't need to cite them. The mainstream media has beaten me to the punch, spreading word of Obama's fine points to the far ends of the globe.

9) Obama too sunny?
By Megan McCardle

Our sister publication asks analysts whether the administration's economic forecasts are too optimistic. They would have gotten a more interesting discussion if their query had been "Is the Pope Catholic?" Of course they're too optimistic. In fact, the word optimistic is too optimistic. A better choice might have been "insane". Like Greg Mankiw, I would love to find a sucker investor who is willing to take the other end of a bet that both growth and revenue will fall short of the administration's predictions.

Having defended Obama's candidacy largely on his economic team, I'm having serious buyer's remorse. Geithner, who is rapidly starting to look like the weakest link, is rattling around by himself in Treasury. Meanwhile, the administration is clearly prioritized a stimulus package that will not work without fixing the banks over, um, fixing the banking system. Unlike most fiscal conservatives, I'm not mad at him for trying to increase the size of the government; that's, after all, what he got elected promising to do. But he also promised to be non-partisan and accountable, and the size and composition stimulus package looks like just one more attempt to ram through his ideological agenda without much scrutiny, with the heaviest focus on programs that will be especially hard to cut.

The budget numbers are just one more blow to the credibility he worked hard to establish during the election. Back then, people like me handed him kudoes for using numbers that were really much less mendacious than the general run of candidate program promises. Now, he's building a budget on the promise that this recession will be milder than average, with growth merely dipping to 1.2% this year and returning to trend in 2010. Isn't there anyone at BLS who could have filled him in on the unemployment figures, or at Treasury who could have explained what a disproportionate impact finance salaries have on tax revenue? These numbers . . . well, I can't really fully describe them on a family blog. But he has now raced passed Bush in the Delusional Budget Math olympics.

It's therefore frankly more than a little disappointing that the free marketers are represented by Grover Norquist, who trots out conservative boilerplate to the effec that we'rea ll going to hell because of EFCA and marginal tax rate increases. Republicans will not fight delusional accounting by demonstrating that they're still tangled up in the Laffer Curve. Growth can still hit 1.2%--or even 3.2%--if EFCA passes. But it manifestly cannot in the middle of an ugly recession.

9a) Grading Obama’s Economic Policy
By Francis Cianfrocca

President Barack Obama has to deal simultaneously with two competing economic-policy objectives: first, he wants to create a perception that the financial system is under control. And second, he’d like to federalize the economy in important ways. These objectives are in conflict with each other, and judging from his recent comments, Obama is having trouble holding both of them in his mind at the same time.

As regards economic stability, the problems for Obama relate to capital markets (particularly the stock market), unemployment, and housing. In each of these areas, Americans perceive serious threats to the way they live their lives, or would like to. And these threats are fanned by news headlines that are shocking and frightening.

So in the last analysis, Obama’s true objective in respect of economic stability is to manage the headlines.

The stock market and housing matter greatly to ordinary people, because of the strong growth in these asset classes in recent years. Seeing your 401(k) balance and comparable home sales in your neighborhood go up month after month creates a powerful sense that you can consume beyond your current income. When your assets go into reverse, you start consuming far less and saving more. Multiply by 100 million households, and you have a recession. You don’t even need to add water.

The unemployment situation is the classic market response to economic distress. Recessions beget high unemployment, and high unemployment begets changes in the political fortunes of the party that holds power in Washington.

So ignore the complex analyses of these phenomena that you get from sophists like me. In terms of Obama’s economic policy, the objective is to stem the decline in stock prices and housing, and to reduce the unemployment rate.

Since neither he nor his advisers have the slightest clue how to accomplish any of that, they’re concentrating on managing our perceptions. In recent days, Obama has himself told us that it’s a good idea to invest in the stock market because it’s undervalued. (One presumes we’re expected to believe that the mere presence of Obama himself will soon make the stock market go up.)

In addition, he’s sent out people like Christina Romer to tell us that the recently-enacted fiscal stimulus package is like penicillin to the economy, and it just needs time to work. Therefore, unemployment will someday get better, even if it gets worse in the meantime. (You may recall a highly-respected Stanford economist named Christina Romer who has written many papers questioning the value of fiscal stimulus as a policy tool, and questioning the conventional wisdom that tax cuts aren’t good for the economy. This is the same Christina Romer, but she has a different boss now. When well-credentialed scholars of unquestioned integrity get top jobs in the White House, their integrity often becomes a secondary priority.)


If managing the headlines is his first priority, Obama’s second goal is transitioning the US economy over to much more government control. He wants to end low-cost energy use in the US and move over to high-cost wind and solar energy. He wants to provide universal health insurance at a time when health expenditures are rising sharply for the baby-boomer population. He wants to sharply improve the finances of state governors, which ultimately means increasing payouts to teachers, education administrators, hospitals, and other unionized public employees. And he wants to do all this in a context of “fiscal discipline,” which means raising taxes on capital, business and high incomes.
I’m not going to question here whether the US should embark on a path toward broad government control of the economy. My concern is: how are we going to pay for it all? To increase spending on socially-determined outcomes is necessarily to displace spending from privately-determined ones. There is only one way to accomplish higher social spending without causing deep pain among private individuals, and that’s to increase the size of the economic pie that we are redistributing. Socialism is a luxury that is only available to rich nations.

And here, Obama is doing the things that really determine the grade he should receive for economic policy. The priorities and the policy objectives that Obama and his team have articulated are precisely ones that will cause the economy to grow much less vigorously in the near and medium term.

The Nobel-prize winning economists that are advising the President are deeply committed to the apparently-logical view that if consumers demand something, producers will supply it. When consumers demand less, all government has to do is demand more and everything gets good again. Right?

Wrong. From the business and market perspective, nothing could be worse than an aggressive, activist government threatening higher taxes and tighter regulations. The uncertainty created by activist government simply destroys business confidence. Business doesn’t supply more because demand is higher. Business supplies more when the risk-adjusted returns to capital justify the additional production. Economists have suggested long before Keynes was born that supply creates demand, not the other way around.

Obama couldn’t be doing more to destroy business confidence if that’s what he had intentionally set out to do, and frankly, it’s hard not to get the impression that this is indeed the case. Certainly Obama has done nothing to suggest otherwise.

Bottom line: Obama wants to go on a massive government spending spree. But he’s working as hard as he can to destroy the means that will make the spending spree possible. He earns an F for economic policy.